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6 People Reportedly Arrested for Leaking Secrets About This Smartphone Giant

Chinese President state visit - Day TwoChinese President state visit - Day Two
Ren Zhengfei (right) gives Chinese President Xi Jinping a tour of Huawei’s London offices during a visit in 2015.Photo: Press Association/Sipa USA

Six former employees of rising Chinese smartphone maker Huawei were said to be arrested this week for leaking commercial secrets to their new employers and Huawei rivals.

According to Chinese media reports, the former Huawei engineers and designers were arrested after allegedly sharing information with Coolpad and LeEco, two Chinese smartphone makers whose market share ranks outside the country’s top five. A spokesman for Huawei declined to comment on Thursday.

Huawei finds itself in a tough position. The most recent market share figures in China show the company as either No. 1 or within a couple percentage points of the top spot, depending on the researcher. Globally, it shipped 140 million smartphones last year, a 30% rise from the previous year. But in a particularly competitive Chinese market, where more companies spend and lose bigger piles of money chasing after market share than anywhere else in the world, Huawei faces fresh new rivals all the time.

Huawei must feel the need to stay vigilant against former employees with nondisclosure agreements if it is to meet its own stated goal of surpassing Apple next year for the world’s second-largest market share.

In a story to be published in the next issue of Fortune, Huawei’s head of consumer business Richard Yu declares: “We want to grow into the top two [in] market share, and, in the future, top one by 2021.” (Becoming relevant in the U.S., where Huawei last had a market share of 0.37%, is another story, and detailed in the forthcoming Fortune report.)

The arrests of former Huawei employees may well have been helped by the company’s position as a national hero. It has long been a favorite of the Chinese government as the country’s largest seller of telecom equipment and as one of its most successful tech companies in foreign markets. Close government relationships can hasten legal proceedings in a country where the judiciary isn’t independent from the ruling party.

The arrests were publicly reported by local news site sina.com, which said the arrests were first revealed in an internal Huawei letter on Wednesday.

Correction: A previous post said Huawei founder Ren Zhengfei met with Chinese president Xi Jinping this week at the World Economic Forum in Davos. Ren did not attend.