Tuesday, February 19, 2019

Huawei, tech war and geopolitics

Expect the tech war and geopolitical struggle to continue.

At the very moment Trump was having dinner with Xi Jinping in Argentina last year, an international bombshell event occurred the CFO of Huawei got arrested in Canada at the request of US officials. Now the US will extradite the CFO from Canada.

Meng Wanzhou, the CFO, is no ordinary person; known as the “Princess of China,” she’s also the daughter of Huawei’s founder, who is a billionaire and a legend who spent 15 years in China’s army (PLA) as a technology specialist. Think of him as Chinese Steve Jobs with an extra dose of patriotism.

Huawei itself is a global company with 18,000 employees and a revenue of $100+ billion. It is a leader in many areas of technology (more on that later).

First, let’s take a look at the charges against Meng:

Apparently, Huawei sold computers to Iran in violation of the new sanctions passed by the US in 2012. And specifically, the CFO allegedly lied to HSBC bank in 2013 about Huawei’s relationship with a Hong Kong company (SkyCom).

Even if all the allegations are true, can the US just arrest her?

Two days ago, EU announced that it will ignore US sanctions and continue to do business with Iran! Specifically, three big countries UK, Germany and France will bypass US dollar and US banks to trade goods and services with Iran. Are we going to arrest May, Macron and Merkel??

Unilateral and extraterritorial sanctions are against international laws, but the US does it anyways, because … it’s the superpower.

Also, many major European banks traded with Iran after Obama’s sanctions. In the end, they got caught, since they used US banks for transferring payments. But no European executive got arrested, and the banks simply got fined. For example:

So why is Huawei being targeted?

Two reasons: Technology and Geopolitics

Tech War: The US wants to contain China and is threatened by the “Made in China 2025” initiative, which aims to make China a world leader in technology and innovation. This is why tech giants such as Huawei are critical for both China and the US. Huawei has been rising exponentially over the last decade. Here are some examples of its technological prowess:

  • In 2018, Huawei sold more than 200 million smartphones and took over Apple as the #2 vendor. It wants to overtake Samsung within two years.

  • Huawei’s phones are consistently ranked as one of the best in the world even by US analysts and US consumer magazines. When Apple’s most expensive phones have 12 Megapixel cameras and Huawei’s phones have 40 Megapixel cameras, the winner is obvious. Huawei’s smartphone, Mate 20 Pro, has artificial intelligence that was used to compose classical music and complete Schubert’s 200-year-old unfinished symphony.
  • Huawei became the #1 telecom infrastructure provider, beating Ericsson and Nokia.
  • Huawei has become the leader in 5G and has released the world’s first chip-set for 5G base stations. On Feb 25, Huawei will announce a foldable 5G phone at MWC 2019. The phone is based on Huawei’s own Kirin 980 chipset and Balong 5000 modem (Note: no US technology). Kirin 980 is also the world’s first commercial 7nm system-on-chip (SOC). For AI tasks such as image recognition, Kirin 980 is twice as fast as Qualcomm’s Snapdragon 845 and 3x as fast as Apple’s A11.
  • But 5G is more than smartphones. 5G is going to transform the world and will enable IoT (Internet of Things), Smart Cities, Smart Manufacturing, Autonomous Vehicles, AR/VR (Augmented/Virtual Reality) etc. Huawei has already installed 10,000 5G stations in China and has contracts with 22 different carriers from 66 different countries to implement the 5G infrastructure.
  • Huawei is also pioneering in AI semiconductor chips (called “Ascend”) and is challenging Qualcomm and Nvidia.
  • Huawei claims to have beaten Intel with the world’s fastest server CPU “Kunpeng 920”; and is getting into cloud computing as well.

Here’s a quick video from Huawei touting their mobile technology

So, basically, Huawei has become a threat to the profits of western corporations. That’s the first reason behind all the demonization.

And how did Huawei become a leader? Although Huawei started off as a reseller and then became a copycat, it has become a veritable innovator over the last decade. There have been allegations that Huawei stole IP from Nortel and Cisco, but Nortel never brought charges and Cisco dropped the lawsuit in 2004. Moreover, US companies also regularly accuse each other of IP theft — for example, Qualcomm is now suing Apple for patent infringement and stealing valuable trade secrets.

What is rarely acknowledged by the mainstream media is that Huwaei spends about 15% of its revenue on R&D, while US corporations spend trillions of dollars on stock buybacks. Huawei also publishes more patents than Apple, Google, Intel, Qualcomm etc.

Geopolitics: Although Huawei hasn’t been caught spying so far using their infrastructure, well, it’s an eventual certainty that’s how the world works. The CIA/NSA have backdoor to iPhones from Apple and servers from Dell/HPE and routers from Cisco etc. Also, with so much faux outrage, people forget that the NSA hacked into Huawei’s headquarters a couple of years ago and stole all their corporate emails!

So, basically, the US argument boils down to “We can spy” but “Others cannot spy”!

Geopolitics is like middle school there will always be plenty of hypocrisy, double standards, gossips, slandering, back-stabbing and bullying.

Going Forward

Expect the tech war and geopolitical struggle to continue. Chinese technology will probably rule most of the developing nations in Asia, Africa and even much of Latin America. For example, Chinese brands have already captured 60% of India’s smartphone market, which is the second largest in the world. If China can supply better products at smaller prices, why would developing nations reject them? They will be spied on by either the US/EU team or China. Do they really care?

As for Meng Wanzhou, my prediction is that China will promise massive purchases of soybeans and oil … and Trump will release the Princess of China in a couple of months.

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