Huawei Exits the US Market

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The warning came when Eric Xu, one of Huawei’s rotating CEOs, said in April “We are not interested in the US market anymore.” Now the Global Times reports that Huawei is exiting the US Market. Ren Zhengfei, founder and CEO of Huawei, said the decision was in order not to affect Sino-US relations. This does not mean that Huawei is gone permanently. He noted that man-made barriers cannot last long in globalization, especially for the telecommunications industry.

That’s where he may be wrong. Man made barriers seem to dictate the telecom industry. It seems fit, as telecom is, of course, man made itself. Telecom has always been very national. Many countries are still tele-dominated by national PTTs. The Internet was the exception, and even that seems to be fading. Many countries are considering disconnecting from the Internet, or at least tightly controlling international access. The Internet, for all its tubes, is a dangerous place. It’s filled with porn, anarchists recipes, and spies. It’s that last point that seems to be the core issue here.

Was Huawei the enemy? Probably. Electronic spying sure has been effective for the NSA. The NSA has forced companies to comply with its mission. My impression is this would be easier in China. Huawei is a pseudo private/Government entity. Certainly Huawei was the enemy of many US firms. It had a bit of an edge with its low costs, huge market, and the home court advantage when it comes to manufacturing.

Huawei didn’t seem to really have a chance here in the US – at least of recent. In October, 2012, the US Congress released a report claiming that Huawei and ZTE had helped Chinese intelligence infiltrate the communications networks in the US. In March 2013, the US government banned government departments from buying information technology equipment from Chinese companies. In other words, the US has zero tolerance for foreign spying. This is perfectly reasonable except that the US and NSA have been revealed by Snowden for similar acts. Other countries want less to do with us as a result. Earlier this month Cisco CEO John Chambers admitted in an earnings call that political dynamics were curtailing his company’s revenues overseas. A survey by the Cloud Security Alliance, an industry group, found that 10% of its non-U.S. members have canceled contracts with U.S.-based cloud providers since May. Fifty-six percent said they’d be less likely to use one.

Of course, there’s lots of Chinese companies doing business in the US – many of which are spying. It’s the cool patriotic thing to do. Even our US film makers are spies. Are we going to stop doing business with Volvo because it’s now a Chinese company? It has GPS systems and knows where you go.

Forget cars, the jackpot is indeed network equipment since we use the net for everything. But the problem is much bigger than routers.

I was just about to install Uber on my smartphone, but actually read their permissions. The Uber app uses GPS – that makes sense, but why does it access my contacts? Why should I give a ride service full access to my personal contacts? There’s no logical explanation for this type of personal espionage. I can’t find anything via Google why it needs these rights. Is Uber spying on me? Is the NSA spying on Uber (yes)? Will some distant relation in my contacts that happens to be under investigation land me in prison? Our digital trails are hard to control and harder to cover. Even Incognito mode does little to hide our identity any more.

So we have a situation with three very bad trends.

  1. Our digital trails are the best place to spy – and the convenience we trade for our privacy (like a ride sharing app) seems like a good deal to most.
  2. Because of this, nations are figuring out their vulnerabilities and kicking out foreigners. This will be unfolding in lots of ways. Small countries that don’t have their own manufacturers may have to resort to solutions that use open source code. It likely means a much smaller market for multinational corporations.
  3. The two above will result with less competition. Less competition equates to higher prices and less innovation. But at least are spies are “friendlies.”

The point about competition reminds me of the wise line in Godfather 2: “Keep your friends close, but your enemies closer.” Would you prefer the Chinese or our own NSA monitoring your actions on the Net – which sites you visit, what your emails are about, and which petitions you are signing?

Huawei isn’t walking away from much, it didn’t have a strong foothold in the US. It’ seems like a bold move to walk away from the largest market, but less bold when it wasn’t a viable market. I have never used a Huawei product, and never attended any of their events. But I will miss them because they made the other vendors better. Perhaps because they stole ideas, but I don’t know.

The market continues to implode. How many of the major UC vendors today will be around in 10 years? Not many.

Dave Michels