#4 - Huawei
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📰 1 topic: Huawei
Huawei has emerged as one of the world leaders in core 5G infrastructure, and countries building out their 5G networks have recently had to make the decision whether or not to purchase equipment from Huawei.
Almost a year ago, the U.S. banned American chipmakers from supplying components to Huawei and American companies from using Huawei equipment. In 2018, Australia imposed a ban on Huawei gear, and Japan put restrictions on purchasing Huawei equipment for government use. A few weeks ago, the U.K. said that it would not ban Huawei equipment from being used in its new 5G network, and now, eyes are on Germany as it votes in a few weeks on whether or not to exclude Huawei. What’s all the hype around Huawei?
Arguments in favor of allowing Huawei to handle countries’ 5G networks:
Delayed 5G, delayed innovation. Huawei sells the cheapest and best 5G equipment (partly because of massive state subsidies), so banning Huawei equipment would delay the construction of 5G networks and cost billions to replace old equipment. 5G is so important because each new generation of cellular networks and connectivity unlocks new technology. For instance, you could not have built Google Maps on dialup; you could not have built video streaming services on 3G; and you could not have built Snapchat without 4G / LTE. What explosion of technology will 5G enable? If innovation is a lever for social progress, we should pursue the path of least resistance in enabling that innovation.
Free trade absolutism. Huawei should do what Huawei can do best, and all consumers can reap the benefits.
Chinese investment and talent. John Roos, the former American ambassador to Japan, said that the Huawei ban (and obviously the trade war) has soured the U.S.-China relationship. As a collateral consequence, less capital and talent have been flowing between the two countries.
Evidence of espionage is unconvincing. The U.S. has been harping on Huawei’s security vulnerabilities (see analysis below), but British officials and executives said the U.S. hasn’t shared “smoking-gun” evidence that warrants an outright ban. Although there may be some security vulnerabilities in Huawei’s equipment, British officials found that the problems were not a result of interference from the Chinese government. In any case, Huawei has already guaranteed other governments that it wouldn’t engage in surveillance.
Britain’s approach: Limit and monitor. When Britain decided it would allow Huawei to help build out its 5G network, it also imposed some restrictions: Huawei equipment can only have a max 35% market share of Britain’s 5G network, and Huawei equipment cannot be used in network-critical areas such as city-centers. This serves two purposes: (1) The restriction encourages new competition that could benefit other companies building 5G infrastructure, including Ericsson, Nokia and Samsung; and (2) The limit precludes Britain from relying too heavily on Huawei equipment that the Chinese government could compromise down the road. In any event, Britain will also continue to monitor Huawei equipment and can therefore pull the plug on Huawei later, anyways.
Arguments against Huawei all revolve around national security.
Huawei’s ties to the CCP. As a general matter, no Chinese company is fully independent of its government, which reserves the right to require companies to assist with intelligence gathering. As a particular matter, Huawei is even more closely tied to the government than many other Chinese firms: Its founder, Ren Zhengfei, is a former technologist in the People’s Liberation Army. Huawei claims the Chinese state has no influence over its activities, but the company is treated as a state-owned enterprise and has benefited from state procurement funds, subsidized financing from state-owned policy banks and state funding for research.
Security vulnerabilities. U.S. officials have been digging into Huawei technology, uncovering vulnerabilities, and sharing these findings with countries currently considering whether or not to use or ban Huawei. This past week, the U.S. decided to make some of these vulnerabilities public. Officials said Huawei’s equipment secretly preserves its ability to access networks without the carriers’ (e.g., AT&T, Verizon) knowledge. Australia also claims it knows that Huawei has aided the Chinese government in hacking foreign networks. Other telecom-equipment manufacturers don’t have the same security flaws.
Britain’s limit-and-monitor approach is flawed. Software apparently plays a bigger role in 5G networks. If this software is constantly being updated, small (but critical!) changes may go right under the nose of regulators.
Intellectual property theft. One of the ways Huawei (or the Chinese government) can exploit its security vulnerabilities is to steal intellectual property. Huawei, after all, has a lengthy history of doing so. For instance, as far back as 2003, Huawei was accused of stealing intellectual property from Cisco. More recently, Huawei has been accused of stealing intellectual property from T-Mobile.
Espionage and cyberattacks. China admits it has an army of hackers. The Chinese government could use Huawei to hack into our communication networks, which would be … pretty bad… I’m just throwing darts out, but let’s suppose autonomous vehicles will communicate with one another and with remote servers using advanced 5G networks. If the 5G networks were built on Huawei, Huawei could theoretically cause cars to crash into one another, or at the very least, drop the communications.
Geo-politics. If we rely on Huawei, we’d be relying on a potentially adversarial state for foundational, critical infrastructure. The fact of the matter is this: If you play out a gazillion scenarios of future disputes, the number of situations where the U.S., Sweden, and Finland are on the same side is very high, but you could easily imagine many scenarios where the U.S. and China are on different sides. As a practical matter, if someone else is going to be in control of your communication technology, wouldn’t you rather it be someone that shares your worldview? The argument goes that if we should be relying on anyone for our 5G, it should be Finland’s Nokia and Sweden’s Ericsson. Although Huawei might not do anything today or tomorrow given the current state of geo-politics, what happens when the current order gets out of control?
This was a long post, probably deserving of a blog sometime later. I personally am more on the side of banning Huawei although it’s a hard decision for me. I’m principled in my commitment to innovation, and I do think that 5G will unlock a ton of it. That said, I’m even more committed to freedom and democracy (yeah, cliché).
I know I’m missing a few arguments, so what are your thoughts?
📚 5 articles
Lots of China here, too:
Chinese state surveillance and coronavirus. China is using artificial intelligence to track people with coronavirus. It can apparently use facial recognition to spot and identify people with fevers.
AI innovation to combat coronavirus. One of the few non-bad (good?) things to come out of the coronavirus outbreak: China has responded by taking risks in deploying nascent technology (autonomous vehicles and robots) sooner than it otherwise would have.
Predicting coronavirus before it happened. Fifty years ago, it would haven taken a long, long time for a state to declare a national epidemic. Sick patients would go to their primary care providers —> primary care providers would individually report information that would slowly trickle its way up to the government —> the information would eventually get aggregated, after a bunch of people have already come down with the sickness. Today, the Internet + AI, can detect trends before patients even go to their doctors.
The neuroscience behind picking a presidential candidate. My (discouraging) takeaways: For many, in the arena of politics, we don’t know what we really want. We don’t have strong convictions. We are easily manipulated. This definitely applies to a bunch of things outside politics as well.
Physics, centrifuges and rockets. Very cool.