Not even a deadly virus originating on its home turf can upset Huawei, it seems. The Chinese equipment giant has already weathered the storm of US sanctions, coped with the detention on Canadian soil of its chief financial officer and shrugged off suggestions it spies for the Chinese government. Now it's bounced back from COVID-19 with enviable speed.
Already a deeply suspicious character to his critics, Ren Zhengfei, Huawei's founder, will certainly not have endeared himself to US authorities in his latest media interviews with the Wall Street Journal and the South China Morning Post. While Europe and the US are braced for a long battle with what Donald Trump has called "the Chinese virus," the Chinese vendor is bragging about its good health, flexing its giant R&D muscles and eyeing new sales opportunities outside its domestic market.
Of greatest alarm to Huawei's opponents will be Ren's boast about increasing R&D spending this year to a monstrous $20 billion, from $15 billion in 2019 (although Ryan Ding, the head of Huawei's carrier business, told analysts and reporters in February that Huawei actually invested as much as $18 billion in R&D last year). Even if the Chinese company has a broader range of interests than its rivals, these sums dwarf what other companies spend. Last year, Sweden's Ericsson forked out about $4 billion on R&D, while Nokia managed $4.5 billion. US-headquartered Cisco, more focused on the enterprise sector, spent $6.6 billion in its most recent fiscal year.
That R&D capability explains why Huawei has some of the most advanced network technology in the world, say many of its critics and supporters. "Huawei's leadership comes from having the best radios, and the reason they have the best is they have been making their own semiconductors that are available only to them," says Steve Papa, the CEO of US software company Parallel Wireless and an outspoken critic of the Chinese firm. "The US government needs to be pushing Department of Defense dollars into that area to catch up with and beat Huawei."
For hawks like Papa, COVID-19 could feasibly threaten US efforts to challenge Huawei in the semiconductor space. Even in the best of times, persuading private-sector investors to go up against "a state actor," as he calls Huawei, is difficult. The current pandemic now presents US policymakers with perhaps the greatest challenge they have faced since the Second World War. To any government institution, 5G semiconductor innovation might not seem like a priority while the rate of COVID-19 infections continues to rise.
Huawei, meanwhile, is already back to 90% of its production capacity, Ren told the South China Morning Post. By offering protective gear to its partners, it has been able to mitigate any major supply chain disruptions, he is also reported to have said. Outside the Chinese province of Hubei, the epicenter of the original outbreak, none of Huawei's employees have caught the virus, said Ren.
The news is not entirely positive. COVID-19 has forced Huawei to lower its financial targets for 2020, according to the WSJ (how much is unclear). Even if its own business is relatively unscathed, the European telecom operators that buy Huawei's equipment may struggle to carry out network upgrades while cities across the continent remain under lockdown. Projects may be delayed until the virus is brought under some kind of control.
But the chest-thumping Ren remains defiant. "Neither the US sanctions nor the pandemic had a major impact on us," he told the South China Morning Post. And his optimism that demand will remain strong may be justified: Usage of network services has rocketed in European countries where people are confined to their homes, with Facebook this week reporting a 70% increase in the time spent on its apps in Italy since the crisis began. "There is a demand we need to meet," said Ren.
He seems oblivious to the PR risks. Given the importance that mobile and broadband networks have assumed almost overnight, upgrades may be vital, and any business activity during an economic recession should be welcome. A Western vendor on the lookout for deals would be unlikely to face censure. But Huawei already stands accused of being a security threat, trade cheat and technology thief. The merest suggestion that Europe's pain is the Chinese vendor's gain is the last thing it needs.
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— Iain Morris, International Editor, Light Reading