Last week, Huawei CEO Ren Zhengfei told the New York Times that the company was willing to license its entire 5G platform, including its extensive collection of patents and source code, to an American company to build out and sell its 5G infrastructure anywhere outside of China. Huawei hopes that such a deal will break the deadlock between the United States government and the Chinese tech giant. Huawei, considered the “crown jewel” of Chinese technological achievement, is seen as a national security threat to the United States, and as a part of an intensifying geopolitical conflict with China, the U.S. has effectively banned Huawei infrastructure from its market and has pushed its western allies to do the same.
Can and should the technology industry remain free with the existence of a Chinese tech giant?
Founded by Ren Zhengfei in 1987, Huawei grew rapidly during China’s economic liberalization period and evolved from a reseller of network equipment to become the world’s largest telecommunications equipment manufacturer–making everything from smartphones to modems to enterprise network devices–all without breaking into the world’s largest market: the United States. Now, Huawei is becoming a leader in next-gen 5G technology, which promises exponentially faster mobile internet speed and capacity than current 4G tech, and is expected to bring significant benefits to society in the next 10 years.
This isn’t the first time a foreign company has risen to challenge America’s technological leadership. Like its Japanese and Korean predecessors, Huawei has gained market dominance by offering products that are often significantly cheaper than western competitors with similar or even better performance. The big difference between Huawei and Sony, or Samsung, however, is that it is based in a country that not allied with the United States. This is the real reason why the U.S. government see’s Huawei as a threat: after all, every company is subject to the laws and governance of its home country, and unlike virtually any other major technology company in the world, Huawei’s home country is a geopolitical rival of the United States.
Many people in the western-dominated tech industry don’t fully understand this: they think that the U.S. government’s hardline stance against Huawei is informed by top-secret intel of backdoor security vulnerabilities in Huawei products or just plain trade protectionism. The retort is always: if Huawei products are truly insecure, why not come out and prove it with hard evidence? The reality is that even if Huawei products have absolutely no vulnerabilities (which is far from the truth), the very fact that Huawei is based in China and therefore answerable to the Chinese Communist Party means that Huawei products could be commandeered at any time by the government to be used as cyber weapons against the United States, similarly to how United States federal agencies commandeer American technology products to do the same to our rivals. Only when it happens in China, there will be no whistleblowers or public controversy. If the United States widely adopted Huawei-made 5G infrastructure, a Chinese cyber-attack could cripple the country.
But by allowing an American company to buy its IP for use outside of China, Huawei is reassuring the U.S. government that this won’t happen, and in exchange, Huawei will be allowed to collaborate with U.S.-based tech companies like Alphabet (Google) to maintain its position as a tech giant outside of the United States. While theoretically a sound idea, it will depend on the U.S. Department of Justice’s acceptance and a U.S. company’s willingness to sign on to the sure-to-be expensive purchase. The purchaser will have to go over the Huawei 5G codebase and patent designs with a fine-toothed comb to check for security vulnerabilities which, if left unfixed, would have national security implications.
The technology industry has been held up by free-market advocates, myself included, as a great example of how open competition and a hands-off regulatory approach ultimately benefit society to a much greater degree than seemingly well-intended government interference. The commodification of smartphones alone has helped reveal police brutality in the United States while enabling better weather predictions for farmers in Zimbabwe. According to free-market principles, Huawei should be able to sell its products directly to American consumers and businesses, which will in turn derive great benefits from cheaper products and quicker adoption of next-gen technologies like 5G. Free-marketers would further argue that the dependence of US infrastructure on Chinese companies would decrease the likelihood of war between the two countries, since it raises the stakes of confrontation.
However, with China’s rapidly advancing high-tech, AI enabled surveillance and suppression program against its own people, it would hardly be wise for rationally self-interested Americans and the government to welcome Chinese dominance of the tech industry, while acceleration of a technological “Cold War” between China and the United States is also not ideal. This potential IP licensing deal would allow some level of cooperation between the US and China while still remaining a level of “technological sovereignty” for the United States, which may be the best option we have between two extremes.
Andrew Chang-Gu is a Freedom in Tech Alliance Contributor and a Strategic Security Consultant at Mandiant, a FireEye company. The views and opinions expressed herein are his own and do not reflect those of FireEye, Inc. or any previous employer.