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USA vs Huawei, which could be the consequences?

May was a difficult month for the Chinese giant Huawei. The administration of Donald Trump placed the company on the blacklist to do business, forbidding any kind of commercial relationship with the United States without first having a special permit from the Department of Commerce. Derived from alleged “backdoors” in their devices that allowed the Chinese regime to spy on US citizens.

Huawei sanctions are not new, they began in January when the government of President Trump filed a lawsuit against the Chinese company, stating that it had conspired to steal intellectual property to the operator T-Mobile. Derived from these recent actions, Google made the decision to break relations with Huawei so it will immediately lose access to updates to the Android operating system, including access to the Play Store (its app store), Gmail and other functions, in the next Huawei smartphones.

This prohibition delays and jeopardizes the supply chain for the implementation of 5G services in the world, but future sales of the company are the most dangerous. Huawei, nevertheless, communicated that they have a “plan B” which consists of that they have increased for months the inventories of the necessary components to continue arming their equipment and for the development of their own operating system. Kirin, as it is known until that new operating system, will be released later this year or early 2020.

However, the company’s plan B does not seem to calm telephony service providers. Vodafone and EE, two of the largest operators in the United Kingdom, have decided to temporarily suspend orders for mobile phones with 5G technology to the Chinese manufacturer. For its part, Softbank and KDDI, the largest operators in Japan, have opted for the same maneuver. To make matters worse, the SD Association expelled Huawei, so the Chinese company will no longer have access to the use of microSD cards, technology that make use of most of their smartphones.

Huawei, inside China, enjoys great popularity since it is living a different reality from the West. For example, searches are done through Baidu, the Youtube alternative is called Toktok, and the most popular chat application is Wechat. Undoubtedly, Huawei is in a critical position where it seems that China is being confined, the future of this great Chinese company will depend on its trade negotiations with the rest of the world, but – mainly – with the United States. The world must consider that the supply chains nowadays are global and the fall of one of the most important companies in technological innovation can affect other international companies.

Or, in the effort to try to block China’s technological advance through this company, it could have the opposite effect and cause it to accelerate the development of technologies that compete with those Americans that currently dominate the market. Thus, we could see in the short-term progress in the development of Huawei devices that allow them not only to be self-sufficient, but to be a real alternative to Western technology.

THE WAR THAT COMES WITH TECHNOLOGICAL LEADERSHIP

According to experts in the field, China and the United States are in a competition to lead the world of technology, which has caused tensions between the two countries. On December 1, 2018, Meng Wanzhou, Huawei’s financial director and daughter of the founder of Huawei, was arrested in Vancouver, Canada for alleged violation of US sanctions against Iran.
Huawei, is the most important Chinese company in the manufacture of components for the development of fifth generation or 5G mobile networks. It is expected that this technology (5G) creates a new ecosystem of the Internet of Things, satisfying the communication needs of billions of devices connected to the network. We have found reasons to think that Iran is simply a pretext for the United States to stop the development of this technological giant. It must be taken into account that EE. UU has used commercial and financial penalties for political purposes.
This shows that China’s technological aspirations have raised concerns in the United States. UU In this regard, President Donald Trump has said that the trade war with China will protect US dominance and curb Beijing’s plans to achieve economic and technological supremacy – according to the New York Times.
On the other hand, in 2015, China approved a strategic plan known as “Made in China 2025”, an initiative that seeks the development of ten key sectors of high technology to modernize its manufacturing base, for example, in aeronautics and robotic. One of the main objectives is that, by 2025, Beijing will be 70% self-sufficient in these high-tech sectors. Added to this, Jun Canrong, associate dean of the International Study School of Renmin University in Beijing, said that “Even if the US it tries to block China’s development, it will not succeed, since China’s huge domestic market alone is enough to drive a mature industry of AI (Artificial Intelligence). ”
“Made in China 2025” has already given something to talk about. In the midst of the aeronautical crisis generated by the plane crashes of the Boeing 737 Max, which forced them to remain on land and contemplate the possible cancellation of more than 5,000 units, China announced to international markets the arrival of a plane that will compete with it. , the C919 of the COMAC company, which has a capacity between 168 and 190 passengers. This aircraft will represent an alternative to Boeing aircraft and a new competitor in the aeronautical market dominated by Airbus and Boeing.
So far, 815 COMAC C919 units have been requested. Those who have shown interest in this aircraft are, mainly, local companies and small companies from countries with great dependence on China. The COMAC C919 costs almost half the price of its competitors, but still needs to improve its energy efficiency, which puts it at a slight disadvantage.
It is worth mentioning that China is the main Boeing market, with 25% of the aircraft of this US company. Boeing even has a manufacturing plant in China, and has strategic alliances with Chinese companies that supply their components. Thus, a new Chinese competitor in the sector can bring as a consequence readjustments in the Asian aeronautical market. Boeing will be forced to adapt to these changes. However, derived from the crisis generated by the accidents of two 737 Max, Boeing is in a very delicate situation to commit to the development of new aircraft.
This situation benefits China to impose reciprocal measures against the United States for the Huawei case. China was the first country to order its airlines to suspend flights of the Boeing 737 Max aircraft. In addition, negotiations are currently underway to reach a trade agreement between China and the United States. One of the points in discussion is the export of Boeing 737 Max aircraft to the Asian country. Thus, it remains in China, given the crisis caused by these planes, how to continue with the talks, and what position to take to be benefited.
Without a doubt, China has given much to talk about. On the one hand, the Huawei case exposes the concerns of the US government. UU for the Chinese rise in technology, which could take away their leadership. On the other hand, China has been clear in its intentions to lead the world technology sector and the arrival of COMAC C919 brings it closer to its goal.

Do you know how this battle for technological leadership can impact your business? Write to info@riesgospoliticos.com.mx to provide you with the advice you need.

 

 

Photo by Lachlan Gowen on Unsplash

HUAWEI THREATENS WORLD CIBERSECURITY?

Since the revolution in telecommunications prompted by the massive use of the Internet, the management of computer systems has become an essential part of the security strategy of governments around the world. At first, one could infer the identity of those who stole public information by its modus operandi and by the type of information stolen, since -generally- corresponded to political motivations. However, currently, the amount of information available on the internet and that can be the subject of theft is massive. As the number of users and servers in the network increases exponentially, the perpetrators of cyber attacks become practically invisible.

Even so, it is possible to know the country of origin of a cyber attack, but not the identity of the authors; that is, if they are attacks carried out by individuals or by governments. According to a study published by Fortune Magazine in 2015, it can take up to 205 days for an organization to realize that it was the victim of a hack. So, by the time organizations discover it, it’s usually too late.

Currently, the biggest threat to the cybersecurity of organizations and governments, are -justly- foreign governments, not private individuals. For this reason, media cases of hacking or cyber attacks, mainly carried out by Russia and North Korea, have increased. Therefore, Western countries have increased their efforts and measures to prevent them. This explains the growing concern generated by the entry of foreign telecommunications companies into their markets.

Throughout 2018, several instances of the government of the United States have expressed the possibility of being victims of cyber attacks by the Chinese government. As a result, President Donald Trump barred government officials from using Chinese-branded devices. Also, the director of the FBI, Chris Way , recently stated that allowing the positioning of foreign companies that do not share US values ​​represents a serious risk for his country. One of the companies that causes alarm among the US government. UU it’s Huawei; the arrest of its financial director is a sign of these concerns.

Huawei is the fastest growing telecommunications company in the world and recently outperformed Apple in the mobile device market. She is expected to become the leading provider of fifth generation (5G) smartphones. For this to happen, it needs to increase investment in telecommunications infrastructure for the creation of the 5G network. Although Huawei has said that it has no links with the Chinese government, several governments fear that a network of such technological level will increase intelligence capabilities of the Asian giant.

Western attempts to stop Huawei have already escalated politically. On December 1, Washington asked Ottawa for the arrest of the Chinese brand’s financial director, Meng Wanzhou , on the grounds that Huawei helps Iran to avoid sanctions imposed by the Trump administration, through a subsidiary of the company.

China reacted by arguing that this speech based on the protection of the national security of EE. UU it’s just an excuse to stop the expansion of Huawei. The Chinese government launched a diplomatic campaign in both Canada and Washington to free Wanzhou , including arresting a Canadian citizen based in China. The Asian country managed to get the benefit of house arrest to the director of Huawei.

Such is the concern that China causes to the West that the governments of Germany and England promoted changes to their laws to prevent foreign companies from having a greater than 15% stake in projects in strategic sectors (among them, telecommunications). This limits the possibility that Huawei, understand China, will become the main supplier of the 5G network in these countries.

On the other hand, in recent statements, the Vice President of the European Commission, Andrus Ansip , said that the European Union should fear that the Chinese government obtain private information from its citizens through devices of companies such as Huawei. In this regard, the European Commission considers that the investments of Chinese companies represent a risk to the sovereignty and security of the Member States; The Commission is concerned about the possibility of Chinese private companies collaborating with their government’s intelligence services.

This eventual deployment of the 5G network has motivated the United States to lead a front against the increase of Chinese presence in virtually the entire world. In addition to the European governments, Japan, Australia and New Zealand have joined the blockade of the participation of Chinese companies in their telecommunications markets to avoid hacking their systems.

 

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Photo by Kamil Kot on Unsplash