With its belligerent disregard for the rest of the world, China’s ruling regime has overplayed its hand in several ways.
Among the most telling examples is the abrupt change in fortunes of China’s Huawei Technologies Co. Ltd.
Huawei was once poised to help reinvent how the world communicates, with its technological lead in next-generation 5G networking, which is about 100 times more powerful in speed and functionality than the current 4G technology.
But today, Huawei is radioactive. In many of the world’s biggest markets, it has become politically difficult or impossible for telecom operators to buy Huawei gear for 5G networks.
And so, Huawei’s growth prospects suddenly appear constrained, effectively limited to Huawei’s home market of China.
The likely prospect of stunted growth at the $165-billion (revenues) Huawei was not self-inflicted, unlike most corporate crises. Huawei is collateral damage to a hostile Chinese foreign policy.
That’s ironic. With its brutally insensitive foreign policy, Beijing has been inadvertently sabotaging a Huawei it has long counted on to spearhead China’s industrial renaissance and increased global influence.
Canada is pretty much the last shoe to drop in this rare drama of a Leviathan industrial enterprise humbled by its own country’s misguided geopolitics.
Ottawa has yet to decide on welcoming or banning Huawei in Canadian 5G networks.
Complicating the issue, of course, is the 19-month-long arbitrary imprisonment by China of Canadian nationals Michael Kovrig and Michael Spavor. Ottawa insists the two issues are not linked. But it has to worry that a negative decision on Huawei could jeopardize the release it seeks of the “two Michaels.”
Yet, Canada’s decision on Huawei has effectively been made.
It was made in June, when the giant Canadian telecoms Bell Canada and Telus Corp. selected Huawei rivals Ericsson AB of Sweden and Nokia Corp. of Finland as lead suppliers to their 5G networks.
That was quite a blow. Since none of Canada’s other telecoms have committed to Huawei in 5G, Huawei has lost Canada as the one remaining major Western economy with which to showcase Huawei’s prowess.
That’s despite Huawei’s continued technological lead over its competitors in 5G. And Huawei still underprices its rivals, which it is able to do thanks to its huge captive Chinese market.
And customers like Telus were so committed to Huawei that the Vancouver-based telecom went public early this year with a warning to Ottawa. If Huawei equipment was banned, Telus declared, it might have to rip out and replace $1 billion worth of Huawei gear, an expense it would have to pass to its customers.
So how did Huawei lose Telus — and Canada?
We’ll soon see, but first a bit of background.
For years, Huawei has been described as a juggernaut. After all, more than three billion people use Huawei’s telecom networks and devices, including smartphones.
But most of those people are in Mainland China, which Huawei relies on for almost 60 per cent of its total revenues.
After 33 years in business, Huawei’s sales in the Western Hemisphere are a paltry 6.1 per cent of revenues.
Even more startling is that Huawei sales in its Asia-Pacific backyard are a mere 8.2 per cent of revenues. That has to hurt. Asia-Pacific is home to the world’s fastest-growing economies, and some of the largest ones.
Huawei’s paucity of orders outside its home market in recent years undoes almost a decade of effort by Huawei to reduce its reliance on China.
For Huawei to keep growing, it needs to start posting double-digit rates of revenue growth outside China. But for some time to come, that is an unlikely prospect.
It’s true that Huawei has not been able to stanch Western fears that, like all Chinese firms, it must do the Communist Party of China’s bidding if asked — a potential national security threat. Beijing responds to those concerns with Rottweiler diplomacy, badmouthing every country that dares raise this point of obvious relevance.
It’s also true that the Trump administration has channelled much of its fear and loathing of China into weakening Huawei.
But if Chinese President Xi Jinping is wondering who to blame for a looming stall-out in Huawei’s growth, he need only look in the mirror.
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China refuses to recognize Taiwan’s sovereign status. So, of course, Taiwanese telecoms do not use Huawei equipment — just one of Huawei’s many Asia-Pacific dead zones.
With China’s menacing armada of warships in the South China Sea, a threatened Japan — the world’s third-largest economy — has banned Huawei in its 5G networks.
So have Singapore and Vietnam, also fearful of China’s territorial aggression.
China has meddled in the internal political affairs of Australia. Australia has banned Huawei from its 5G networks.
China props up an otherwise doomed North Korean ruling regime that is threatening the security of the entire region. So South Korea’s two leading telecoms, KT and SKT, naturally shun Huawei equipment.
In May, China launched a shooting war on its Indian frontier. Dozens of people died and China has taken control of a slice of disputed territory.
India, the world’s second-largest country, has banned Huawei gear from the huge state-owned telecoms MTNL and BSNL. And India’s giant privately owned Reliance Jio telecom has spurned Huawei.
The U.S. has cut off much of Huawei’s supply of U.S. semiconductors (chips), the world’s best. Telecoms in Canada, the U.K. and across Europe now doubt the quality of Huawei gear.
That blow to Huawei could have been avoided if China had de-escalated its trade war with the U.S. by negotiating in a spirit of compromise rather than intransigence, after decades of abusive Chinese trade practices worldwide.
Still, it wasn’t until last month that Britain finally banned Huawei from 5G.
At that time, London was coping with an all too customary vituperative opposition from Beijing in its bid to repatriate hundreds of British nationals in Hong Kong after Beijing’s ham-fisted imposition of anti-civil-rights laws there.
Which leaves just Canada as the only member of the “Five Eyes” intelligence alliance — including Britain, America, Australia and New Zealand — which has not yet banned or restricted the use of Huawei gear in 5G.
Again, though, that decision has effectively been made.
It was made in June by Bell and Telus.
Not coincidentally, that decision followed revelations that Chinese authorities had covered up the COVID-19 outbreak in Wuhan for weeks last winter, leaving the world unprepared for a looming pandemic.
Huawei is no angel. Few hulking enterprises are. But it’s among the few enterprises of its enormous size and importance that can trace most of its woes to a home country’s wilful alienation of the world.
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