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Home > Publications > PISM Spotlights > PISM Spotlight: U.S. Department of Justice Charges Huawei with Technology Theft

PISM Spotlight: U.S. Department of Justice Charges Huawei with Technology Theft

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31 January 2019
Marcin Przychodniak
no. 9/20019

PISM Spotlight: U.S. Department of Justice Charges Huawei with Technology Theft

On 28 January, the U.S. Department of Justice (DoJ) announced an indictment against Huawei. It accuses the Chinese company of stealing trade secrets from the American T-Mobile between 2012 and 2014. The timing of the announcement during the current round of U.S.-China trade negotiations is an attempt to force concessions from the Chinese side. The allegations are also aimed at convincing U.S. international partners to limit the influence of Chinese companies, for example, in the construction of next-generation 5G networks.

What does the U.S. DoJ allege Huawei did?

Huawei supposedly stole technology from the American company T-Mobile. After the theft was revealed and T-Mobile sued the Chinese company, Huawei falsified legal documents and forced its employees to lie in front of the court. T-Mobile (whose parent company is Deutsche Telekom) owns the rights to smartphone testing “robot” before they are introduced to sales. In 2010, Huawei established cooperation with the company hoping to enter the U.S. market, where it previously had had a limited presence. The Chinese engineers participated in testing phones using the robot and Huawei declared its intentions to buy rights to the device. After T-Mobile declined the offer, the engineers, according to the indictment, photographed the device, copied its technical data, and stole parts. The acquired information was then transferred to a Huawei base in China.

Does the indictment set a precedent?

Not counting recent espionage charges against a Huawei employee in Poland, the indictment of the Chinese company is the first by a country’s criminal justice institutions. Before this, private companies had made claims accusing Chinese firms of technology theft (e.g., Motorola in 2010 and Cisco in 2003). European countries, the U.S., and Australia had expressed concerns related to cooperation with Huawei because of the company’s links to Chinese state institutions and acting in the Chinese government’s interest. The importance of the U.S. indictment is strengthened by the American confirmation of a system inside Huawei for giving benefits and bonuses to employees who illegally acquire foreign technology.

Will the indictment influence Huawei’s position on international markets?

Huawei devices are integral to 4G networks and services across most of Europe. The company’s ambition is to participate in the cooperation on building the fifth-generation network (5G). The U.S. indictment provides an argument for countries, for example, the Czech Republic, France Poland, and Norway to limit cooperation over concerns about Chinese companies’ involvement, Some other countries, namely Hungary and Italy, have declared they plan to continue cooperation with the Chinese firms. Some companies, including Deutsche Telekom, state that while there are security concerns, there could be delays in 5G construction in the EU if Chinese companies are excluded. An EU block of Huawei devices and services will not result in a serious decline in the company’s profit, since most of it is generated in non-European countries—in the Middle East, Africa, and Asia.

How will the indictment likely influence U.S.-China relations?

The Huawei case is a symptom of the trade dispute between the U.S. and China and not its cause. So, it is important to take note of the timing of the indictment announcement, which comes right before the start of another round of negotiations (30-31 January). The U.S. demands more structural changes in China’s economy policy, within which Huawei is an important tool. The previous Chinese negotiation offer is limited to less important topics, such as general declarations on raising imports of U.S. products. The indictment will not force a dramatic turn in relations. The Chinese side will treat the indictment as proof of a lack of will on the U.S. side to compromise and will underline that the indictment applies to events from four years ago, which it will argue Huawei has already explained. The public character of the indictment most likely reduces the possibility for China to change its policy.

What influence will the indictment have on U.S. relations with its partners?

The Trump administration is attempting to influence U.S. partners (e.g., Poland, Israel, UK) to block use of Huawei devices and especially rule out the company (and other Chinese enterprises) from the construction of 5G infrastructure. The indictment will strengthen the U.S. arguments of the potential danger of cooperation with Chinese enterprises. The U.S. will also increasingly solicit partners’ support (also among NATO members) in the growing rivalry with China. The Trump administration suggests frequently that continued cooperation with Huawei will result in less political and military cooperation with the U.S. At the same time, the development of 5G remains a key goal for the European Union and several of its Member States, so transatlantic dialogue—technological and financial—is needed on the means to achieve that goal. 

 


 
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