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Many countries have blocked Huawei, but India can’t afford to ban it from its telecom story

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Experts in the US and other countries have long suspected that Huawei’s products spy for China, but it seems inextricable from India’s telecom sector.

New Delhi: Some of the world’s most powerful countries have blocked products from the biggest telecom equipment manufacturer Huawei, because they suspect threats to their national security.

Since August 2018, seven countries have either banned Huawei (US, Australia, New Zealand, and Japan), are mulling a ban extension (Taiwan), or have seen their leading telecom companies discontinue or restrict the use of Huawei infrastructure (UK and France). In addition, the US is calling Germany and Italy to join the fray against the Chinese firm.

This, however, is an option India cannot exercise.

With the country getting ready to test 5G connectivity in 2019, the government has been flip-flopping on inviting Huawei to take part in the trials. But it’s a little too late to delete Huawei from India’s telecom story, given its low prices, domestic investments, and long-term repayment schemes, which a sector with Rs 7.7 lakh crore of debt is more than happy to have.

On its part, the Shenzhen-headquartered company has repeatedly denied all allegations against it.

“At Huawei, privacy and security are always our first priority. Huawei has a robust system of cyber security assurance and a proven track record. We comply with all applicable laws and regulations wherever we operate. In India, we ensure necessary compliance based on audits by external agencies,” Huawei told ThePrint in an email response.

Huawei in India

Huawei says it entered India around 20 years ago and was among the first Chinese companies to invest in the country. Its largest overseas R&D centre is in Bengaluru.

In India, it sells products like smartphones, smartwatches and dongles to retail consumers and telecom equipment and software to network carriers.

Many of India’s telecom sector players, from the state-owned BSNL to Reliance (even before the Ambani brothers split up), have been using Huawei equipment for more than a decade.

Vimal Wakhlu, former chairman and managing director of the government-owned Telecommunications Consultants India Limited, explained just how Huawei became an integral player in India, despite concerns over security.

“The Chinese are master negotiators,” Wakhlu said. “When a company offers equipment at the cheapest possible price and gives you about 15 years to pay off the bills, it’s hard to say no, and by the time you realise it, you’re deep in debt and it’s too late to back out of the ties.”

Also read: Huawei eyes no.1 slot in smartphone sector after dethroning Apple

Suspicions raised

Huawei was founded in 1987 by Ren Zhengfei and four other partners whose names are not known, according to Bloomberg. In 2018, it is both the world’s biggest telecom equipment maker, and the second-largest smartphone maker after Samsung. Its 5G innovations have won global honours.

But early on in its rise to the top, eyebrows began being raised at the company.

“Since the 1990s, several countries have had suspicions about the security of Huawei equipment — that they have secret trapdoors and backdoors for sending confidential information back to China. Or that the Huawei equipment have hidden ‘kill switches’ which China could use to paralyse telecom networks in other countries which bought Huawei equipment,” Ravi Visvesvaraya Sharada Prasad, a Delhi-based consultant in telecommunications and information technology, said.

Prasad, an alumnus of Carnegie Melon and IIT-Kanpur, described one of the most suspicious things noted in Huawei equipment, though he said it wasn’t conclusive proof of a ‘backdoor’.

“There is a call set-up network, by which your phone queries my phone if I am ready to receive a call. A small amount of call set up data travels, and it is not encrypted. However, on some Huawei networks, it was occasionally seen that huge amounts of encrypted data – several hundred megabytes – were travelling. But it could not be determined where this encrypted data was going to, or what the [data] packets contained,” he said in an email to ThePrint.

“Typically, the time taken for the call set up is a few hundredths of a second. But in some Huawei equipment, it was occasionally seen that it took about a second to set up calls, about twenty to fifty times longer than what it ought to take.

“This is very suspicious behaviour, but it is not conclusive proof of espionage by Huawei. They might just be collecting information about the performance of their networks in operation, and sending this data back to China for the purpose of improving their equipment.”

Sources told ThePrint that officials at India’s National Technical Research Organisation, which reports to the National Security Advisor, have been puzzled by this particular behaviour of Huawei equipment.

In 2014, India had also investigated claims that Huawei had hacked the BSNL network, which the company denied.

Ownership question-marks

There are also questions over Huawei’s ownership. It is said to be owned by its employees, with founder, director and CEO Ren Zhengfei holding just 1.4 per cent of shares, but the structure is opaque.

“Other Chinese companies in the exact same industries like ZTE or HikVision are directly owned by branches of the Chinese military or intelligence firms and have enormous security problems,” Christopher Balding, a widely-quoted American critic of China and associate professor at Fulbright University, Vietnam, said, adding, “At the very least, they provide complete access to Chinese intelligence. At worst, they are partially owned by state-linked entities in the military industry.”

According to its 2017 annual report, the Huawei group received a mix of conditional and unconditional government grants totalling 1,504 million yuan (approx. US $230 million) for the year ended 31 December 2017. Further questions arise because Ren was part of the military’s engineering corps, retiring as deputy director in 1983 when the corps was disbanded.

However, Ananth Krishnan, visiting fellow at Brookings India, who was based in China from 2009 to 2018, said it was “overstating the case to say Huawei is part of the People’s Liberation Army, or that Ren was a senior PLA figure”.

“Most folks with engineering and technical backgrounds like Ren in the 1950s and 1960s had few options besides the PLA’s engineering corps,” Krishnan said.

“However, countries doing business with Huawei, including India, should be under no illusions about its close links with the authorities. Huawei and other Chinese companies, private ones included, will pursue their commercial interests abroad, but they will also never go against the interests of the [Chinese Communist] Party and the government,” he said.

Also read: Eight charts that tell technology’s story for 2018

Flourishing despite controversies

In the midst of all the bans, earlier this month, Ren’s daughter Meng Wanzhou, also a top executive at the company, was arrested in Canada, at the behest of US authorities.

But despite all the controversies, Huawei continues to grow fast — its 2017 revenue was $92.549 billion, and the Hong Kong media said it has forecast its revenue to grow to $100 billion. Ren’s own net worth is approximately $2 billion, according to Bloomberg.

Part of the reason for this unhindered growth is Huawei’s incredible talent to weave cheap prices into negotiations. Indian telecom industry sources say it offers products at much lower prices compared to competitors, sometimes even 40 per cent lower.

Jay Chen, CEO, Huawei India, told ThePrint that in India, there is no set pricing: “No prices in India…only negotiations.”

Another Huawei tactic appears to be, ‘If you can’t beat them, hire them’.

“Britain’s electronic espionage agency GCHQ had set up a special cell in Banbury to examine Huawei’s equipment for spyware, with the entire cost to be borne by Huawei. Interestingly, Huawei recruited several senior officials who were investigating it. These include Andrew Hopkins, who was deputy director and head of engineering of GCHQ, and John Suffolk, who was chief information officer of the UK government,” said Prasad.

Having joined Huawei in 2011, Suffolk now serves as senior vice-president of global cyber security and privacy. He has met Indian government officials to help change their perception of the company.

5G in India

Even if the government of India wants to keep out Huawei from the development of 5G in India, as it stated in September 2018, it may not be possible, since Indian telecom companies have already been testing 5G mobile networks with Huawei equipment.

“The government of India had banned Huawei and [another Chinese firm] ZTE from participating in its 5G programmes, a move which has been strongly opposed by Indian telecom operators, who have bought equipment from Huawei on attractive long-term supplier’s credit and easy payment terms,” Prasad pointed out.

The Cellular Operators Association of India (COAI), the premier telecom lobby body whose core members include Reliance Jio, Airtel and Vodafone-Idea, has often defended Huawei, its associate member.

“We acknowledge and appreciate Huawei being one of the major companies at the forefront of 5G innovation. They are suitably equipped to prepare operators and industry to build 5G capabilities in operations, in organisation, and most importantly, in the ecosystem, that they are fully compliant with all government requirements,” COAI director-general Rajan S. Mathews, speaking on the 5G issue, told ThePrint.

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  1. Let us take the worst case scenario. Huawei is owned by the Chinese state, its founder is a mukhauta. A company with $ 100 billion in revenue, a lot of it in foreign countries, is a strategic asset for China. All the more since it is in the high technology sector, where China would like more of its economy to be. Not sure the Chinese would risk the future of the enterprise by making it a front for espionage and dirty tricks. For that matter, it is a safe bet that US tech firms like Google and Microsoft would be sharing every single byte of information with the US government whenever called upon to do so. If Facebook can do so much mischief for money, difficult to see any US firm say No if a request is made on grounds of national security. 2. It is now clear that the United States is trying to trip up China, impede its continuing rise, block the transition of its economy to a level of sophistication that matches America’s own. India must do it’s sums carefully, judge where its long term interest lies.

  2. Indian authorities should not take this lightly. If advanced countries like the USA have found something fishy about Huawei, we must give credence to their scepticism. Following is a quote from this article:

    “..Part of the reason for this unhindered growth is Huawei’s incredible talent to weave cheap prices into negotiations. Indian telecom industry sources say it offers products at much lower prices compared to competitors, sometimes even 40 per cent lower…”

    There is no “talent” required to offer low prices — you can either afford to offer low prices or you cannot afford. “40% lower” is not necessarily alarming; the important thing would be to compare Huawei’s prices with other CHINESE SUPPLIERS for the same products. If Huawei is able to offer “surprisingly low prices” even compared to its “compatriots”, who obviously manufacture in the same milieu (same labor costs, same raw material or components cost, similar overheads etc), then obviously “somebody” is subsidising Huawei’s costs. Which could mean Chinese government or military.

    On such issues there should be a linkup between India’s NIA and USA’s CIA or FBI.

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