Huawei - a victim of the USA-China trade war?

Press Office
The White House is engaging in a major trade battle with China
The White House is engaging in a major trade battle with China by David Everett }
The White House is engaging in a major trade battle with China

Professor Fragkiskos Filippaios from KBS comments on the ongoing political and economic tension between the USA and China and how Huawei has become a proxy for this battle.

‘Huawei, the global Chinese telecommunications equipment provider, prides itself by claiming that it is owned by its employees. This is true to a certain extent. The company’s corporate governance structure is built on a substantial amount of representation from its employees/shareholders. The company, though, is jointly owned by Mr Ren Zhengfei, the founder of Huawei. Mr Zhengfei controls a substantial amount of the company and is closely related to the Chinese Communist Party making Huawei a proxy state-owned enterprise.

It is this close relationship with the Chinese government that has raised concerns over Huawei’s involvement in developing sensitive telecommunications infrastructure in a number of countries. The United States is not the first country imposing restrictions on Huawei. Australia, New Zealand and India have in the past imposed restrictions and a number of EU countries consider to do so either directly or through influencing the main telecommunications providers in Europe. Google has also already restricted access to Android applications on Huawei phones. Whilst there are a number of security concerns over Huawei’s involvement in sensitive telecommunications projects the current US restrictions have also another dimension.

‘Huawei has found itself in the middle of an economic war between US and China manifesting itself through an escalating trade war. Huawei being a very successful global company, of Chinese origin, has attracted a lot of attention. The company has managed to climb to the third place of the global mobile phones market behind Samsung and Apple and challenges the domination of the two key players.

Huawei has invested substantial amounts on Research and Development over the last few years and it is also developing its own operating system to challenge Apple’s OS and Android. Despite the potential impact of Huawei’s listing on the Bureau of Industry and Security entity list, it is worth highlighting that the restrictions focus on the sale of American technology to Huawei. The restrictions cover direct sales but Huawei might be able to have access to these technologies through a different route.

‘Since 2003, Huawei has performed eight Foreign Direct Investments in the United States. These investments correspond to $278.8 million and just over 750 new jobs. The vast majority are in sensitive research and development sectors through the establishment of specialised labs that have the ability not only to create new technologies but also act as listening posts for technologies developed by competitors.

California, Texas and Washington are the main investment locations. These are the places where Apple’s main research and development centres are also located. Huawei has therefore positioned itself strategically in the market of its main competitor and has already mitigated some risks emerging from the current US restrictions.’

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