Globalization is an economic model built on trust, where businesses assume that geopolitical tensions can be overcome by mutual self-interest. But the case of Huawei, the Chinese telecoms company that was briefly the world’s largest seller of smartphones, demonstrates the limits of that ideal.
Huawei has suffered a crisis of trust. Since 2019, the U.S. has accused the company of spying for Beijing and lobbied its allies to bar the telecom equipment manufacturer from helping build out their national 5G infrastructure.
The Five Eyes security alliance of the U.K., New Zealand, Australia, Canada, and the U.S. have all partially or fully banned Huawei tech from national 5G rollouts, and Huawei’s reported annual revenue has slipped from $105 billion in 2018 to $99 billion in 2021.
But, prior to the U.S.-led campaign against Huawei, the telecoms provider had worked for years alongside British network providers, providing critical infrastructure and earning trust through an innovative verification model that allowed third parties to check and verify the company’s operating protocols: the Huawei Cyber Security Evaluation Center (HCSEC).
The HCSEC, which is located in Oxfordshire and is referred to as “the Cell,” opened in 2010, five years after Huawei partnered with BT, formerly British Telecom, to provide equipment as part of a $12 billion network upgrade. The partnership was Huawei’s first major contract in western Europe, but BT workers soon noticed suspicious “chattering” going on inside the Huawei switches installed in the U.K.’s network, prompting British intelligence services into action.
The Cell is operated at Huawei’s expense, is staffed by government employees, and is managed by an Oversight Board composed mostly of staff from the U.K.’s National Cyber Security Center (NCSC). For an extra layer of security, the NCSC contracts auditing firm EY to review whether HCSEC operations are sufficiently independent of Huawei’s influence.
“We have had thorough oversight of Huawei’s presence in the UK for more than a decade, and this will continue,” a U.K. government spokesperson told Fortune when asked for comment about the HCSEC.
The Board has consistently found room for improvement in Huawei’s security protocols, providing plenty of fodder for China hawks on both sides of the Atlantic to lambast Huawei as a security threat. But the HCSEC’s operation satisfied London’s intelligence officials well enough to allow Huawei to expand its presence in the U.K., helping build out the country’s 4G and 5G networks.
Huawei has even replicated the HCSEC’s model in several markets, establishing what it calls transparency centers in Canada, Germany, the UAE, Belgium, and China. The U.S. is a notable exception from that list, and Huawei executives have previously told me they would build one there if the U.S. would welcome it.
“Trust needs to be based on facts, facts must be verifiable, and verification must be based on common standards,” Huawei deputy chairman Ken Hu told representatives from the EU and World Economic Forum when the telecoms giant opened its Cyber Security center in Brussels in 2019.
(A key difference between the U.K.’s HCSEC and Huawei’s “transparency” centers, however, is that only the HCSEC is run in conjunction with a government partner. The transparency centers are more ad-hoc locations where third parties can arrange to review Huawei’s products.)
But, despite Huawei’s best efforts to maintain open and transparent relations with its customers, the U.S. campaign against Huawei—particularly Washington’s May 2020 decision to extend a ban on U.S. companies supplying Huawei with vital components—has prevented other governments from mitigating the risk of using Huawei technology.
“Assuming that continued operation of HCSEC is permitted under U.S. export law, the number of products which HCSEC has the capacity to analyze will be significantly reduced,” the NCSC said in an assessment of the effect of Washington’s export ban on the HCSEC’s operations, noting that the export ban could result in Huawei sourcing less secure components for its products.
The NCSC’s eighth annual HCSEC report, which should have been released late last year, is now months overdue. A government spokesperson told Fortune the NCSC is “reviewing the best mechanism to report on HCSEC’s work.” The U.K. banned Huawei from the country’s 5G rollout in 2020, giving telecom operators until 2027 to remove all existing Huawei 5G products from their networks.
Huawei did not respond to a request for comment, but the company has quietly pivoted away from western markets, focusing on R&D to build domestic components that aren’t subject to U.S. export controls. According to Politico, Huawei chairman and founder Ren Zhengfei told staff in 2022 that the company no longer has “an ideal for globalization.”
“What is our ideal today?” Ren asked. “Survival!”
Eamon Barrett
eamon.barrett@fortune.com
NEWS YOU CAN USE
Why are nonscientists leading the world’s largest companies’ sustainability efforts?
Chandran Nair, the founder and CEO of the Global Institute for Tomorrow, writes in a Fortune op-ed, that 23% of Fortune 500 corporations claim to engage with the Sustainable Development Goals framework, but only 0.2% have developed concrete methods and tools to evaluate their progress. The problem? Too few corporate leaders have any actual ESG credentials.
Meta will now give persistent content violators up to 7 chances to be better before sending them to ‘Facebook jail’
Last December, Facebook’s oversight board found that the company’s “cross check” protocols—whereby a human auditor checks the validity of automated violation notices—were deeply flawed and designed to “satisfy business interests.” In response, Facebook has now changed its violation policy to provide “well intentioned” regular users with seven violation warnings before blocking their accounts.
Norfolk Southern CEO makes 5-year pledge to help disaster-struck Ohio town and calls aid so far a ‘down payment’ for toxic train wreck
Weeks after one of his company’s freight trains derailed in East Palentine, Ohio, leaking toxic chemicals into the air, the CEO of Norfolk Southern pledged in his first significant interview on the topic that the company was “going to do what it takes” to see the clean up operation through. Norfolk Southern has already provided over $6 million in clean-up funding for the incident, but CEO Alan Shaw says that amount is just a “down payment” on its recompense.
Paying for Meta’s blue tick won’t buy you respect, leadership experts say
Leadership coaches are urging managers not to pay for Meta’s new verified “blue tick” status, Orianna Rosa Royle reports, telling them that “paying for the blue tick devalues its worth.” Verified status on Meta, and rival platform Twitter, used to be reserved for accounts that had proved to be authentic and influential. But, as more platforms allow users to simply buy their status symbol, one leadership expert warns the new payments systems could further erode trust in expertise.
TRUST EXERCISE
The World Bank is about to welcome a new leader after current President David Malpass announced this week that he would step down. Malpass has been under pressure to resign from his role at the top of the world’s intergovernmental loan provider after his refusal last year to acknowledge that burning fossil fuels causes climate change. The bank’s new leader, who will be nominated by U.S. President Joe Biden, will have to act decisively to reassure the world that combating climate change is back on the lender’s agenda.
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.