Why Huawei Matters

Date : 12/06/2018 @ 7:22PM
Source : Dow Jones News
Stock : Intel Corporation (INTC)
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Why Huawei Matters

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By Dan Strumpf 

Huawei Technologies Co. has been the target of a yearslong, multipronged effort by Washington to limit the telecom-equipment giant's footprint, both in the U.S. and around the world. Here's what you need to know:

What Does Huawei Make?

It is the world's largest manufacturer of telecommunications equipment. That includes base stations and cellular towers that help connect devices across networks. Huawei is also the second-largest maker of mobile phones globally, just behind Samsung Electronics Co. It recently pulled ahead of Apple Inc., despite selling almost no phones in the U.S.

How Big a Company Is It?

Huawei, founded by Ren Zhengfei, is widely seen as China's biggest global success story. The company employs about 180,000 people, more than Intel Corp., and has built telecom networks around the world, including in Europe, Africa and South America.

Its revenue of $92.5 billion last year is more than three times the revenue generated by Chinese e-commerce giant Alibaba Group Holding Ltd. It pours about one-third of its budget into research and development, about $13 billion last year, making it one of the world's top spenders on R&D.

So, What's the Controversy?

Huawei has been dogged for years by concerns from the U.S. that it could be subject to Chinese government influence, making its equipment vulnerable to espionage by Chinese authorities. These concerns were officially raised in a 2012 report by the U.S. House Intelligence Committee, which said the company posed a national security threat.

More recently, the U.S. has grown concerned that Huawei's strides in developing 5G -- technology headed for the next-generation mobile networks -- could force U.S. companies to one day buy equipment from Huawei. Huawei's major competitors in telecommunications gear are Sweden's Ericsson AB and Finland's Nokia Corp. No American company is any longer a major contender in telecommunications equipment.

What Does Huawei Say?

Huawei says it is employee-owned and doesn't do Beijing's bidding. It says its gear is as safe as any of its competitors' because the industry shares common supply chains. In order to sell its gear in the U.K., it has allowed British authorities virtually unlimited access to inspect its equipment at a lab that is overseen by a board that includes British government officials.

Who Is Mr. Ren, the Founder?

Mr. Ren, 74 years old, left the Chinese army shortly before founding the company in 1983, the company has said. A shareholding arrangement gives him a 1.4% stake in the company.

Who Is Meng Wanzhou?

Ms. Meng is Mr. Ren's daughter and the chief financial officer of Huawei, making her one of its highest-ranking executives. Earlier this year she was elevated to deputy chairwoman, a position that places her just under her dad in the corporate hierarchy and on equal footing with three other executives who take turns as rotating chairs of the company. She has been arrested in Canada at the request of U.S. authorities for alleged violations of Iran sanctions. It wasn't possible to immediately reach an attorney or representative of Ms. Meng.

Write to Dan Strumpf at daniel.strumpf@wsj.com


(END) Dow Jones Newswires

December 06, 2018 14:07 ET (19:07 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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