How the West Can Hurt Huawei

December 11, 2018

For years, Huawei has been trying to raise its profile in the West. Well known in industry circles as the world's biggest maker of the boxes and antennas that make up today's telecom networks, it has never enjoyed the same recognition as the US tech giants, despite its recent push into smartphones. Having a name that is hard(er) for Westerners to pronounce has not helped: Attempts at it by those unfamiliar with the company suggest links to the Hawaiian Islands, or sound like a sporting battle cry from the north-east of England.

But citizens from Vancouver to Volgograd are suddenly trying to get their lips around the requisite vowels. Unfortunately, for Huawei, they are doing it for all the wrong reasons. Last week, the company's chief financial officer, Meng Wanzhou, was arrested in Canada at the behest of US authorities. Allegedly owning more passports than Jason Bourne -- at least seven, according to prosecutors -- she is accused of covering up business deals with Iran, in breach of US sanctions, and could spend up to 30 years in a US jail if found guilty. China has angrily demanded her release and threatened Canada with retribution. Meng has swiftly become the central figure in a major diplomatic spat, and Huawei's name is plastered across more newspaper headlines than it ever managed with a smartphone launch. (See Canada Arrests Huawei CFO – ReportHuawei CFO Committed Sanctions Fraud, US Alleges – Reports and China Slams Huawei CFO's Arrest, Huawei 'Not Aware of Any Wrongdoing'.)

Meng's arrest, however, simply marks an escalation of a long-running US campaign against Chinese vendors Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763). Neither has been able to operate freely in the US market since 2012, when a government report first described them as a threat to national security. More recently, the US has been leaning on Western allies to shut them out of 5G deals. Charged with violating sanctions against Iran earlier this year, ZTE was temporarily banned from acquiring any US components, and nearly went out of business. It is now fighting to overcome the doubts of existing customers. (See Amid the Rubble of L'Aquila, ZTE Tries to Rebuild.)

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