U.S. Government Must Wake Up to Reality of Huawei’s Presence
April 08, 2019
At a seminar we attended on national security at UT, the Deputy Director of the Office of National Intelligence, and a former CIA official, maintained that the U.S. is very concerned about the ability of Huawei products to capture information in networks, where its equipment is used and delivery the information to the Chinese government. However, Ms. Gordon believes that the U.S. will have to live with the situation and, “We are going to have to figure out a way in a 5G world that we’re able to manage the risks in a diverse network that includes technology that we can’t trust. We’re just going to have to figure that out.” This seemed to indicate that the US is admitting that no matter how much pressure they exert on others, they will have to deal with Huawei’s technology, which is meets the 5G spec and is significantly lower cost than all of its major competitors. The price/performance of Huawei equipment is better than most, and Huawei bends over backward with both large and small customers to provide a cost-effective platform for telecom services. When it really gets down to decisions for smaller carriers or even smaller countries, they look to the most effective solution and deal with security risks as part of the cost of doing business. Many smaller network providers in the U.S. use Huawei equipment because of its utility and lower cost. The Chinese government made it a priority to control 5G technology, when China failed to get a foot hold in 4G 5-years ago. It is apparent that Huawei is an example of China’s ability to meet its 5-year plan.
The US government and US carriers will have to connect to hundreds of systems in the U.S. and other countries that use Huawei equipment. Once traffic passes through such systems, whatever the security risks that the US government fears, will become part and parcel of that traffic. As many network providers, both allies and less-than allies decide to use, or continue to use Huawei equipment, especially for 5G, Ms. Gordon is saying that the US is better served developing security systems that sense or protect against potential security issues, regardless of whether they come from the Chinese government or the myriad of other countries that have CIA-like organizations. From: SCMR, LLC and OLED-A
See our article on Apple potentially delaying its entry into 5G because it cannot acquire sufficient # of modems and related parts.
In other news about Huawei
Despite the U.S. governments intense pressure in both their carrier business and their consumer (smartphone) segment, Huawei reported full year 2018 sales of $107.4b US, up 19.5% Y/Y, putting it over $100b for the first time. Huawei’s consumer businesses, which includes smartphones is now the largest segment of their company, generating ~$52b, up 45% Y/Y, while carrier sales were flat at ~$37.1b, and the enterprise segment up 23% to ~$11.1b. The company indicated that the transition from 4G to 5G was responsible for the flat carrier business and it expects large scale deployment of 5G in 2019. Net profit was $8.8b, up 25.1% Y/Y and the company spent $15.1b in R&D, or ~14% of sales. Apple spent ~5.6% of sales on R&D in calendar 2018 and Samsung Electronics spent 7.4% of sales during the same period. Huawei remains a private company and ranks close to Cargill and Koch Industries in the private company realm and Microsoft and Home Depot in the public space based on sales.
The company got a mixed review from the HCSEC (Huawei Cyber Security Evaluation Centre) an organization set up by the EU to monitor equipment supplied by the company to carriers 8 years ago. The board issued their 5thannual report that stated “The oversight board continues to be able to provide only limited assurance that the long-term security risks can be managed in the Huawei equipment currently deployed in the UK”, but added that the board “…does not believe that the defects identified are a result of Chinese state interference”, and are “about basic engineering competence and cybersecurity hygiene that give rise to vulnerabilities that are capable of being exploited by a range of actors.” Huawei responded, “We understand these concerns and take them very seriously. The issues identified in the 2019 HCSEC Oversight Board Report provide vital input for the ongoing transformation of our software engineering capabilities,” Huawei also said that the UK’s oversight is the toughest and most rigorous in the world, and further that the report does not suggest that the UK networks are more vulnerable than last year. The EU commission has ignored the US call for a ban on all Huawei equipment and called for a focus on 5G equipment, but cautioned that Huawei has not provided evidence that they have improved software engineering and security practices, despite the company’s commitment to a $2b ‘transformation program’, initiated late last year.