The Huawei Conflict: A Front in the New Cold War

We appear to have entered a new Cold War between the US and China. There are a number of fronts across a widening battlefield. One of them concerns the issue of the provision of 5G equipment to countries, including the UK, by Huawei. The UK government appeared to have taken the decision, advised by its Security Service, to use Huawei to provide around 35% of the ‘non-core’ 5G network equipment. However, the UK has insisted that Huawei will not be involved in the ‘core’ provision.

However, since the decision, the UK government has been subject to intense lobbying to reverse its decision, on security grounds, by the US state and defence departments; four of the so-called ‘five eyes’ intelligence network, i.e. Australia, Canada, New Zealand, and the US, NATO, and a number of senior Conservative MPs.

Others, including Huawei itself, have been attempting to counter the above lobbying pressure. Vodafone has written to the Prime Minister urging the original decision to be maintained.

But the issue is not simply about security. It is part of a broader strategy being deployed by the US, and some of its allies, against China. Not that China is an innocent party in this new Cold War. During the past few years China has become more paranoiac, and more belligerent in defending itself against what it sees as attacks on its internal affairs. However, the aim here is to explain the contentious issue surrounding the Huawei provision of 5G software in the UK.

There are three sets of issues to consider: the technology issues, the security issues, and the political and trade issues.

Technology

It is important to recognize that the essence of 5G is a telecommunications network, and unlike 4G, its network architecture is virtual, mediated principally by vendor proprietary software. It is important to recognize that 5G will not ‘replace’ 4G for some considerable time (until the late 2030s), but will, effectively, overlay it and be integrated with it. Huawei, although it manufactures and sells mobile phones, is primarily a telecommunications network provider, currently it is the leading global provider of 5G networks. Its technological lead is significant because of the early roll-out in China, compared to 4G, and the wide use of mobile technology in China, e.g. in payment systems. It has also benefited from Chinese government R&D support, as happens in various ways, some overt and some less so, in other countries. The US, for instance, has always used its defence procurement to provide support to private companies as well as direct R&D support.

Interestingly, 5G was launched in the US in 2018 and has wide coverage. If this is so, one might question why the US is getting so excited about Huawei? The answer is that the US system is currently based on a non-standalone (NSA) network which is most useful for enhancing broadband mobile voice and data coverage on an upgraded 4G system. The two top US suppliers are Verizon and AT&T, together with T-Mobile and Sprint. The Huawei network is a standalone (SA) system with a new radio access system and new core architecture (to which NSA networks, as intermediate systems, will transition, in time). The SA system is necessary for the sophisticated data use in industrial and public, including government, settings, e.g. the internet of things and remote robots, and public transport control and driverless cars. This difference explains Huawei’s current technological lead and US fears.

It is these latter applications in sectoral economic areas, covering also public health and finance, which is driving China’s use of 5G and associated technologies to achieve its China 2025 economic development vision. A drive that that has been significantly reinforced in the context of Covid19, with the announcement of major technological upgrading, including the ‘industrial internet’ and the launching of the Digital Transformation Partnership Action Plan 2020.

There are five key technological differences (involving both opportunities and constraints) between 4G and 5G. In the case of 5G:

  1. It can move much more data much more rapidly (lower latency) over the network to receptor terminals (phones, tablets, remote robots, smart city terminals, etc.).
  2. It can support a much higher density of receptor terminals across the network.
  3. It can use ‘network slicing’ to enable multiple specific networks to operate independently of each other.
  4. Crucially, though still dependent on physical base stations – in fact, larger numbers of smaller repeater base stations (e.g. located on bus shelters) – communication across the networks is virtual, i.e. mediated via software. Hence, there is a software Network Function Virtualisation Infrastructure (NFVI) managed by a software Management and Network Orchestration function (MANO).
  5. This virtualisation layer means that a separation of the core services from access via the peripheral receptor terminals is made more difficult (though not impossible) than in the case of 4G. The issue revolves around how far out the core services are extended to the periphery. That some extension is necessary is determined by the fact that to achieve the lower latency distance of the transmission need to be minimised. However, to extend the core services to the edges of the network, i.e. to every individual base station, is neither necessary (from a use case perspective) nor desirable f(rom a security viewpoint). The UK system maximum extension is intended to be large metropolitan areas.

Security.

It is crucial to note that the 4G and 5G networks are the property of and are built, operated, and maintained by private companies. Hence, given the all-pervasive nature of mobile phone technology in our lives – to be substantially expanded by 5G – it is clearly necessary for there to be a continuous  security review of the networks and the private vendors by the UK security services.

The already strong representation of Huawei – regarded as a high-risk vendor – in the UK’s current 4G network has meant that security has been assured by a continuous surveillance of Huawei by the security services. This is conducted technically via the Huawei Cyber Security Evaluation Centre (HCSEC). HCSEC is a common security team (involving Huawei) created to analyse and give information to operators to help them do their risk management well when using Huawei equipment. But there is also a security Oversight Board.

HCSEC validates the technical design of the Huawei operating system and peripherals. Its audits have in the past, in 2018 for instance, found serious flaws in the software engineering – a far from uncommon occurrence even in the largest software companies – which Huawei has been endeavouring to obviate.

Given this history, as far as security directly is concerned, it was not surprising that an audit carried out by the security services found that any potential threat to UK cyber security from Huawei was minimal and there had been no national security breaches, or any evidence of malicious Chinese state cyber activity through Huawei, detected since the inception of NCSEC in 2014.

On the other hand, in relation to China itself, the National Cyber Security Centre (NCSC) has assessed, with the highest level of probability, that the group widely known as APT 10, operating in China, is responsible for a sustained cyber campaign focused on large-scale service providers. The group almost certainly continues to target a range of global companies, seeking to gain access to commercial secrets.

The key issue is the potential future role of Huawei in relation to security. It is alleged that Huawei, as a Chinese company, albeit private, could ultimately be influenced or even directed to provide sensitive national security information to the Chinese government. However, the wording of the Chinese security law quoted appears to exclude ‘enterprises’ from such collaboration.

Nonetheless, various organisations (e.g. NATO) and other commentators have argued that the technical issue of any Huawei involvement in 5G network deployment should be assessed in geopolitical terms. Any technocratic discussion, it is argued, should not be isolated from discussions surrounding the protection of critical infrastructure, whether defence or civilian.

These wider issues can now be discussed to attempt to provide a balanced view.

Trade and Geopolitics

Currently, there are three major companies which are capable of supplying 5G networks, software and hardware. These are Huawei, Ericsson, and Nokia, though other major companies are involved in the various supply networks involved in establishing 5G networks. These companies include, for instance two companies mentioned below: patent licenses provided from the US firm Qualcomm and the Taiwanese advanced chip supplying firm TSMC.

Comparisons about the relative positions, of the major supplying companies in their telecommunications network business and their mobile technology business, are difficult to assess with absolute certainty. None of the major companies involved is particularly transparent, not just Huawei. The generally accepted ranking is Huawei, Ericsson, and Nokia in terms of market share.

Comparison of the global influence of the two governments involved, the US and China, in the struggle to influence the business and trade outcomes of the new Cold War (of which the Huawei issue is simply one dimension, albeit an important one), is easier to assess. The global financial and technology reach of the US, built up over many decades, gives it considerable power to influence matters. This power is used in a ruthless manner, using extra-territorial influence and constraining the ability of independent companies and other governments to pursue selected investment and policy routes.

A minor, but crucial example, is the recent US decision to tighten Commerce Department rules to prevent Huawei from buying components made with US technology, even where they are made outside the US. This will, for instance, prevent Huawei from using equipment in its mobile phones and in its cellular 5G base stations from key Taiwanese supplier, TSMC, probably the world’s leading supplier of advanced chips. There are reports from Taiwan that TSMC is already restricting shipments to Huawei. This punitive action will cause some economic damage to TSMC, which is unlikely to receive any favours from the US in return. China could retaliate, for instance against Apple or Qualcomm, US firms operating in China. In the short run, Huawei may switch to Samsung and in the longer-run develop more rapidly its own chip-making capacity; or another Chinese company will establish capacity to supply the chips.

This strategy points to another market fear of the US, related to its own telecommunications industry, namely the monopoly-hold that, until destroyed relatively recently, AT&T, as a vertically integrated telecommunications company, had on the US market. Huawei is a similarly vertically integrated company, which could, or so some US commentators believe, lead to an analogous global dominance by Huawei. This scenario is unlikely, but its credibility does not matter if Trump believes it!

As has been suggested, there is competition in the 5G market, with Ericsson and Nokia as the main rivals of Huawei. This competition has driven innovation, and is linked to the on-going process of telecommunications standards, via 3GPP the mobile standards body, which the US has only recently joined. The only US company which might become a credible 5G provider is Cisco, which manufactures in China but may face countermeasures.  Qualcomm is another US firm, one of whose major customers is Huawei, so it will lose revenue from US attacks on Huawei. The problem associated with any US action is the complex, interrelated nature of the software, mobile radio, and telecommunications industry, which operates across the world. The law of unintended consequences operates in this area and may not leave US companies unscathed.

Aside from the blatant abuse of US commercial power, this and other measures, risk further damaging the integrated global trading system, at a time when there is going to be a significant global downturn, post-Covid19. It should be noted that. Despite criticism of China not being open to competition within China, its current two main rivals Ericsson and Nokia have been awarded contracts in China. The world is one where companies are part of integrated supply chains which support the global economy. The problem with the US approach is that the strong economic position of China in the globally-integrated environment, and its likely belligerent, though usually calibrated response, may push China into a less open trading approach.

If these actions were simply a matter of commercial ‘bullying’ by the US, one might hope for a less autarkic, post-Trump era in US trade policy. However, US commercial policy appears to be partly driven by a wider and deeper political concern – emanating from the political establishment in the US – at the increasing global economic and political influence of China.

Insofar as this is an attempt to defend the US geopolitical empire, in an era when a multipolar world appeared to be emerging, it is both foolish and dangerous. Even though the Washington Consensus is less than 20 years old, it is on life-support. The world is changing, but the US does not yet appear to have taken on board the magnitude of the geopolitical changes.

There is the substantial economic growth of China and its political influence in Africa, the Middle East, and Latin America. There is the linked shift of economic and political influence to the Pacific and South-East Asia and India. But these seismic movements are accompanied by the massive global collaborative effort required to tackle climate change and its attendant economic development issues around the world.

To attempt to use a ‘playbook’ from the 1945 to 1985 Cold War period where the foe was the Communist Soviet Union is to ignore the revolutionary economic, political, and technological  transformation undergone by the world, both during that period and the subsequent 35 years. Following a similar US strategy as in the past, substituting China for the Soviet Union, setting up a ‘clash of civilisations’ is incomprehensible and doomed to failure.

The rest of the world views the US rather differently than in former decades and will not necessarily be sympathetic to its actions in driving forward a new Cold War, particularly when the actions have damaging commercial and financial aspects.

Conclusion

Leaving aside the underlying political motivation of the US in launching a trade war on China, and its blatant attempt to damage Huawei, by whatever means possible, it seems evident that the commitment of the US to capitalism does not extend to international trade competition. Maybe, except for its relatively brief period of global trade dominance, it never did. Any student of the latter quarter of the 19th century will recognize the protectionist instincts of the US.

Notwithstanding the more recent belligerent responses of China under Xi, the global polity requires from President Xi and from Trump, or whoever is elected US President in November 2020, a return the constructive engagement. At a minimum, the trade war initiated by Trump, and which has enveloped Huawei, needs a truce, if only to protect the rest of the trading nations and the progress of global innovation, in relation to 5G and in other technology areas.

 

About the GPI

The Global Policy Institute is a research institute on international affairs. It is based in the City of London, and draws on both a rich pool of international thinkers, academics as well as policy and business professionals. The Institute gives non-partisan guidance to policymakers and decision takers in business, government, and NGOs.

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