Huawei under fire, what happens next?

What can Huawei do? Under heavy incoming fire, its founder presents openness, calm, and some bemusement. But it's control of the narrative that matters now.

The hits keep on coming for Huawei. This week we learnt a) there’s a live legal process in the USA where the company is charged with stealing trade secrets related to an automated phone testing technology. b) Taiwan’s ITRI is going to stop Huawei mobile being used by government personnel c) Germany is somehow going to game its security requirements for 5G networks to make it impossible for Huawei to be a vendor (it’s unclear how it might do this).

Just a reminder, it’s CFO is still on bail in Canada awaiting extradition to the USA to face charges of sanctions busting. Recently on that story came a decently-sourced allegation that Huawei had created two front companies via which to export equipment containing US technology to Iran.

An employee in Poland was accused of as-yet unspecified espionage, and was fired by the company.

On Monday, Huawei’s Founder Ren Zhengfei appeared, unusually, at a media round table to answer questions from the likes of the FT, AP, Bloomberg etc. Clearly Huawei’s newly appointed PR agency Burson Cohn & Wolfe has quickly turned to the crisis comms pages of its operating manual. But this is a situation that is very difficult to manage using crisis PR. The aim of this sort of media appearance is to come out and be open, to get ahead of the story and to try and regain some control of the narrative. Did Ren achieve this?

There’s an attempt to humanise Huawei, by drawing attention to Ren’s back story (in part itself a mini-history of late 20th and early 21st century China) and to Huawei’s work in disaster relief programmes. He says that despite others knocking lumps out of Huawei, he won’t retaliate or seek to invoke nationalistic retaliation, say against Apple. He seems bemused that the US thinks it can anachronistically assert control of an interconnected, globalised technology sector.

On some items there is progress. When he is asked why he joined the Communist Party, he is open on the realpolitik of such a move. He claims he was not a party natural and refers to his father being a labeled as a “capitalist roader”. (Later on he even appears to embrace trickle-down economic theory in welcoming Trump’s corporate tax cuts.) He explains the ownership of Huawei, prompting journalists to check the employee share register. He perhaps makes too much of a rather top-down controlled employee rep election. Some denials are also clear, even if they do also leave some legalistic room for manoeuvre: “China’s Ministry of Foreign Affairs has officially clarified that no law in China requires any company to install backdoors. Neither Huawei, nor I personally, have ever received any requests from any government to provide improper information.”

But if you’re going to take this sort of media approach, you really do need to be genuinely open, or at least to give that impression. On occasion, Ren was not. When he is directly asked, effectively, “Is your chairwoman Sun Yafang a member of Chinese intelligence, as has been alleged by the CIA”, he answers that her bio is on the Huawei website. Why not just say “no”? When he is asked how his military origins affect Huawei now – ie, “tell us about any links between Huawei and the military” there’s a huge background story of hardship and development that finishes with some distancing from the military, but no overt recognition of the obvious current importance of the question. When he is asked, “Will you do the Government’s bidding when push comes to shove” (again, a precis) he says Huawei would never do anything to hurt its customers. Not quite the same thing. When he is asked what assurances Huawei could give to be allowed back into US markets, he says he doesn’t know.

These quibbles aside, things in this “story” move too fast, and on too many fronts, for such an approach to have much impact. It’s very hard to change the narrative when the bullets are coming from four fronts, and in such rapid fire.

Taking fire on four fronts:

1. Sanctions busting. The accusation is that Huawei used front companies as cover to break sanctions on exporting technology of US origin to Iran. These accusations are historical, ie they address something that is alleged to have happened, rather than being “potential”.

In theory they can be played out in court, and this is purely a legal reckoning. However, both “sides” have muddied the waters – making this situation look more political than legal. China has carried out a series of arrests of Canadians (that it claims are unrelated), and Trump has made an “I could make this problem go away” offer.

2. Then there are accusations that Huawei equipment is insecure, and could be compromised in some way by the Chinese government for spying purposes or to meet some other national security interests. These accusations, to date, exist as potentialities. ie, there is no public example or breach or even technical specification that Huawei can respond to.

All it can do is deny that a) it is controlled by the Chinese government b) that it has installed any backdoor access to the Chinese government that would enable surveillance. But until western intelligence or Huawei itself makes clear what the actual issues are, or can point to a known breach, then Huawei is in the realm of proving a negative.

The closest example of things getting more tangible in this realm was of the UK authorities determining that Huawei’s process rigour was lacking – meaning that it could not track software development and thereby certify security – and the subsequent promise to set up further processes to conform to the requests of UK authorities.

3. The new accusation that is emerging around industrial espionage. This opens (or rather re-opens) a different front for Huawei. So far the company has been silent on this specific story, although it has long, long faced similar accusations of differing seriousness and far-fetchedness, from corporation-destroying surveillance (Nortel) to smash and grabs at trade shows, via injunctions sought by Cisco alleging wholesale copying of its codebase. Naturally Huawei has never admitted to this.

4. Huawei as a direct tool of government espionage. This one is bubbling under and in Poland has bubbled over. The long running implication has been that Huawei has acted in some way as cover for Chinese intelligence, or has some level of connection. Huawei’s chairwoman was directly accused by CIA of being an intelligence member. This accusation is linked to item 2 in that it is suggested that Huawei equipment is part of a sigint operation. However there is also a human intelligence angle – that a MNC like Huawei, connected to critical businesses and to governmental entities in many countries, is a great place for China to place officers and from which to recruit assets, and gather information.

Huawei’s response has been to immediately sacked its Polish-based employee in an attempt to put clear red water between itself and any suggestion of spying. And nobody knows what exact charges the man will face, and if they are related to government or corporate espionage or to a criminal enterprise.

What else can Huawei do?

At the moment the impression is that things are spiralling out of control for Huawei. Every week brings a new story. Each country’s government, and many telcos themselves, are being asked for their position on Huawei. Any hesitation in endorsing the company results in a new story.

Ren’s position in his media statement was to effect a sort of fatalistic calm,  a sense of powerlessness. “We are like a small sesame seed, stuck in the middle of conflict between two great powers.” He said that the company would carry on with those that do welcome it, even if it is banned from western or other markets. That way they can prove their credentials. He’d rather carry on, and be a smaller player if need be, than chase lost causes, although he would remain “open” to all markets. A ban on using US tech would not be an existential threat, as it was for ZTE.

Huawei plans more media round tables. What we know for sure is there will be a ready supply of stories for it to address at any future such events.