The chairman of Chinese telecoms giant Huawei’s Australian business, John Lord, says his company is the “most audited, inspected, reviewed and critiqued” information and communications technology (ICT) player in the world.
But that may not be enough to stop the private company from being banned again in Australia.
Lord fronted the National Press Club in Canberra earlier this week to defend Huawei’s reputation amid reports that Australia’s government – which banned the company from tendering for a national broadband network in 2012 – is about to do the same for a 5G telecom infrastructure rollout.
“We are proud of our transparency and our track record of demonstrating and making available to customers everything we do,” said Lord, a former admiral in the Royal Australian Navy.
“We are proud that after every kind of inspection, audit, review, nothing sinister has been found. No wrongdoing, no criminal action, or intent, no ‘back door,’ no planted vulnerability and no ‘magical kill switch’.”
Lord was on the offensive this week, but it was clear that not everyone believed him. Indeed, Huawei could be a significant corporate casualty in the fast-evolving diplomatic and security chill in relations between China and Australia.
National security threat
No decision has been made in Canberra on the 5G network, but market whisperings are strong that Huawei is still considered by the government as a national security threat that cannot be trusted to build sensitive telecom infrastructure.
This is despite the fact that the company has had success, without any controversy, in building a national broadband network in New Zealand, and is partnering on 5G with Singapore telecom carrier MI, including on virtual reality applications.
Australia is a member of the “Five Eyes” intelligence-sharing alliance with the US, Canada, the United Kingdom and New Zealand. It is reportedly basing its suspicion on the British experience, when Huawei was contracted by BT – formerly British Telecom – in 2005 to supply routers and access and transmission equipment for a US$17 billion network upgrade.
According to sources who claimed to have been briefed by British intelligence, core switches installed by Huawei in the upgrade were behaving suspiciously and were potentially letting data in and out to a third party. The extent of the alleged network vulnerabilities has never been publicly disclosed.
At the National Press Club, Lord addressed these reports by saying it was a “myth” that the UK government regrets Huawei’s presence in the country.
“I think George Osbourne, the then UK Chancellor, best summed it up when he said ‘there are some Western governments that blocked Huawei from making investments, not Britain, quite the opposite’,” said Lord. He then went on to mention recent supportive comments on Huawei by the UK government’s National Cyber Security Centre.
Research and development
Despite its setbacks in Australia, Huawei still has a major presence. It has provided mobile broadband infrastructure for local telecom companies Optus, Vodafone and TPG and built private networks for leading corporates such as oil and gas producer Santos. Its mobile phones are sold alongside all other brands in stores around the country.
The company has invested A$20 million (US$14.7 million) in an Australian National Training & Innovation Centre in Canberra and takes 30 Australian tertiary students to its Chinese Research and Development facilities each year in a program funded by the Australian government.
Nevertheless, the ongoing suspicion is having a negative impact on its Australian business. Huawei’s financial reports show its research spending in Australia is now at zero, falling from A$10.1 million (US$7.4 million) in 2014.
Its Australian revenue is also on the wane, falling by A$50 million (US$36.8 million) to A$623.2 million (US$458.5 million) last year.
As such, it is perhaps unsurprising that Huawei was revealed this week to be the biggest sponsor of corporate travel for Australian politicians, paying for 12 trips by politicians from all parties since 2012.
While some have viewed this as yet another reason to be suspicious, the company has defended its actions as above board and necessary lobbying and normal business practice.
Much of the suspicion about Huawei comes from the fact that its founder, Ren Zhengfei, is a former officer of the People’s Liberation Army, and it has had to fight perceptions that it is a kind of corporate “Trojan Horse” for China’s ruling Communist Party.
“We often joke in Huawei that outside of China we are seen as the untrustworthy communists and inside China we are viewed as the greedy capitalists,” said Lord, before claiming that much of the resistance to Huawei was based on its Asian origins.
“For some western political and business leaders, the rise and influence of China is not easy to accept,” said Lord.
“In the innovation sectors, traditionally we have relied on European and US-sourced technology to connect us, but this orthodoxy is being challenged by the rise of Asia and the rebalancing of the global ICT industry.”
Whether Australia puts greater emphasis on cutting-edge ICT capabilities or security will be known in the next month or so.
That decision will be a litmus test not only for Huawei’s ambitions in Australia, but will be a major indicator for the future direction of Australia-China relations.