Europe Becomes a Battleground Over Huawei and 5G

The phones are cheap compared to Apple and Samsung products, and they get high marks from tech reviewers who praise them for all their bells and whistles. What's more, they look good: They're sleek, colorful, and easy to handle.

Huawei has become one of the most popular brands on the European market — and many consumers are not raising eyebrows over concerns that they're Chinese, much less wondering if buying a Huawei phone is tantamount to buying a piece of China's spyware.

“Europe is a mature market, with a sizable lower middle class which isn’t able to afford an iPhone — especially not when such a device becomes obsolete so quickly,” said Jeremy Ghez, a professor of economics and international affairs at HEC Paris, a business university, in an email.

“There is a huge market remaining for cheaper, lower-end smartphones,” he said. “This is what Huawei is able to catch in terms of demand.”

In 2015, only about 2% of smartphones sold in Europe were Huawei devices; now Huawei sells nearly a quarter of the smartphones in Europe.

Simultaneously, Huawei is at the forefront of upgrading Europe's networks for the 5G shift. It's signed about 30 5G contracts in Europe with telecommunications companies and its 5G equipment — switches, routers, masts, towers, network slicing gear — are popping up in European cities. For now, 5G is mostly a phenomenon taking place in cities.

It's a leader in other ways too. Huawei collaborates with European universities, operates a large cybersecurity center in Brussels, flies European students to its Chinese headquarters to learn about 5G and it funds a number of research hubs in Europe.

There are about 13,300 Huawei employees in Europe, and according to one analysis commissioned by Huawei, it's contributed about $14 billion to Europe's gross domestic product.

Huawei sees Europe as a vital market, a counterbalance to its rejection in the United States and Australia.

“Huawei is committed to Europe,” the company says in brochures. “The company sees Europe as its second home and wants to contribute to European growth and toward Europe’s technology leadership in the world.”

Huawei denies it can be exploited by the Chinese government, saying it's a friend to Europe capable of helping Europeans protect their data and internet.

“Our aim now is to continue growing hand in hand with Europe, helping the European Union achieve its goal of making Europe fit for, and a leader in, the Digital Age,” the company says. Huawei did not respond to requests for comment from Courthouse News.

Ghez said Europe's use of Huawei is pragmatic.

“We may be overestimating the degree to which any decision is 'in favor of' or 'in opposition to' any actor, be it the United States or China,” he said. “There are industrial stakes involved for Europe. It needs a reliable 5G network, and cost is obviously significant.”

But Huawei's — and China’s — march across Europe is being challenged and halted.

In March 2019, the European Commission for the first time called China a “systemic rival” and “an economic competitor in pursuit of technological leadership.”

It is common now for European policymakers to question the wisdom of allowing Chinese firms to build the 5G internet grid of the future — a matrix that will become increasingly more important, a kind of glue that keeps an ever-more technologically dependent society together.

In January, the British government announced that Huawei 5G equipment will not be used in “core parts” of its network and that Huawei’s market share of the grid will be capped at 35%. This means Huawei's 5G technology will be kept away from such places as military bases and nuclear sites.

Shortly afterward, EU officials spelled out strict standards that regulators should enforce to safeguard networks. Nonetheless, these measures do not go far enough for the United States, which is calling for a ban on Huawei.

At the beginning of February, Vodafone, a major European telecommunications company, said it would remove Huawei equipment from sensitive parts of its mobile network across Europe. The company said this decision will cost about $220 million over five years. BT, the U.K.'s major telecom company, estimates it will cost more than $645 million to swap out Huawei components and comply with new rules. Orange, a major French telecom company, also recently announced it was not using Huawei in its 5G network.

But some technology experts warn that when 5G becomes the norm, it will be impossible to separate core and noncore parts of the network. Thus, if Huawei is allowed to participate in so-called noncore areas, it will have access to the entire network, experts warn.

“It is almost a philosophical question,” Kleinhans said about this aspect of 5G. “This is why the debate is so hard and tricky.”

Ghez said of banning Huawei from the core parts: “It might be an acceptable solution, in the short run at least, until public authorities feel better about their ability to secure networks.”

A major moment is expected to come as soon as March, when German Chancellor Angela Merkel's government may announce its policy toward Huawei.

For months, German leaders have been sparring over Huawei. Key members of Merkel's party and her coalition partners, the Social Democrats, want to see Huawei technology banned on national security and human rights grounds. Human rights advocates criticize Huawei for working with Chinese security forces in the Xinjiang region of northwestern China, where Uighur and Muslim populations are forced into “re-education” camps.

But Merkel has said she favors allowing Huawei 5G technology and not stifling a free market and competition. A major concern for German businesses is that banning Huawei could result in retaliation from China against German manufacturers and car companies, which are big exporters to China.

Another argument against banning Huawei is that doing so could delay the rollout of 5G by several years and significantly raise costs for consumers and businesses and put Europe at a competitive disadvantage.

Yet many say the delay and cost are of little consideration for something so fundamental.

“5G is the nervous system of our digital society and economy,” German Foreign Minister Heiko Maas, a Social Democrat, said last year in an interview with Zeit, a German weekly newspaper. “If we make decisions about security risks today based on cost, we will pay for those decisions very dearly in the future.”

There is another factor influencing this debate: Many Europeans lost trust in U.S. tech companies and the U.S. government after the stunning revelations of Edward Snowden, the whistleblower.

“Now we are in the realm of trust relationships,” Kleinhans said. “Europe had its fair share of trust relations with the U.S. in 2013 after the Snowden revelations.”

Today there is a vigorous debate in Europe about the U.S. government's influence, and jurisdiction, over companies like Google.

Snowden revealed that the U.S. National Security Agency bugged Merkel's cellphone and ran wide-scale surveillance operations on European citizens and leaders. The surveillance was done using U.S. tech companies and platforms, investigations showed.

The Snowden documents revealed that NSA agents intercepted shipments of network devices made by Cisco, the U.S. technology giant, and installed “beacon implants” on them before sending the packages on to the intended customers.

In the Huawei debate, Europeans point out that there are U.S. laws requiring American tech firms to cooperate with the U.S. government, making the United States arguably not so different from China.

“If you compare the Chinese intelligence act with the U.S. Patriot Act, which some of us appear to have forgotten, one can see that they have pretty much the same requirements,” said Dieter Kempf, president of the German Federation of Industries, a powerful business lobby, on a recent German television talk show.

Still, there is a big difference between China and the United States, Kleinhans said. After the Snowden revelations, the United States passed laws to limit mass surveillance, but China has done little to ensure that Huawei is not used by its intelligence services.

Europeans also see the U.S. legal system as more reliable, as evidenced by Apple's fight with the FBI over access to costumer data.

“It's also about trust in the Chinese government, and there are good reasons not to trust the Chinese government,” Kleinhans said.

Politically and economically, China has threatened to retaliate if Europe excludes Huawei, which the Chinese government sees as part of its global strategy to advance its interests.

“If Germany were to take a decision that leads to Huawei's exclusion from the German market, there will be consequences,” warned Wu Ken, China's ambassador in Germany, in December. “The Chinese government will not stand idly by.”

Europe's conundrum is complicated by another factor: Two of the world's leading 5G technology companies are based in Europe. There is Nokia in Finland and Ericsson in Sweden. Both companies are competing with Huawei for the 5G market worldwide.

“It is not as if there is a vacuum beyond Huawei,” Ghez, the HEC Paris economist, said. “There are alternatives.”

Since the election of Trump and the United Kingdom's Brexit referendum, Europe has become more focused on hardening the EU bloc and its leaders now talk about building up an EU army, creating a more defensive industrial strategy and not giving up control of critical infrastructure to foreign companies.

Within this context, Nokia and Ericsson are being touted as the safe companies to rely on for building the next phase of the internet, involving millions of lines of code that are hard — if not impossible — to police. But their products also are more expensive and it may be very difficult — and possibly unlawful — to keep Chinese companies out of Europe's 5G network.

Thomas Lohninger, executive director of epicenter.works, a Vienna-based digital rights group, said it is necessary for all the companies building 5G networks to be heavily scrutinized and held to the highest standards.

“We need to trust the technology that we use every day,” he said in a telephone interview.

“It is good that we are having this debate [on Huawei], but we are having it in a too narrow way,” he said. “To have that debate solely in the midst of a U.S.-China trade war is futile.”

Lohninger said that instead of focusing criticism on Huawei, Europeans need to be “asking the right questions” of all technology companies.

“It is certainly good to question the security from China and from the U.S.,” he said. “None of them should get a blank check.”

Ghez said tech companies — including Huawei — may be forced to safeguard privacy or face the backlash of consumers.

“Ultimately,” Ghez said, “Huawei may be the one caught between a rock (the Chinese Communist Party) and a hard place (its global clients).”

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(Courthouse News reporter Cain Burdeau is based in the European Union.)

Follow @cainburdeau

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