It would be an understatement to say 2018 was not a good year for Huawei. Things started going south early in January and only got worse as the year progressed. After months of troubles, the year culminated with the company’s CFO, who also happens to be the founder’s daughter, getting arrested in Canada at the behest of the U.S. government.
Huawei’s misfortunes in 2018 began from concerns that the company’s telecommunications equipment could be used for cyber espionage. For that reason, the company became a target of U.S. politicians. Then its troubles became inextricably connected with tensions between the United States and China over trade and tariffs. Finally, toward the end of the year, the U.S. government accused Huawei of circumventing sanctions to sell telecom equipment to Iran.
Let’s recap the events of Huawei’s worst-ever year.
In early January, Richard Yu, CEO of Huawei’s consumer business group, was scheduled to give a keynote at CES in Las Vegas where it was anticipated he would announce a ground-breaking deal in which AT&T would begin selling Huawei smartphones. Instead, AT&T backed out of the arrangement at the last minute.
Next came legislation from the U.S. House and Senate proposing a prohibition by the U.S. government from using equipment from Huawei and ZTE. The bills included H.R. 4747 and S.2391 both titled “Defending U.S. Government Communications Act.”
Both bills have been referred to government committees for security and oversight.
Piling it on further, FCC Chairman Ajit Pai proposed a ban on the use of money from the FCC’s $8.5 billion Universal Service Fund (USF) to purchase equipment or services from companies that pose a national security threat to United States communications networks. Pai’s statement said, “Hidden ‘back doors’ to our networks in routers, switches — and virtually any other type of telecommunications equipment — can provide an avenue for hostile governments to inject viruses, launch denial-of-service attacks, steal data, and more.”
The threat from the FCC was a particularly harsh blow to Huawei because the modest amount of business it has been able to muster in the United States comes from smaller communications providers that rely on USF monies.
But while some smaller service providers defended Huawei, the company became a pariah to other stakeholders. For instance in April, Huawei issued a press release saying it was working with Hewlett Packard Enterprise (HPE) on SD-WAN technology. But HPE quickly shot back, saying Huawei’s announcement was inaccurate. “HPE does not have a partnership with Huawei to develop SD-WAN or any other technology for general market availability,” stated HPE.
Other Countries Join In
After so much high-profile news about the U.S. government’s beef with Huawei, other countries began banning the vendor as well. In August, the Australian government banned Huawei and ZTE from providing 5G equipment to the country’s telecommunications providers, according to a tweet from Huawei Australia.
And in November, senior German officials were reportedly attempting to convince their government to prevent German telecom operators from using equipment from the Chinese vendor to construct their 5G networks.
Meanwhile, the U.S. government reached out to allies in other countries such as Italy and Japan to try to pressure their local wireless and internet providers to avoid using telecom equipment from Huawei.
The vendor did receive a small token of support when T-Mobile Poland, a subsidiary of Deutsche Telekom, announced the launch of what it described as the “first fully functional” 5G network in the Eastern European country with the support of Huawei.
However, any gains Huawei made with T-Mobile Poland were probably washed out by losses with T-Mobile US. In December T-Mobile US and Sprint received approval from the Committee on Foreign Investment in the United States (CFIUS) for their proposed $26 billion merger, after both companies appear to have agreed to not use Huawei equipment.
Finally, an awful year for the Chinese vendor was capped off with the shocking news that Huawei’s chief financial officer Meng Wanzhou, who is also the daughter of the founder of Huawei, was arrested in Canada at the request of the United States.
During her bail hearing it was revealed that she and the company were under investigation by the U.S. Justice Department for possibly selling equipment to Iran in violation of U.S. sanctions. The Wall Street Journal had caught wind of this investigation earlier in the year, noting “the investigation into Huawei followed administrative subpoenas on sanctions-related issues from both the Commerce Department and the Treasury Department’s Office of Foreign Assets Control.”
Few details are known at this time, but the investigation could be similar to the case against ZTE, which ultimately cost that company billions of dollars and being banned for several months from buying components from American companies.