The war between China and the U.S. consists of 2 battlefronts – the trade war and the tech war. The trade war is Trump’s attempt to put an end to intellectual property (IP) thefts and forced technology transfers, not to mention to eliminate the barriers to American companies competing in China, all of which the U.S. president has claimed as unfair trade practises.
The tech war, on the other hand, is a different animal altogether. It actually has very little to do with trade war. Therefore, the U.S. conveniently hides behind “national security” in their war against Chinese tech giant Huawei, simply because the superpower is miles behind China in 5G technology. Today, there is no American 5G equipment maker.
Lucent, which used to be part of A&T, was the last U.S. manufacturer of telecommunications equipment. It is now part of Nokia, after the Finnish company completed the acquisition of Alcatel-Lucent in 2016. Qualcomm, on the other hand, only makes 5G modems and antennas for smartphones, and doesn’t build any telecommunications equipment.
Cisco, the biggest maker of computer networking equipment, is one of Huawei’s main competitors. Curiously, the company never considered building its own radio access network equipment for 5G, and for some strange reason, the U.S. government never asked it to do so. Cisco depends on 5G macro radio technology from Ericsson, Nokia, and Samsung to build 5G networks.
Hence, Cisco Systems Inc. Chief Executive Officer Chuck Robbins told President Trump that his administration should not worry that Huawei Technologies Co. will dominate the race to build 5G wireless networks. He said – “The current infrastructure around the world is built on a combination of communication suppliers from Europe, from China, from the U.S., everywhere.”
Still, the U.S. continues to seek to discourage purchases of equipment from Huawei and is pressuring – even intimidating – European governments and allies to do the same, claiming it’s a gateway for Chinese spying. Although the US government has been concerned about espionage by Huawei on behalf of Beijing for years, they have yet to produce any evidence to support their allegation.
That means either the Chinese products are extremely good, so much so that the best brains from the U.S. could not find any proof of spying, or simply Huawei does not spy at all. China consistently rejects U.S. allegations that its laws require companies to help collect intelligence, arguing instead that it was the U.S. laws that force American companies to help the U.S. Intelligence Community.
The arrest of Sabrina Meng Wanzhou, Huawei’s CFO (chief financial officer) and daughter of the company’s founder Ren Zhengfei, in Canada in December last year at the request of the United States had nothing to do with Huawei 5G spying. Instead, it was for allegations of bank and wire fraud in relation to violation of US sanctions on Iran.
Now, Huawei has proposed a jaw-dropping plan to end its tech war with Donald Trump. The unusual and extraordinary tactic is to sell the rights of its 5G patentsto the United States. Huawei’s CEO, Ren Zhengfei, told The Economist that the Chinese tech giant was offering to bundle up its 5G patents – licenses, code, and technical blueprints – in a one-off transaction.
In essence, that would create an immediate rival to challenge Huawei, allowing the U.S. to finally get in the race for 5G supremacy which is now dominated by Chinese companies Huawei and ZTE. It was like Colonel Sanders offering the KFC fried chicken recipe to other fast-food chains. Ren Zhengfei admits – “The idea would be to create a rival for the Chinese tech giant.”
“Huawei is open to sharing our 5G technologies and techniques with U.S. companies, so that they can build up their own 5G industry. That would create a balanced situation between China, the U.S. and Europe,” – revealed Mr. Ren to New York Times columnist Thomas Friedman. But that was not the only honey offered to the Trump administration.
The Huawei’s big boss said that U.S. companies interested in its 5G technology would be allowed to modify as they see fit the software code used to run any of Huawei’s 5G equipment – or even change it to meet their security requirements. Interestingly, Beijing’s approval of the stunning and mouth watering proposition has not been granted.
However, Huawei did not disclose how much would they charge for its 5G technology. Understandable, it could cost any company interested in the Chinese technology billions of dollars, if not tens of billions, considering the massive amount of money Huawei has poured into R&D (research and development). Still, has Ren Zhengfei lost his mind in giving away Huawei’s crown jewels?
Not really. By allowing American licensees to sell their 5G equipment based on Huawei’s intellectual property (IP) anywhere in the world, the Chinese company hopes to leverage on the U.S. to do the heavy lifting of marketing Huawei products to American allies. It’s also a clever plan to create brand awareness to the Western countries, not to mention neutralise Huawei’s current “blacklist”status.
More importantly, if Trump agrees to the shocking proposal, it will not only legitimise Huawei 5G technology in the world, but will also eliminate the suspicion trumpeted by the U.S. that Huawei equipments are tools for Chinese spying. No amount of denials could convince the U.S. otherwise, so what better way than to give them access to the core technology of Huawei 5G.
Huawei also understood that they cannot win a battle against a narcissist U.S. president whose impulsive and immature behaviour is beyond anything they had ever seen. Trump always wanted to be seen as a “winner”, and enjoys seeing rivals humiliated. That means Huawei has to throw a huge bone to create an impression that the U.S. president has won the tech war.
With the Huawei 5G technology being offered on the table, Trump could easily claim his tough leadership has forced the Chinese to surrender its crown jewels and as a result, stops the Huawei’s 5G dominance. The U.S. can then, under the pretext of examining and analysing Huawei 5G for security loopholes, learn or perhaps copy the Chinese technology to build their own 5G industry.
It would be quite tough to reject such proposal without giving it a serious consideration. American allies would question the wisdom of rejecting such offer. The offer will provide the opportunity for the U.S. to prove – once and for all – their allegations all this while that Huawei is working with Chinese national spy agencies. The U.S.’ reputation may be affected if they walk away.
– Finance twitter