This week is proving to be a veritable tale of two cities for Huawei, with the glitz and glamor of a center-stage presence at Barcelona's Mobile World Congress failing to quell the intensifying battleground for the company in Washington D.C. Barely 24 hours after launching a "5G folding phone pioneer" intended to outsmart Samsung's new Galaxy Fold, today's headlines are back to focusing on U.S. national security concerns.
In a letter to Energy Secretary Rick Perry and Homeland Security Secretary Kirstjen Nielsen, eleven cross-party U.S. senators, led by John Cornyn and including Marco Rubio, Mitt Romney and Dianne Feinstein, noted that "Congress recently acted to block Huawei from our telecommunications equipment market due to concerns with the company’s links to China’s intelligence services," and urged "similar action to protect critical U.S. electrical systems and infrastructure."
The potential security risk has been highlighted before, with the argument running that Chinese access to solar energy could act as a "sleeper" route into the wider energy system, presenting a national security risk.
The headlines from the senators' letter have primarily focused on the specifics of solar energy inverters and the potential risk from cyber penetration of the national energy grid. But the issue is much broader than that. It's all about the Internet of Things and the cyber risk that stems from the connection of everything, everywhere.
Back in October, former governor Tom Ridge warned that "the United States remains exposed to the potential for large-scale or prolonged disruption of the power grid, which could cripple the economy, adding that "we’ve been lucky to date, but that luck cannot hold out against a determined foreign agent with billions of possible points of entry."
This followed a 2018 report by Ridge Global and Protect Our Power, noting that "the director of national intelligence told the Senate Intelligence Committee they would not advise Americans to use products or services from Huawei" and that "the U.S. intelligence community has long been wary of Huawei, which was founded by a former engineer in China’s People’s Liberation Army."
The same month, Congressman Tom Marino wrote to Secretary Perry to "consider the threats to our national and economic security before allowing Huawei to penetrate the U.S. residential and utility-scale solar market."
Huawei didn't respond to a request for comment on this news specifically, but last week they told me that "it is time to recognize Huawei for what it is: an employee-owned global company operating in 170 countries and regions, which is committed to innovation and delivering outstanding technology to customers. Huawei’s business covers over 170 countries and regions worldwide, and the company's operations and management follow applicable laws and regulations in each country."
In December, Huawei made it clear that they would continue with their fast-growing U.S. solar business.
The Risks From IoT's Coming Tidal Wave
Solar inverters are part of the much broader Internet Of Things (IoT), with billions of devices due to come on stream over the coming years, powering smart homes, cities and workplaces. IHS Markit forecasts 125 billion IoT devices by 2030, up from 27 billion last year, with Accenture estimating that IoT could add $14 trillion to the global economy by 2030 through “the biggest driver of productivity and growth in the next decade, accelerating the reinvention of sectors that account for almost two-thirds of world output.”
The penetration of IoT devices into homes and workplaces has only just started. It is a market that lends itself to Chinese manufacturing dominance, and so expect to see this debate expand rapidly across the broader critical infrastructure sector and industrial base and then into homes.
The theory runs that a "bad state actor' could penetrate this network to cause untold damage - a situation made much worse by the intended prevalence of 5G. "We understand that Huawei, the world’s largest manufacturer of solar inverters, is attempting to access our domestic residential and commercial markets," the Senators wrote in their letter. "Our federal government should consider a ban on the use of Huawei inverters in the United States and work with state and local regulators to raise awareness and mitigate potential threats."
Somewhat ironically, this latest U.S. rallying call against Chinese tech comes just as there appears to be a potential thawing in the broader trade dispute between the two countries, with President Trump telling a number of U.S. governors on Monday that "we're going to have another summit, we're going to have a signing summit. So hopefully, we can get that completed. But we're getting very, very close."
For Huawei, the battleground has shifted from the U.S. to Europe, their largest market outside of China. A week ago, U.S. Vice President Mike Pence called "on all our security partners to be vigilant and to reject any enterprise that would compromise the integrity of our communications technology or national security systems."
This followed U.S. Secretary of State Mike Pompeo telling reporters that “if [Huawei] equipment is co-located where we have important American systems, it makes it more difficult for us to partner alongside them.”
Huawei CEO and Founder Ren Zhengfei told the BBC last week that "there's no way the U.S. can crush us." If the lights go out in the West, the East will still shine. And if the North goes dark, there is still the South... America doesn't represent the world."
Now, as Mobile World Congress begins, U.S. lobbying for European allies to join its ban on Huawei 5G equipment is failing to have the desired effect. Germany and Italy appear to be wavering, and even the U.K is equivocating. If the U.K. persists With Huawei, that would be the most damaging for the U.S. position, splitting the Five Eyes and introducing Huawei equipment into the core infrastructure of its most trusted intelligence and defense partner.
"It’s a hugely complex strategic challenge which will span the next few decades, probably our whole professional lives," the head of U.K. intelligence agency GCHQ said this week. "How we deal with it will be crucial for prosperity and security way beyond 5G contracts.” U.K. intelligence community reviewers are reportedly set to advise that risks associated with the inclusion of Huawei equipment can be mitigated.
For the time being, there is unlikely to be a let up in the rhetoric between U.S. lawmakers and Huawei. Although President Trump appeared to shift the argument last week from security to innovation, tweeting: "I want 5G, and even 6G, technology in the United States as soon as possible. It is far more powerful, faster, and smarter than the current standard. American companies must step up their efforts, or get left behind. There is no reason that we should be lagging behind."
On Sunday, Huawei's chairman responded in support of this, saying “I have noticed the president’s Twitter, he said that the U.S. needs faster and smarter 5G, or even 6G in the future, and he has realized that the U.S. is lagging behind in this respect, and I think his message is clear and correct."
And so this week, Huawei will spend half their time in Barcelona where they will continue to peddle business as usual (albeit with intense behind the scenes lobbying of non-U.S. regulators and carriers), and the other half of their time praying that progress in U.S.-China trade discussions takes the sting out of their American issues.
Expect more headlines throughout the week.