You might think it redundant to say that the world’s biggest manufacturer of telecoms equipment is a name to watch. But Huawei — which isn’t quite pronounced ‘Who are we?’ but perhaps ought to be — really does deserve scrutiny. This beacon of Chinese enterprise overtook its main rival, Ericsson of Sweden, in the first half of this year with more than $16 billion of sales. It has just announced an expansion of its UK activities, which include a research facility in Ipswich and a ‘cyber-security evaluation centre’ in Banbury, promising to create 700 jobs and winning applause from David Cameron.
It is a supplier of equipment to 45 of the world’s top 50 mobile network operators, including BT and Vodafone, and provides ‘managed services’ for networks in 60 countries. It employs 140,000 people around the world, an astonishing 62,000 of them in R&D; among them is Whitehall’s former chief IT officer, John Suffolk, with the title of ‘global cyber-security officer’. The former journalist Baroness (Patience) Wheatcroft sits on its UK advisory board, which is chaired by the former civil servant Sir Andrew Cahn. It is the way the world is going, and its own-brand smartphones will soon be as familiar as Samsung’s or Sony Ericsson’s, many of which are made in China anyway.
But Huawei is also reported to be ‘working closely’ with GCHQ to prove that its kit — evidently built into the networks on which the Cheltenham spy centre depends — is not vulnerable to hackers and does not come with built-in ‘backdoors’ through which state and commercial secrets can be spirited away. For that is the suspicion that hangs around Huawei in other parts of the world, alongside longstanding insinuations, unsubstantiated but much repeated in the blogosphere, that its meteoric rise from humble beginnings in 1987 was based on copying technology from western companies such as Cisco Systems, as well as on cut-throat pricing and a cult-like internal culture.
Of the five major mobile networks that choose not to do business with Huawei, four are American and one Canadian. In the US, Huawei has lost out on acquisitions and contracts because of hostile reactions in Washington. Likewise it has met a frosty reception in India and Australia. Whispers focus on low-profile chief executive Ren Zhengfei, who was an electrical engineer in China’s People’s Liberation Army before establishing Huawei in Shenzen as a seller of Hong Kong-made phone systems to small-town Chinese customers. Since it started winning overseas contracts in the late 1990s, the company’s growth has been phenomenal — and the rumours have swirled.
The PLA is believed to control many Chinese companies, but Huawei — which remains private, rather than stockmarket-listed — hotly denies any connection, declaring itself to be wholly owned by its Chinese employees. Analysts suggest the ownership structure may not be that simple; the sharp-pencilled China-watcher David Webb has described it as ‘completely opaque’. A Canadian journalist, Iain Morrow, in a long investigative piece for Toronto’s Globe and Mail last year, concluded by referring to Huawei as ‘the People’s Engineering Army’.
Of course it’s sometimes easier to resort to conspiracy theories than to face the fact that the Chinese are now ruthlessly efficient global competitors. A paper published by John Suffolk of Huawei addresses these reputational slights head-on: ‘We have never… had the intent to steal any national intelligence, enterprise secrets or breach personal privacy and we will never support or tolerate such activities.’ It’s also fair to point out on his behalf that all kinds of sensitive technology sold under trusted western brand names is actually assembled in Chinese factories, where bugs could be embedded but probably aren’t — and that a generation ago it was the Japanese who stood accused of deploying low-cost manufacturing in a sinister bid for world domination, though they never achieved it.
What we do know is that every electronic communication in Britain, including the secret stuff, is now likely to pass through little black boxes supplied by Mr Ren’s mysterious company. Some cynics saw this month’s rather vague announcement of an extra £1.3 billion investment as a well-timed Chinese-style present to David Cameron, giving him a post-Olympic opportunity to declare that ‘the UK is open for business’ as a reward for running one of the few western governments which welcome Huawei with open arms. But then some cynics think we’re all living in an extended episode of Spooks.
Slow start-up
It seems sensible of George Osborne, in the interests of holding the coalition together long enough for his own economic strategy to bite, to have a locked drawer from which he periodically pulls wads of cash to pay for interventionist projects that keep senior Liberal Democrats happy. Thus Nick Clegg had £1.4 billion for the embarrassing flop (or ‘great success’, as Vince Cable loyally described it) that was the Regional Growth Fund I wrote about a fortnight ago, and now Cable himself has a billion of capital for his ‘business bank’. Next perhaps, a big cheque for Chris Huhne to fund start-up ventures in prisons.
But the business bank is by no means a bad idea — it is certainly not a new one — if it succeeds in fuelling £10 billion of medium-term lending to smaller companies and tying together a confused bundle of support schemes already available. If it is to provide a challenging alternative to what’s currently on offer from risk-averse commercial banks, however, the new entity will have to start by recruiting managers and directors out of those banks who are properly trained in credit assessment: it certainly doesn’t need a board of bien-pensant quangoists like the Clegg fund. And it will have to set to its task swiftly if it is to have impact on the current scarcity of credit: the word from the Cable camp that the bank won’t start lending until 2014-15 sounds like a device to prevent anyone labelling it another embarrassing flop before the next election.
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