Huawei: China’s Controversial Tech Giant

Huawei: China’s Controversial Tech Giant

The Chinese telecommunications company faces accusations that Beijing could use its 5G infrastructure for espionage. The outcome of the struggle could shape the world’s tech landscape for years to come.
A Huawei employee walks by a screen displaying the company’s logo at its Shenzhen headquarters.
A Huawei employee walks by a screen displaying the company’s logo at its Shenzhen headquarters. Kevin Frayer/Getty Images
  • Huawei, a Chinese telecommunications company, is the world’s leading seller of 5G technology and smartphones. 
  • The United States and other countries claim that Huawei threatens their national security. They say it is beholden to the Chinese government, which could use the company to spy. Huawei denies the accusation. 
  • Australia, Japan, the United States, and other countries have effectively banned Huawei from building their 5G networks. The company will likely suffer as a result, though other countries continue to do business with it.


Huawei is the world’s leading provider of fifth-generation (5G) mobile technology. The Chinese telecommunications giant’s global influence has stoked fears in many countries, particularly the United States, that the Chinese government could force it to spy, sabotage, or take other actions on its behalf. Washington has imposed sweeping restrictions on Huawei and is pressuring its allies to do the same as part of a larger crackdown on Chinese technology companies. 

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Some experts warn that tensions between Washington and Beijing over technology could lead to a “digital iron curtain,” which would compel foreign governments to decide between doing business with the United States or China.

What is Huawei?

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It is the world’s largest seller of smartphones and telecommunications equipment, including 5G network infrastructure. Based in Shenzhen, China, Huawei sells its products domestically and internationally. In the United States, it sells few phones but helps provide connectivity in some rural areas.

Ren Zhengfei, the company’s billionaire CEO, founded Huawei in 1987. With more than 180,000 employees, according to its website, Huawei claims to be a private company fully owned by its employees, though its precise ownership structure is unknown.

Why is it so controversial?

In recent years, the United States and several other countries have asserted that the company threatens their national security, saying it has violated international sanctions and stolen intellectual property, and that it could commit cyber espionage.

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Cyber espionage. The main concern, according to U.S. intelligence agencies, is that the Chinese government could use Huawei to spy. Officials, primarily in the United States but also in Australia and several other countries, point to vague Chinese intelligence laws that could be used to force Huawei to hand over data to the Chinese government. (The United States has not publicly provided evidence that this has happened.) There are also concerns that Huawei’s 5G infrastructure could contain backdoors giving the Chinese government access to its inner workings and allowing Beijing to attack communications networks and public utilities.

A 2012 U.S. House Permanent Select Committee on Intelligence report [PDF] concluded that using equipment made by Huawei and ZTE, another Chinese telecommunications company, could “undermine core U.S. national security interests.” In 2018, six U.S. intelligence chiefs, including the directors of the CIA and FBI, cautioned Americans against using Huawei products, warning that the company could conduct “undetected espionage.”

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Icons that show Huawei's global reach: $100 billion in revenue in 2018; 200 million smartphones shipped; 170 countries of operation; 42 commercial 5G contracts; $222 million in Chinese government grants.

At the heart of Washington’s concerns is 5G, the next generation of cellular networks, which will provide faster download speeds for smartphones, connect devices in smart cities, and support autonomous vehicles and robots. “5G is a different type of risk versus 4G or 3G. It’s much harder to separate the core from the periphery,” says CFR’s Adam Segal. “Once you have those risks, you have to trust the company much more. But it is difficult to trust Huawei, given the relationship between companies and the Communist Party.”

Intellectual property theft. U.S. companies and global telecom firms have for years accused Huawei of stealing trade secrets, starting with Cisco’s 2003 lawsuit alleging that its source code appeared in Huawei products. (The suit was later settled.) In 2017, a U.S. jury found Huawei guilty of stealing intellectual property from T-Mobile, and the U.S. Justice Department claimed in a 2019 indictment [PDF] that Huawei repeatedly tried to steal design information for a T-Mobile robot.  

Trade violations. The United States claims that Huawei has long violated sanctions on Iran. A federal indictment unsealed in January 2019 against Meng Wanzhou, Huawei’s chief financial officer and Ren’s daughter, said that Huawei defrauded banks in order to do business with Iran and obstructed justice in the process by destroying evidence. Meng, who has denied the accusations, was detained in Canada in 2018 at the request of the United States, which is seeking her extradition.

How much sway does Beijing have over tech companies?

The government has considerable sway over Chinese private companies through heavy regulation, including the requirement that they establish Chinese Communist Party (CCP) branches within them, and state-backed investment. Executives of many of the biggest companies are party members, including Alibaba cofounder Jack Ma and Huawei founder Ren, who served as an engineer in the People’s Liberation Army during the Cultural Revolution.

Under President Xi Jinping, the lines between public and private have become even more blurred. Experts have observed that the CCP is working to boost its influence over private industry, especially tech companies. In recent years, state-run companies and local governments have invested more in private firms. Foreign news organizations have also reported that the government could start pressuring tech companies to offer the party direct ownership stakes and give party members even greater roles in management, though there is no evidence that this has happened at Huawei.

Some experts and U.S. officials also point to vague Chinese laws that could be used to force Huawei to help the government with intelligence gathering. For example, the National Security Law, enacted in 2015, states that citizens and enterprises have the “responsibility and obligation to maintain national security.” The 2017 National Intelligence Law [PDF] declared that Chinese companies must “support, assist, and cooperate with” China’s intelligence-gathering authorities. These laws have prompted additional U.S. concerns that social media app TikTok, which is owned by the Beijing-based company ByteDance, could share user data with the Chinese government. 

Huawei has distanced itself from the CCP, repeatedly asserting that its equipment has never been used, and will never be used, to spy. In January 2019, Ren said he “would never harm the interest of my customers” and that Huawei would not answer government requests for intelligence. In May 2019, Huawei commissioned a report [PDF] from a Chinese law firm supporting its argument that it cannot be forced to spy, but other lawyers in China and around the world said the law has never been tested. The Chinese government has also gone to bat for Huawei, saying it would “take all necessary measures to safeguard” Chinese companies.

How did Huawei become so dominant?

Huawei became the world’s largest telecommunications company over three decades, reporting $123 billion in revenue in 2019, a 19 percent jump from the previous year. This success has helped drive suspicion that the Chinese government has played a more significant role in the company in recent years than its leaders have let on.

In 1996, both the government and military began treating Huawei as an official “national champion,” a status reserved for firms that bolster China’s strategic aims. The move highlighted a shift in official policy. From then on, Beijing explicitly supported domestic telecom companies—and Huawei even more than others [PDF]—to prevent foreign domination of the industry. The Chinese government ensured Huawei had easy access to financing and high levels of government subsidies—$222 million in grants in 2018 alone.

A bar chart shows that Huawei owns more patents for 5G network construction than its competitors at 1,554 as of April 2019. Its next closest competitors are Nokia (1,427) and Samsung (1,316).

This support has allowed Huawei to price its network equipment below foreign competitors’ rates. In the Netherlands, Huawei underbid Swedish firm Ericsson by 60 percent to provide network equipment for the national 5G network. Experts said that Huawei’s prices would not have even covered the cost of producing their parts without subsidies. Chinese state banks also provide countries low-interest loans to use Huawei’s equipment.

Huawei says its low prices are the result of technological expertise—a claim with some merit, according to industry experts. Huawei’s annual research and development (R&D) budget is among the world’s largest, and Ren says his firm spends more on it than most publicly listed firms can. At $15 billion in 2018, Huawei’s R&D expenditures rank alongside those of Alphabet (Google’s parent company) and Amazon.

What restrictions has the United States imposed?

The United States has taken many steps to block Huawei. In 2018, the Donald J. Trump administration banned U.S. federal agencies from using the telecom giant’s equipment. (Huawei sued the United States over the restriction.) That same year, following pressure from regulators, AT&T walked away from a deal to sell Huawei’s smartphones.

U.S. actions against Huawei culminated with Trump signing an executive order banning U.S. companies from doing business with Huawei and the Commerce Department adding the company to its “entity list” in May 2019, essentially banning Huawei from buying U.S. goods without the government’s permission. Huawei relies on American software, microchips, specialty lasers, and other products. Days after the Commerce Department’s announcement, Google said it would restrict Huawei’s access to its products, including its Android operating system; a new Huawei phone unveiled later in the year didn’t come with Android apps. More than one hundred Huawei affiliates have been added to the entity list since then, and Trump’s executive order has been extended until May 2021. The department cracked down further in May 2020, issuing new rules to block foreign semiconductor manufacturers that use U.S. machines and software from shipping products to Huawei without a license. 

However, the Commerce Department has allowed some business activities that it says do not pose significant risks to U.S. national security, and it has temporarily granted licenses for some U.S. companies, such as Microsoft, to continue selling their products to Huawei. Since Huawei was placed on the entity list, the department has repeatedly extended ninety-day licenses that allow Huawei to continue limited work with some U.S. companies, particularly telecommunications companies working in rural areas that depend on its equipment. 

In November 2019, the Federal Communications Commission (FCC) voted to designate Huawei and ZTE as national security threats, which prevents U.S. internet providers from using federal funds to purchase the tech companies’ equipment. Huawei filed a legal challenge, calling the effort “unlawful and misguided,” but the FCC’s decision went into effect in June 2020. The Trump administration has also imposed visa restrictions on Huawei employees it says contribute to human rights abuses committed by the Chinese government, including against Uighurs in China’s Xinjiang region

Can Huawei survive the bans?

It’s not just the United States that has banned Huawei. Washington has pressured its allies to follow suit, even threatening to stop sharing intelligence with countries that use Huawei. Australia and Japan effectively banned the company from building 5G networks in 2018. The United Kingdom banned the use of Huawei equipment in 2020. Other U.S. partners, such as Canada, Germany, the Netherlands, and New Zealand, are considering bans.

Experts expect that Huawei will survive the bans but not without suffering damage. “It certainly will cause massive dislocations and probably loss of markets in the short term, but it’s unlikely to basically kill the company,” says CFR’s Segal.

At the same time, analysts say, U.S. companies could also be hurt by the bans. About 1,200 U.S. companies are Huawei suppliers, and U.S. telecom firms have said that banning Huawei products would set back the development of 5G in the United States by several years.

Why are some countries resisting the bans?

Other countries, especially those participating in China’s Belt and Road Initiative, are already using or have agreed to use Huawei’s equipment to build 5G networks. Many have been attracted by the company’s ability to provide high-quality networks for low prices. Russia’s 5G network will be built with Huawei’s help, and Malaysian telecommunications firms have signed preliminary agreements with Huawei. India has allowed Huawei to participate in the country’s 5G trials, though it reportedly considered reversing course amid rising tensions with China in mid-2020.

Authorities in potential markets that have not ruled out using Huawei, including several European countries, argue that security risks are inherent in all 5G networks, regardless of the supplier. They acknowledge, however, that the risks are higher for Huawei. Officials in these countries say they prefer to keep their auctions for 5G construction open to all firms and will tighten security measures to minimize any risks. As one example, the European Union recommended that member states apply targeted restrictions on high-risk suppliers but not ban Huawei.

Recommended Resources

Explore CFR’s latest coverage of Huawei and 5G. 

CFR’s Adam Segal writes in Foreign Affairs about what China’s plans to become a cyber superpower will mean for the world.

BBC investigates Huawei’s history and its ties to the Chinese Communist Party.

In Foreign Affairs, Oliver Stuenkel analyzes Huawei’s influence in Latin America.

This timeline from the Carnegie Endowment for International Peace tracks actions related to Huawei in EU and NATO member states.

This CFR report lays out the challenges and offers recommendations for securing 5G networks.

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