America’s first offensive against a Chinese tech giant it was the one launched during the Administration Trump – but prepared in the years of Barack Obama – against Huawei. The budget? It’s a failure.
Although the United States has made efforts – sometimes with the help of allied countries – to strangle the Chinese telecom giant, today Huawei is far from destroyed. For some aspects she was reborn stronger than before. The story is important for many reasons, including the fact that the anti-Huawei campaign prefigured those technological embargo measures then applied by Joe Biden with even greater vigor and determination. If that gives me a lot… we shouldn’t have too many illusions about the Western ability to limit or slow down China’s rise in strategic sectors.
A story that started in 1987… from the army
I take a step back in time to remember the context in which the American anti-Huawei campaign was born. With the premise that this is not “just any” company. Founded in 1987 in Shenzhen by a former People’s Liberation Army officer, Ren Zhengfei, Huawei is an exemplary model of Chinese-style hybrid capitalism.
On the one hand it is a private company, with the efficiency, leanness and speed of decision-making of an “American-style” capitalism. On the other hand, it has always enjoyed favor from the political authorities in Beijing, particularly since Xi Jinping has been president. Huawei is pampered by the regime as an example of a “national champion” to be supported in the competition with the United States. Also because some of its technologies are dual: they have both civil and military uses.
The first American accusations in 2012
Huawei was finished in Washington’s sights long before Trump arrived in the White House, at least from 2012 (second term Obama) for the numerous clues that its industrial and technological rise had been favored by espionage and systematic theft of know-how American. Also towards the end of Obama’s presidency, the Americans became convinced that Huawei was a long arm of the Beijing regime and was collecting information at its service.
During the Trump era, two different and specific issues came to the fore. Huawei was indicted for violating sanctions against Iran (at the height of an investigation launched under Obama). This led US federal justice to issue an arrest warrant against her Huawei’s financial director and daughter of the founder, Meng Wanzhou. The arrest was made by Canadian police while Meng was embarking in Vancouver for China in December 2018.
Blackmail against Canada
The arrest coincided with an important US-China summit, even if it was only known later. The detention of the financial director was “golden” (house arrest with wide freedom of movement, in a luxurious Canadian residence) and yet Xi Jinping responded with ruthless retaliation by having two Canadians arrested and subjected to harsh prison terms: a real one hostage takinga kidnapping for the purpose of “exchange”, proof of how much Huawei and its top management are dear to the communist regime. The pressure from Beijing was so strong that the US Justice Department under Biden decided to abandon the investigation against Ms Meng, which came freed by the Canadians (without ever having spent a day in prison) in September 2021.
The game of fifth generation telecoms (5G)
The other Huawei dossier that grew in importance during the Trump presidency concerned 5G, fifth generation telephony. The transition towards this technology, still underway in various parts of the world, should herald an increase in speed for all Internet functions, and a world where it will be easier generalized interconnection or “Internet of things”: a leap in efficiency and productivity, with the networking of many devices and machines that can communicate with each other and exchange information.
Huawei had come to have an advantage over all competitors in 5G: its infrastructure new generation telecom they were the most advanced, or the least expensive, or both at once. Many countries, including Western ones, had decided to contract Huawei with the construction of new 5G networks and the infrastructure to manage them.
An alarm arose in America: the fear that Huawei’s 5G networks would become a “Trojan horse” for Chinese espionage to penetrate much of the world. He launched a diplomatic campaign from Washington to convince allied nations to disengage from Huawei. These pressures were accompanied by a embargo, to prevent Huawei from sourcing the most advanced microchips manufactured in the West or in Taiwan. The Biden Administration has resumed, confirmed and prolonged all Trump’s measures against Huawei, adding many others that constitute a generalized embargo on certain supplies of Western technologies, not only against Huawei but extended to the entire Chinese industry.
The revenge under the sign of “autarky” innovation
Result? Huawei is not dead. It has lost some foreign marketswent through a very difficult period, but she survived and in some respects she was even reborn. I take the data on his “resurrection” from an analysis published on The Economist. In the first quarter of this year the Chinese company recorded a formidable rebound in net profits: +564%. Its total 2023 revenue of $100 billion is worth double that of Oracle, a flagship of US technology. By turnover, Huawei is half the size of Samsung, its South Korean competitor, but it invests even more in research and development.
His investment budget in innovationequal to $23 billion in 2023, places it in the top ten in the world, after the big American ones (Amazon, Alphabet-Google, Meta-Facebook, Apple, Microsoft). Huawei focuses on research activities 114,000 employees, more than half of its workforce. Is exactly here lies the key to the “resurrection”. The blow of American-Western sanctions was harsh at the beginning, but then it stimulated an autarkic reaction that works.
Huawei in its products managed to replace as many as 13,000 foreign components with the same number manufactured in China. Huawei like microchip customer it has become a driving force in the process of China’s emancipation from the West, it is the leader who disseminates orders to many other Chinese companies to stimulate them to produce what was once imported from abroad.
Huaewi is still far from matching the leading edge of America or Taiwan. It cannot compete on the most sophisticated semiconductors. For now, Chinese autarky is developing in the more mature microchip sectors. But the direction of travel is clear.
American sanctions appear to have accelerated Chinese innovation, rather than slowed it. This leads The Economist to suggest that we we should focus more on positive strategies to strengthen our superiority, rather than on containment policies who delude themselves into stopping the Chinese advance.
