Economic Policy

Tensions Continue to Rise Between Huawei and the United States

Huawei, the Chinese tech giant, continues to expand its empire overseas, but is starting to face push back in the United States. Federica Russo examines some of the issues the US has with Huawei's expansionist endeavors.

BY: FEDERICA RUSSO

Centuries ago, the Age of Discovery promoted the consolidation of the European position on the global stage: Courageous and adventurous men left their towns in search of unexplored places where they could demonstrate the potency of their nation by erecting the national flag, the symbol of pride and victory.

Nowadays, the antagonism between governments has not gone away, and the willingness to succeed in arduous missions, in order to conquer applause and influence, remains evident.

However, in contrast to the old practices, the aim is not penetrating distant and deserted lands but rather affirming its own role on the international stage is an ongoing tussle in field of innovation. Here, the capacity to grow and to become precursors of the future relates to the authoritativeness it gives.

According to the World Intellectual Property Organization, from 2003 to 2017 China deposited 20% of the international patent applications seeking to spread its dominance in the area of artificial intelligence, quantum computers, 5G technologies, and robotics.

The Asian Giant is driving the patent applications demand by understanding the importance of emulating, and then surpassing, the US performance, with the purpose of becoming the engine of progress. This perspective does not reassure the US government which would implement new commercial measures to curb the wave of the economic, financial, and technological transformation ridden by their Chinese counterparts. By analyzing the dynamics within the innovation technology sector, an element may be added to the mosaic of the commercial rivalry between Washington and Beijing. This card is Huawei, the Chinese company at the head of the race for the establishment of the red flag in the ITC industry.

In 1987, the Huawei Technologies Co. Ltd was founded in Shenzhen by Ren Zhengfei, a former salesman of telephone equipment. This organization has evolved over the years and it is now a multinational telecommunications and service company, which operates in 170 countries through 180.000 employees.

By definition, the ITC environment is characterized by a high level of instability and complexity; they are distinctive features leading to a daily increase in contextual shifts making it hard to meet significant targets, especially when the competitors are titans like Apple or Samsung. Despite this complexity, Huawei responded swiftly to the context by implementing a strategy focused on the Research and Development Unit. Every year, 15% of profits is allocated to the study and search for new solutions thanks to the connection and to the tracking of the needs of the external environment.

This strategy could be summarized in The Wolf Spirit absorbed inside the company. This means having the ability to develop a great competitive instinct and a collaborative approach in order to transform the desired objectives into achieved results.

Due to the combination of a specific set of behavioral features with global changes, in recent decades, the Chinese enterprises have expanded abroad. China’s accession to the WTO, the 2008-2009 global financial crisis, and less stringent procedures of overseas M&A, created opportunities beyond national borders.

The strategies adopted to satisfy the overseas designs were different. Huawei opted for a rural to urban growth first of all by establishing its bases in the emerging economies (Russia, Africa, Southeast Asia, South America and Middle East) and subsequently by penetrating into the European, Japanese, and North American markets to grasp independent intellectual property rights.

In spite of an effective action plan, there were several challenges in the well-established markets. Specifically, Huawei faces obstacles in the United States, where the government is guarded when dealing with Chinese enterprises.

The US government believes that Huawei can exploit the sale of mobile devices in America for espionage activities. The charges against the company are linked to the experience that Ren Zhengfei had when he was younger, working for the Technology Research Unit of the People’s Liberation Army. According to the US authorities, the Huawei founder could be involved in the Chinese government’s affairs and consequently his firm could be a threat to public security.

Despite the fact that Huawei refuted every accusation, the tension between the two main digital powers is enduring. In the last few days, Google CEO Sundar Pichai, received a document signed by Senators Tom Cotton and Marco Rubio, and by some Members of Congress including Dutch Ruppersberger, Liz Cheney, and K. Michael Conaway, in which the signatories expressed their concerns about the birth of the relationships between the American multinational company and Huawei calling for Google to reconsider these ties in order to protect the national interest. The move comes after Google decided to withdraw from its collaboration with the US Department of Defense, a choice that maybe influenced the content of the text.

This is a signal of weakness from the United States, a country which is losing ground in the IT sector, where they have been represented by the famous Silicon Valley for a long time. This area has always been known as one of the few hubs, where new ideas are created and translated into our lives in the form of advanced and sophisticated technologies. But today the scenario is mutating and “someone is knocking on Cupertino’s doors.” China is building its own piece of Paradise in the universe of technololgy innovation thanks to the reverse brain drain phenomenon, which called back in the Guangdong region the brightest minds to realize a fully-modern empire no later than 2049. In the new Silicon Valley made in China, companies like Huawei, ZTE, and Tencent are ready to reclaim their position on the global stage and, obviously, this ambition cannot coincide with the US plans.

In this sort of minefield, the political and economic dispute between Washington and Beijing takes place by imposing tariffs and measures that can affect various sectors of the economy. It should be noted that Huawei has never violated US regulations, and the doubts around its work are not reflected in the reality considering the company has received excellent recommendations from local governments in various countries.

The financial or political variables cannot take precedence over the varied cultures they affect. They are parallel lines. When the analysis of an entity is directed only towards the search for truth, all decisive elements that contribute to shape its identity should be examined, even when they are deemed non-credible from an observer’s point of view. Leadership models and corporate ethics models can differ when they relate to different organizational cultures in different countries, which, in turn, are driven by the values, the history, the habits of a civilization.


Federica Russo is an Italian student of Business Administration with a focus on Organization Design, Statistics, Corporate Management, and International Economy. With five years of experience in writing articles on world affairs, she is a contributor for the Asian section of “Il Caffè Geopolitico” where she covers articles on Chinese issues. At the moment she is working on her final dissertation analyzing the impact of the BOD composition in the multinational Oil Companies.

Please note that opinions expressed in this article are solely those of our contributors, not of Political Insights, which takes no institutional positions.

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