February 14, 2019

The Huawei case: Canada loses it all: CATA Op-Ed, Jean Guy Rens, CATA EVP, Research

When RCMP officers handcuffed Huawei Technologies’ vice president of finance, Ms. Meng Wanzhou, on Saturday, December 1, 2018, at the Vancouver airport, they opened up an international crisis that has been clumsily handled so far, and contrary to Canadian interests. The clumsiness must be attributed to current government officials who immediately said they had been warned “a few days in advance” of the upcoming arrest but had done nothing to prevent it. Usually, a State concerned with its interests would have discreetly warned the Chinese authorities of the threat posed to one of its nationals. For “a few days” the fate of relations between Canada and China was in the hands of our PM. He had plenty of time to think about the consequences, but he chose to do nothing.

Why does the U.S. reproach Huawei Technologies? Essentially, it is about having done business in Iran while this country was hit by an American embargo. Of course, it is perfectly understandable that the U.S. is embargoing Iran. Yet, should all countries live in the age of the vagaries of the American political agenda and consider the position of the day as an immutable “rule of law”?

The U.S. is so aware of the partisan political nature of its quarrel with Iran that it has matched Meng Wanzhou’s extradition request with a host of other charges, including one that is totally foreign to the Iranian question. Huawei Technologies is accused of having spied on the T-Mobile cell phone company and stealing secrets from its robot nicknamed Tappy. This is a rather ordinary equipment that is used to test smartphones before marketing them. The quarrel between Huawei and T-Mobile dates 2014 and was lingering before the federal court in Seattle without attracting the attention of anyone, as are the many lawsuits between high-tech giants. Remember how Blackberry had been harassed for years by a US law firm claiming to have rights to the email technology. Moreover, T-Mobile is the subsidiary of Deutsche Telekom and it is rather unusual for the U.S. to take to heart the interests of a foreign company and, more in particular, a German company.

Huawei is the technology leader of 5G

Mrs. Meng Wanzhou is the daughter of the founder of Huawei Technologies and it is that company that Washington targets. Indeed, Huawei is the largest telecommunications equipment manufacturing company in the world. Its revenues of around U.S. $100 billion a year are double those of number two, Cisco Systems. For a company created thirty years ago it is a spectacular success that dwarfed other Chinese achievements, regardless of the sector considered.

The key to Huawei’s success is its massive investment in R & D. Nearly $14 billion in 2017, which represents about 14% of revenues. This ratio should be increased to 20-30% over the next few years. In comparison, Nokia and Ericsson invest 15.7% of their revenues in R & D, Cisco 12.8%, Apple, only 8.2% … Now, these figures stagnate when they do not fall. But that’s not all.

The quality of Huawei’s R & D is not the same as that of its competitors. At the heart of Huawei’s strategy is a bet on basic research. About 10% of the budget allocated to R & D is devoted to pure science. All of its competitors rely on applied research when they do not abandon research altogether. When they want to innovate, they buy licenses and even businesses, rather than investing in R & D.

Huawei’s huge effort is starting to pay off as the company has developed a 5G wireless telecommunications offering before all competitors. It is not a simple increase in the transmission rate compared to 4G, but a qualitative leap that almost completely eliminates the response time of connected devices, offering a latency of around a millisecond, against 10 ms in the current networks. At such a low level of latency, it is no longer human beings that are targeted, but machines and, in particular, the Internet of Things. It becomes possible to operate a remote object in near real time.

Precisely, the 5G allows ultra-connectivity, that is to say to create multiple simultaneous beams to up to one million different devices per square kilometer, whether in the open air or indoors. In short, 5G is at the heart of the world of tomorrow. For the first time, it is not an American company that is at the forefront of a technological breakthrough, but a foreign company and, moreover, a Chinese company. The absolute enemy. Huawei cannot be blamed for copying 5G plans from US companies – no U. S. companies are in line – only Ericsson and Nokia compete with Huawei, but they are two years behind.

Inconsistency of U.S. policy

Bad player if anything, the U.S. is attacking Huawei over China’s refusal to comply with its changing policy on Iran and spying on a so-called robot belonging to a German company that conducts almost no R & D, at least no basic research. Similarly, in 2017, the US Department of Commerce imposed a 300% tariff on Bombardier C-Series airliners that Boeing accused of receiving Canadian government subsidies. The charge was not upheld by the U.S. International Trade Commission, but the damage was done and Bombardier has sold the C-Series to Airbus. There are many instances in which the U.S. has tried to obtain through the courts what it failed to achieve by other means.

The Huawei case is typical of a country plagued by the law of immediate profit that is seeing its scientific research compromised. What is new is that an individual is now taken hostage by the U.S. government and faces a prison sentence of up to 30 years or more if the sentences are considered cumulative, for gestures that should have been settled at the bargaining table. By being complicit in this wrongdoing, the Canadian government has shown a flagrant lack of political judgment, which also affects the two Canadians imprisoned in China on a matter that is of no concern to them. The worst thing about this case is that Canada cannot expect any recognition, much less a counterpart, for its bad action. The  U.S. government is indeed divided into several contradictory trends, teetering on the edge of chaos.

About Jean-Guy Rens

Jean-Guy Rens

Jean-Guy Rens is an information-technologies consultant specializing in public policy analysis and marketing assistance for the introduction of new products and services. Mr. Rens has produced several independent studies on the information-technologies market in Canadian and Quebec markets. He has also conducted several studies on both robotics and cybersecurity for the Canadian Advanced Technology Alliance (CATAAlliance): the Canadian Advanced Security Industry and the Advanced manufacturing sector.

On the international scene, Mr. Rens worked in Tunisia, Senegal and Morocco where he is currently conducting the first study on cybersecurity for the main association of cybersecurity users (AUSIM). Earlier, Mr. Rens had helped France Telecom to get prepared for the advent of competition (Local rates in Canada and Universal service and cross-subsidization in Canada).

Mr. Rens wrote a book on the history of telecommunications in Canada under the title  “The Invisible Empire” (History of Telecommunications in Canada), McGill-Queen’s University Press, Montréal 2001. He is a member of the management team and Governing Council of the Canadian Advanced Technology Alliance (CATAAlliance) and serves as CATA Quebec EVP.

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