Huawei Technologies plans legal action against accusations by official agencies of several countries that its telecom equipment may be used by the Chinese authorities to spy on its clients.

U.S. Secretary of State Mike Pompeo said during a visit to Budapest, Hungary, that the presence of Huawei complicates the country’s partnership with the U.S. Earlier, U.S. ambassador to the EU Gordon Sondland made a similar warning. U.S. Vice President Mike Pence said in Warsaw that the U.S. welcomes Poland’s commitment to “protecting the telecoms sector from China”. Poland arrested a Chinese employee of Huawei and a former Polish security official on spying allegations. Chinese Foreign Ministry Spokesperson Hua Chunying said that U.S. actions using state agencies to suppress and block Chinese high-tech companies are unjust and immoral, and totally unfit for a major world power. Separately, Republican Senator Marco Rubio has proposed legislation that would restrict and tax Chinese investments in the U.S. to counter Beijing’s “Made in China 2025” industrial modernization program, which includes direct subsidies for domestic companies developing advanced semiconductors.

Some dissenting voices disagree with the allegations against Huawei. Robert Hannigan, Britain’s former Director of spy agency GCHQ, has characterized the “chorus of voices” calling for a blanket ban on Chinese companies like Huawei Technologies from telecommunications networks in Western countries as being “short on technical understanding” of cybersecurity and the complexities of 5G networks. While GCHQ’s National Cyber Security Center “has been blunt about Huawei’s shortcomings in security engineering and in its general attitude to cybersecurity”, it has “never found evidence of malicious Chinese state cyber activity through Huawei”, Hannigan wrote in the Financial Times.

That assessment is based on GCHQ’s evaluation of Huawei’s presence in British telecoms networks over some years, which has given it detailed insights into the company’s hardware, code, processes and policies. A blanket security ban based on a company’s nationality is likely to be ineffective as state-linked cyber espionage attacks on IT-managed services providers around the world do not require the manipulation of companies such as Huawei, he added. Hannigan is now a Senior Fellow at Harvard Kennedy School’s Belfer Center for Science and International Affairs. “Assertions that any Chinese technology in any part of a 5G network represents an unacceptable risk are nonsense,” he concluded. Hannigan said that the UK and other European countries should “hold their nerve” and base decisions on Chinese involvement in future telecom networks on technical expertise and rational risk assessment instead of “political fashion or trade wars”.

The CIA and the National Security Agency (NSA) have studied Huawei’s operations for over a decade, but they have not found a “smoking gun” showing conclusively that Huawei executives have helped Chinese security services penetrate America’s wireless networks. Still, President Trump is considering to order an new investigation which could lead to banning Huawei and other Chinese IT companies from selling their products in the U.S. and banning U.S. companies from selling components to them. Chinese telecom sales to the United States are tiny. Huawei has effectively been blacklisted by Washington for several years and made little market headway beyond limited sales in rural markets.

The company also received some good news: Philippines-based network operator Globe Telecom said the security concerns had been overblown and that it would push on with a planned roll-out of its 5G commercial services in the second quarter of the year.

Huawei became the world’s third-largest buyer of semiconductors last year, with its expenditure on purchasing chips witnessing the largest growth among the top five companies, according to research firm Gartner. Huawei spent over USD21 billion on semiconductor chips last year, accounting for 4.4% of the total worldwide market. It increased its chip spending by 45.2%, overtaking Dell and Lenovo Group to the third spot. Three other Chinese companies, Lenovo, BBK Electronics and Xiaomi Corp, ranked in the top 10 semiconductor buyers in 2018. Samsung Electronics and Apple remained the top two semiconductor chip buyers in 2018 with a 17.9% market. Huawei shipped 30 million smartphones in the domestic market in the fourth quarter of last year, up 23.3% year-on-year. It topped the list with a market share of 29%, according to research firm IDC.

Huawei’s offices in Norway

Denmark has ordered the expulsion of two employees of Huawei Technologies because their residence and work permits were not in order, after Copenhagen police carried out a routine check of the residence and work permits at Huawei’s offices. Police said the expulsion of the two Huawei employees was in no way linked to espionage concerns.

But the move came on the same day that neighboring Norway’s intelligence service issued a warning about Huawei. “One has to be attentive about Huawei as an actor and about the close connections between a commercial actor like Huawei and the Chinese regime,” the head of Norway’s domestic intelligence unit PST, Marie Benedicte Bjørnland said as she presented a national risk assessment report for 2019. PST also accused the Chinese government of stealing information from Norway’s cyber domain through technology provided by Huawei. “An actor like Huawei could be subject to influence from its home country as long as China has an intelligence law that requires private individuals, entities and companies to cooperate with China,” she said.

The Chinese Embassy in Oslo swiftly responded by saying “China poses no threat to Norway’s security”. “It’s very ridiculous for the intelligence service of a country to make security assessments and attack China with pure hypothetical language,” the Embassy said in a statement on its website. The Embassy also said China was not forcing any companies to build “mandatory back doors” in their software.

Hackers working on behalf of Chinese intelligence breached the network of Norwegian software firm Visma to steal secrets from its clients, cybersecurity researchers said. Visma, which reported global revenues of USD1.3 billion last year, provides business software products to more than 900,000 companies across Scandinavia and parts of Europe. The company’s operations and security manager, Espen Johansen, said the attack was detected shortly after the hackers accessed Visma’s systems and he was confident no client networks were accessed. Priscilla Moriuchi, Director of Strategic Threat Development at Recorded Future, said the hackers’ activity inside Visma’s network suggested they intended to infiltrate client systems in search of commercially sensitive information.

In Norway, the main telecoms operators Telenor and Telia – which chose Huawei to supply their 4G networks – are gearing up for the roll-out of 5G. “As far as we’re concerned, it’s about setting up a regulatory framework to protect what could be considered critical infrastructure,” Noregian Justice Minister Tor Mikkel Wara said at the same news conference. “What this regulatory framework would look like, and what it would cover, is what we’re working on right now,” he said. Several countries including the United States have banned Huawei 5G telecoms equipment for security reasons, on concerns its technology could be a Trojan horse for Beijing’s security apparatus. Huawei strenuously denies that its equipment could be used for espionage.

Meanwhile, Huawei CFO Meng Wanzhou, who was arrested in Canada and faces possible extradition to the United States, is exploring a defense that claims U.S. charges against her are politically motivated. Meng’s lawyers are also planning to challenge whether her alleged conduct would be deemed criminal under Canadian law, the South China Morning Post reports.

The dispute between China and Canada over the arrest of Meng is also having repercussions on trade, slowing down customs clearance of canola shipments through Chinese ports and causing some importers to hesitate to buy from Canada. Customs clearance of some canola shipments took more than 20 days, about twice the usual time, as authorities carried out more thorough inspections related to GMOs. China buys about USD1.90 billion worth of Canadian canola per year, and a slower sales pace would be another hit to exporters, which include Richardson International, Viterra and Cargill. China relies on Canada to supply more than 90% of its canola imports.

Acting U.S. Attorney General Matthew Whitaker announcing 23 charges against Huawei

The United States has filed 23 charges against Huawei Technologies, contending that the Chinese company had stolen trade secrets from a telecoms rival and violated U.S. sanctions against doing business with Iran. Included in the criminal indictments were Huawei, the largest Chinese smartphone maker; its U.S. affiliate, Hong Kong-based Skycom; and Meng Wanzhou, Huawei’s Chief Financial Officer (CFO), for conspiracy that poses a national security threat to the U.S. The U.S. also requested Canada to extradite Meng, who is free on bail in Vancouver pending extradition proceedings.

A federal grand jury in Brooklyn, New York, charged Huawei – and Meng – with money laundering, bank fraud, wire fraud and conspiracy. Huawei was also charged with conspiracy to obstruct justice. A separate indictment from Washington State accuses Huawei, its U.S. affiliate, Skycom and Meng, of stealing trade secrets from the telecommunications company T-Mobile. The charges stemmed from a civil lawsuit filed by T-Mobile in 2014 over a robot, “Tappy”, which was used in testing smartphones.

“Huawei has misrepresented itself over the years,” Whitaker said at a news conference that included U.S. Commerce Secretary Wilbur Ross, Department of Homeland Security Secretary Kirstjen Nielsen, and FBI Director Christopher Wray. “Criminals and bad actors can be certain that they are not going to get away,” Whitaker said. “We show it today and we will show it as the case moves forward.” Secretary Nielsen said that Huawei’s behavior wasn’t “just illegal but also detrimental to the national security of the U.S.”. FBI Director Wray added that Huawei has repeatedly refused to respect U.S. law. The charges could complicate trade talks between the U.S. and China to end the imposition of tariffs on each others’ imports.

The Chinese government denounced the charges as politically motivated and immoral. “The United States has been using state power to smear and attack specific Chinese enterprises, destroying the legitimate operations of the companies,” Chinese Foreign Ministry Spokesman Geng Shuang said. “There is strong political motivation and manipulation behind it. China is determined to protect the legitimate rights of Chinese companies,” he added.

Huawei denied “that it or its subsidiary or affiliate have committed any of the asserted violations of U.S. law set forth in each of the indictments, is not aware of any wrongdoing by Ms Meng and believes the U.S. courts will ultimately reach the same conclusion.” Meng’s lawyer Reid Weingarten, Partner at Steptoe & Johnson, said Meng “should not be a hostage” in China-U.S. relations. “Our client, Sabrina Meng, should not be a pawn or a hostage in this relationship. Ms Meng is an ethical and honorable businesswoman who has never spent a second of her life plotting to violate any U.S. law, including the Iranian sanctions,” he added.

As Huawei is coming under suspicion abroad, where several governments have either banned or are reviewing whether to allow Huawei equipment for their telecoms networks, China has pledged to fast-track the issuance of 5G commercial licenses as part of an effort to boost the domestic use of the next-generation mobile technology. China’s National Development and Reform Commission (NDRC) said that it will speed up the granting of 5G commercial licenses to upgrade so-called information consumption in the country. The central government already awarded China Mobile, China Unicom and China Telecom with 5G spectrum licenses at the end of 2018, enabling them to conduct final trials for the new mobile system before its wider commercial roll-out set for 2020. The 5G networks are ready for “pre-commercialization” after the completion of the latest tests. 5G devices are expected to become available by mid-2019.

Analysts warn that the U.S. indictments against Huawei Technologies could potentially create two distinct camps in the telecommunications industry. If Huawei is blocked from providing network equipment to the U.S. and its allies, Western companies and Asian firms would only be allowed to serve their own markets.

Belgian telecom operators see no reason to ban Huawei equipment from their networks, although the Center for Cybersecurity has launched an investigation into possible security risks of using the equipment. Proximus says it has a good relationship with Huawei and is a long-time customer. Orange Belgium has been working with Huawei for many years and is not worried. It has not yet chosen 5G suppliers, while Telenet is using a limited number of Huawei equipment, according to the newspaper De Tijd.

In the past 10 years, Chinese smartphone brands have not only topped sales in the home market, but also outshone major foreign rivals in many emerging and developed economies. The success of four of those brands – Oppo and Vivo as well as recently established OnePlus and Realme – can be directly attributed to the guiding hand and investment savvy of reclusive Chinese billionaire entrepreneur, investor and philanthropist Duan Yongping, the South China Morning Post reports. He is the Founder and Chairman of privately held BBK Electronics Corp, a 24-year-old company based in the southern coastal city of Dongguan that now runs one of the world’s largest and most sophisticated electronics supply chains behind the production of a range of smartphones for the global market.

Duan, who will turn 58 years old next month, is widely regarded as the “godfather” of the Chinese smartphone industry for developing two brands, Oppo and Vivo, as large global players competing against the likes of Samsung Electronics, Apple, LG Electronics and Chinese rival Huawei Technologies. OnePlus and Realme, which are backed by BBK and other investors, aim to be the next big Chinese brands to conquer international markets. The Chinese billionaire was also identified last year as an early investor in Pinduoduo, China’s third largest e-commerce company, which was founded by his friend and protégé Colin Huang. Duan’s net worth was estimated at CNY10 billion, according to the 2018 Hurun China Rich List.

Born in March 1961 into a modest family in Nanchang, capital of Jiangxi province, Duan in 1978 entered Zhejiang University in Hangzhou, where he majored in wireless electronics engineering. After a short stint as a teacher at the adult education center of the Beijing Radio Tube Factory, Duan pursued further studies at Beijing’s elite Renmin University of China, where he earned a master’s degree in economics in 1989. That same year, he joined Zhongshan Yihua Group in Guangdong to manage an ailing factory and turned it into a profitable business. He set up a unit that made cheap video game consoles, Subor Electronics Industry Corp, where he served as its Chief Executive. He left Yihua in August 1995 and established electronics firm BBK, in which he had a controlling 70% stake, which was later reduced to 17%. It became the leading vendor of VCD and DVD players in China. Executives at BBK later founded Oppo, Vivo, OnePlus and Realme, the South China Morning Post reports.

Oppo and Vivo, respectively, were China’s second and third biggest smartphone suppliers in 2018, with a combined 40% market share, according to estimates by research firm Canalys. They were behind market leader Huawei, but ahead of Xiaomi and Apple in a year when domestic smartphone shipments fell to 396 million units, compared with 459 million in 2017. In the global smartphone market last year, Oppo and Vivo took the fifth and six spots, respectively, with a combined 15% share, according to data from Counterpoint Research.

Huawei Founder Ren Zhengfei (74) said Huawei’s wireless and 5G solutions are world class and will solve issues many Western countries face in 5G development. He made the remarks in his first-ever television interview on CCTV. “They are foolish and will lose money if they don’t buy our products,” Ren told a CCTV reporter who asked his view on the bans some countries have slapped on Huawei equipment. “We have many things that the European and American countries need, and they will have to purchase from us,” said Ren, who added that he was confident about Huawei’s competitive position in wireless and 5G development when compared to its global peers.

Ren, who founded Huawei in 1987, has embarked on a public-relations campaign to rebuild the company’s image, speaking with at least three groups of reporters in Shenzhen, including a group interview with selected international media, a group interview with domestic media, as well as the CCTV appearance. Huawei, the world’s largest telecom equipment vendor, is facing growing pressure from Western countries, particularly the U.S., over claims it has close ties with the Chinese government. Britain, Germany, Australia, New Zealand and Canada have either banned or are reviewing whether to allow Huawei equipment to be installed in their telecommunication networks.

Before January 30, a U.S. prosecutor must decide whether to formally ask Canada to extradite Sabrina Meng, Huawei’s CFO and Ren’s daughter, who has been in custody and subsequently house arrest in Vancouver since December 1 on charges of banking fraud in relation to U.S. sanctions on Iran. Her next court appearance will be on February 6, to set the date for her extradition hearing. Under the U.S.-Canadian extradition treaty, Meng’s offenses need to be a crime in both countries, or “double criminality”. Once the U.S. submits its formal extradition request, officials from the Canadian Department of Justice will have 30 days to decide whether to go ahead, but if the decision is unfavorable to Meng, she could still apply to the courts to reverse the decision. Foreign Ministry Spokeswoman Hua Chunying warned that “China will take action in response to measures taken by the U.S.”.

Huawei Chairman Liang Hua also called for a quick resolution of the case when speaking to the media on the sidelines of the World Economic Forum in Davos. Canadian Ambassador to China John McCallum jumped into the controversy commenting that Meng “had a strong case against extradition to the United States”, but he had to retract his comment following criticism that it was tantamount to offering legal advice to Meng and undermined the independence of Canada’s judicial process. He later added that Canada would like the U.S. not to file its extradition request. Former Ambassador to China David Mulroney called the comment “mind-boggling”. Another former Canadian Ambassador to China, Guy Saint-Jacques, said that McCallum’s remarks about how Canada would like to see the U.S. drop the case “are true but he should have kept his mouth shut”. Prime Minister Justin Trudeau subsequently sacked the Ambassador.

China’s Foreign Minister Wang Yi said in Rome when asked to comment on the recent problems faced by Huawei that the use of state power to smear or discredit a legitimate business is “not only unfair but also immoral”. Wang’s comments came after Vodafone Group became the latest Western company to boycott Huawei products. The British telecom conglomerate said it had suspended its purchases of the Chinese firm’s equipment for the core of its wireless networks.