The Huawei War

Huawei developed and helped shape 5G. The US fears this and is restricting the use of Chinese technology in America. This has made Chinese tech firms ever more resilient.

In 1994, when Huawei was still a minor domestic player selling switches for telephone networks, its founder Ren Zhengfei met China’s leader Jiang Zemin. Ren, a former engineer with the People’s Liberation Army who went into consumer electronics, played the patriotic card, cautioning Jiang that ‘switching equipment technology was related to national security, and that a nation that did not have its own switching equipment was like one that lacked its own military’. A quarter of a century later, other countries, led by the US, have belatedly grasped the wisdom of Ren’s remarks; the technology in question today is 5G, and it is Huawei’s equipment that they regard as a danger to their national security.

Huawei is an employee-owned firm with a highly unusual rotating leadership structure, a disdain for public markets — Ren Zhengfei finds them too ‘greedy’ — and a corporate ethos that venerates Maoist values and emphasises indigenous innovation as a means of lessening China’s dependence on imperialist foreign firms.

Huawei’s remarkable success stems, in part, from its unyielding commitment to innovation: it has been spending more than 10% of its annual profits on research and development. In 2019 it spent over $15bn — more than Apple and Microsoft — and the budget for 2020 is $20bn. (For comparison, the R&D spend of the entire German car industry in 2018 was roughly $30bn.)

What lies behind these figures? Huawei has great symbolic importance for China: it is a rare company that has succeeded in moving up from the relatively basic, highly commoditised, parts of the value chain to its very top, on a par with Apple or Samsung. Its trajectory is emblematic of the Chinese government’s broader aspirations for its tech industry. China was long confined to the role of a workshop assembling other countries’ products: the words ‘Made in China, designed in California’, found on the back of every Apple device, are a humiliating reminder of this. Huawei’s progress suggests a new era is dawning, in which that slogan could finally be upgraded to ‘Designed in China, made in Vietnam’.

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