Canadian authorities have arrested Huawei’s CFO (chief financial officer), Sabrina Meng Wanzhou, in Vancouver while she was transferring flights in the country. Sabrina, a leading contender to succeed her father, Huawei’s founder Ren Zhengfei, was arrested on Dec 1 as she is facing extradition to the United States – according to the Canadian Department of Justice.
Also known as Cathy Meng, Sabrina serves as deputy chairwoman of Huawei’s board, arguably the most controversial Chinese company in the eyes of the United States. Huawei is strategically important to China’s ambitions in technology from 5G networks to chips. Her arrest is believed to be over alleged violations of U.S. sanctions against Iran, and probably Cuba, Sudan and Syria.
The New York Times reported that the U.S. commerce and treasury departments had subpoenaed the firm over suspected violation of sanctions against both Iran and North Korea. U.S. lawmakers, meanwhile, have repeatedly accused the Chinese company of being a threat to U.S. national security, arguing that its technology could be used for spying by the Chinese government.
In May this year, the Pentagon ordered stores on American military bases to stop selling smartphones made by Huawei and Chinese rival ZTE. And in February, top officials from the CIA, NSA, FBI and the Defense Intelligence Agency told a Senate committee that those firms’ smartphones posed a security threat to American customers.
In what appeared to be a systematic and co-ordinated attack against the Chinese tech giant, the Trump administration launched an extraordinary campaign, similarly urging America’s allies to stop using the Huawei telecommunications equipment because the Chinese company apparently poses a security threat.
Australia and New Zealand have taken the U.S. warning seriously and have either blocked or banned the local telecommunications companies from using Huawei equipment for their 5G mobile networks. On Wednesday, UK telecom company BT announced that it would not buy equipment from the Chinese tech company for the core of its next generation wireless network.
Fifth-generation wireless, or 5G, is the latest mobile internet technology engineered to greatly increase the speed and responsiveness of wireless networks. With 5G, data transmitted over wireless broadband connections could travel at rates as high as 20-Gbps by some estimates – making it the buzzword as the backbone of future cities and even driver-less cars.
In Australia, although the local Huawei Australia has repeatedly denied that it is controlled by Beijing, Australian MPs argue that China’s National Intelligence Law compels all organisations and citizens to support, assist and cooperate with intelligence work. Therefore, Huawei’s equipments can potentially become espionage tools.
Huawei’s rival ZTE Corp had to temporarily halt much of its business earlier this year after the U.S. imposed an export ban on the company related to it’s illegally shipping U.S.-origin goods to Iran and North Korea. As part of a new agreement to lift the ban, ZTE paid US$1.4 billion in penalties, reformed its management and installed US-appointed compliance officers.
The Chinese government, of course, isn’t impressed with the latest arrest of Sabrina Meng. China’s embassy in Canada has demanded the immediate release of Meng – “The Chinese side has lodged stern representations with the US and Canadian side, and urged them to immediately correct the wrongdoing and restore the personal freedom of Ms. Meng Wanzhou.”
The arrest would most likely escalate tensions between the two countries at a delicate moment, considering the episode happened on the same night that President Trump and President Xi Jinping of China dined together in Buenos Aires and agreed to a 90-day trade truce. U.S. stock futures tumbled, followed by Asian markets, as news of the arrest heightened the sense a major collision was brewing.
Investors initially greeted the trade ceasefire reached in Argentina with relief, sending the Dow Jones Industrial Average up 300 points. However, discrepancies over when that truce would begin have led to confusion. As a result, worries and jitters over the U.S.-China trade war immediately returns to the Wall Street, sending the DJIA down by 800 points.
The extradition to the United States of Huawei’s CFO Sabrina Meng would be a slap in the face of Beijing. In the worst case scenario, Huawei could experience the same misfortune which hit ZTE – losing access to the U.S. parts it need to make its smartphones. Beijing will most likely view Trump’s sincerity on the 90-day trade ceasefire with greater suspicions.
Despite being essentially barred from the critical and attractive U.S. market, Huawei surpassed Apple to become the world’s number two smartphone maker in the second quarter of this year and has the market leader Samsung in its sights. It would be hard to deny accusations that this is another dirty tactic to stop the expansion and domination of Huawei in the smartphone market.