Boasting over 45% of the global telecom market share and US$122 billion in revenues in 2019, Huawei is both a global leader in the tech industry and a prime example of China’s “catch up and surpass” vision for its domestic technology industry. The Chinese tech giant has consolidated high-profile support from Beijing through loose regulation and capital investment to push Huawei’s boundaries of innovation and directly challenge the long-held global perception of China’s technological inferiority.
Huawei’s swift rise brings a fall from grace
Huawei’s swift ascent to its status as a leading developer of 5G technologies has surprised competitors and sovereign nations that viewed China’s rise from sleeping giant to global superpower with skepticism. Regardless, citing concerns that Beijing could use Huawei’s telecom infrastructure to conduct mass surveillance operations throughout the world, and more importantly, rejecting the notion that authoritarian regimes could represent a viable alternative to democratic forms of government and private-sector development, the US has taken action to impede the tech giant’s global rise.
These security and ideological risks are significant drivers behind the recent economic sanctions levied by the US Treasury Department. In particular, the Department’s 2019 decision to place Huawei and 114 of its overseas affiliates on the sanctioned “Entity List” and 2020 move to expand export controls and penalize Huawei’s foreign semiconductor suppliers are seen as direct responses to Huawei’s growing international influence.
US action wins the battle but may lose the war
While Washington’s actions may inhibit the Chinese telecom’s growth over the short-term, they also expose the US to consequences that could impact its long-term global competitiveness. By restricting the availability of semiconductors to the Chinese marketplace, the US government has compelled Beijing and Huawei to expedite their campaign of “indigenous innovation.” This strategy, lauded by President Xi Jinping upon his appointment to General Secretary in 2013, would promote the development of high precision manufacturing capabilities for domestic semiconductor producers through R&D, and potentially exclude US involvement in future production of Chinese 5G technology.
Furthermore, US restrictions placed on the exchange of technological information and boycott of 3GPP (a leading international standards body for 5G) would allow Huawei to monopolize international standards and add to the company’s growing arsenal of over 2,000 standard essential patents (SEPs).
Huawei’s global rise as a leader in 5G technology creates an opportunity for Washington to bring China back to the foreign policy table. Instead of instituting economic sanctions that indirectly hamper US innovation while driving Chinese progress, Washington should engage China in the evolving arms-race of 5G technology. With an active role contributing to global 5G standards, US companies can use their expertise in semiconductor production technology to guide global discourse while US regulators focus on intellectual property theft and other trade infringements.