Huawei Confirms Dangerous New Switch To Russia

Huawei Confirms Dangerous New Switch To Russia

The Trump versus Huawei pantomime is now in full swing, and the latest news to emerge from the Chinese giant’s media machine is no less intended to find its mark than Trump’s far-from throwaway “Spywei” barb last month. With Washington’s warnings about the risks of election interference by America’s two most dangerous adversaries—Russia and China—continuing, what better time for Huawei to up the stakes. You’re pushing us into Russia’s arms, appears to be the message, you might want to think that through.

These are desperate times for Huawei. Trump’s latest attack has ripped the chipsets from Huawei’s supply chain that the company needs to power its flagship smartphones and 5G equipment. And while company execs assure that a plan is being worked on, that investments in the company’s own chipset development unit will be redoubled, that answers will be found, there’s been deafening silence from Shenzhen when it comes to any of the details as to what mitigating options the company still has.

And so to that timely reminder as to unintended consequences. Hong Kong’s South China Morning Post reports that Huawei CEO Ren Zhengfei dropped his Russia update during a recent visit to a Chinese university. “After the U.S. included us on the entity list,” he said, “we transferred our investment in the U.S. to Russia, increased Russian investment, expanded the Russian scientist team, and increased the salary of Russian scientists.” Russia and China have complementary technical skillsets but a traditional sense of mistrust between them. Those cracks are fast being papered over by an enemy’s enemy realpolitik, though, as opportunist Moscow senses a win-win.

Russia has always figured in the shadows of the U.S. battle with Huawei. Last year, Vladimir Putin accused Washington of “brazenly forcing Huawei from the global market,” that, “it is even called the first technological war of the coming digital era.” Huawei sales have soared in Russia during its blacklist—albeit Samsung still outsells the Chinese giant. The loss of Google, it seems, has not had the same impact on Russian consumers as in Huawei’s other export markets.

One area on which Huawei is increasing its focus is cloud services. Its cloud business group appears to have escaped the impact of the latest chipset sanctions, and the high profits generated by such services will make for a much needed respite. Coincidentally, Huawei launched a major enterprise cloud offering in Russia back in March, further expanding its revenue base in Russia.

Huawei is also playing a pivotal role in Russia’s 5G deployments and Putin is clearly looking to China’s example as he adopts elements of the country’s Great Firewall. Much more dangerously for the west, though, Huawei is intent on expanding its AI capabilities with Russian talent. As I reported in February, the company is recruiting thousands of developers in the country.

You don’t need me to join the dots here. China’s Huawei is linking Chinese and Russian AI through commercial development programs. And while on the surface this can all be painted as business as usual, Huawei is also recruiting cybersecurity expertise in Russia, and has advertised for offensive as well as defensive cyber skillsets. When I asked about this earlier in the year, Huawei told me that cybersecurity is its highest priority, “we employ a qualified team of specialists worldwide to ensure the security of our products and services. That includes supporting our customers in Russia, as elsewhere.”

The most worrying scenario for Huawei is that it will need China to stand-up a silicon supply chain non-reliant on any U.S. tech—this will take years and Huawei won’t retain its current form until then. Its smartphone business will be irrevocably changed, its 5G business materially damaged. For its part, Huawei now says that it intends to invest in its own HiSilicon chipset development business to create a non-U.S. capacity of its own, within a few years from now.

Huawei analyst Dave Burstein suggests that, in reality, a Chinese chip maker will supply Huawei, regardless of American sanctions. “I think it highly unlikely the U.S. can prohibit a Chinese foundry from selling to a Chinese company in China,” he writes. “I’d expect any rational American regime to avoid raising the issue.” Given the level of those chipsets, this might fix its larger equipment issue, but not its smartphones.

It’s fairly obvious that a China program to establish new supply chains and technical capabilities would be stronger for the support of Russia’s own science and technology sectors. It’s also fairly obvious that in pushing a block rather than monitoring or regulation, the U.S. leaves Huawei will little choice but to go this different route.

“No matter what,” Ren said during that university visit, “we will never hate the U.S. It is only the impulse of some politicians, and does not represent American companies, American schools, and American society.” But with China and Russia representing the biggest cyber and physical security threat to the U.S., Huawei’s investments and increasing presence in Russia will do little to abate any concerns over the company’s risk factor and state links, even if a change in administration follows November’s election.

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