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Visitors take photographs of Huawei’s new foldable 5G smartphone Mate X at the Mobile World Congress on February 24 in Barcelona. Photo: AFP
Opinion
The View
by Richard Harris
The View
by Richard Harris

Why Huawei should lie low and plan a US listing instead of going on the offensive

  • The Chinese telecom giant would do better to fend off attacks from the US by negotiating privately, not involving the government, and burnishing its reputation with a listing in New York
Richard Harris
Richard Harris
Why you can trust SCMP

It is standard operating practice for an airline to paint over the logo on a plane if it has been involved in an embarrassing incident. Keeping a low profile keeps the news hounds guessing. That’s a lesson Chinese telecom giant Huawei could learn.

The pot of US allegations, ranging from intellectual property theft to close ties to the Chinese government, was already simmering when Meng Wanzhou, Huawei’s chief financial officer and the daughter of its founder, was arrested in Canada on fraud allegations at the behest of the US. This ignited an explosive row which has tarnished the company’s reputation in many markets.
Huawei’s recovery strategy has been to do what it would have done in China – be aggressive and run the news agenda. This doesn’t work overseas. Instead, it has provided ammunition to US efforts to pressure potential customers against using Huawei’s 5G telecommunications network equipment.
Lesson one: private companies should not get their governments involved in matters such as these. Meng’s detention quickly became an international diplomatic storm. Unless Meng has some damaging evidence that could be revealed in court, the highly regimented, precedent-based Western legal process would almost certainly have led to her quiet release. Now, she has to publicly go through the due process of the law.

Put another way – don’t get your dad involved in a fight with the other boys at school; he will only make it worse.

Worse happened. Two Canadian citizens were detained in China. No official links have been made with Meng’s arrest but the men have not been charged with any crime even 10 weeks after their detention.
When New Zealand banned Huawei from its 5G network last year, a decision it now says it is reconsidering, the 2019 China-New Zealand Year of Tourism in Wellington exhibition was postponed, an Air New Zealand flight to China was denied permission to land and the country’s prime minister’s planned visit to China was inexplicably delayed. No interference in the internal affairs of a foreign country by China then.
Huawei doubled down. It placed advertisements in major New Zealand newspapers saying “5G without Huawei is like rugby without New Zealand”. The head of Huawei’s carrier business group told reporters the British 5G market without Huawei would be like “the English Premier League without Manchester United”. The own goal is that the many who do not support the All Blacks or United would be delighted to have Huawei banned.
Huawei’s rotating chairman, Guo Ping, tripled down at a conference, saying US law could also force companies to provide government officials with data when requested. However, US law requires an appealable, independent judicial decision to compel such companies – which in China is strictly optional. Guo’s comment just highlighted the possibility that Huawei data could be shared with the government.
Finally, Ren Zhengfei, the company’s famous 74-year-old founder and former PLA engineer, thanked the US for “promoting” Huawei, saying, “5G was not known by common people”. This is true, and the row will surely increase the popularity of Huawei’s excellent handsets.

Investors looking to play the volatility should remember how close some Chinese companies are to the government. Huawei is not a listed company, which begs the question – how did it finance its expansion into the 72nd largest company in the world, with revenues worth US$100 billion?

Huawei founder Ren Zhengfei speaks at a press conference in Shenzhen on January 18. In a recent television interview, he thanked the US for “promoting” the company. Photo: Kyodo

Companies do get into a spot of bother from time to time. Perrier survived the scandal in 1990 when its natural mineral water was found to be contaminated with benzene. Johnson and Johnson issued a full recall and invented tamper-proof packaging when Tylenol was poisoned in 1982.

More recently, Volkswagen was caught falsifying emissions reports, United Airlines provoked an outcry after security staff violently dragged a passenger off a flight, and a loophole in Facebook’s platform allowed Cambridge Analytica to access millions of people’s data without their permission.

What Huawei should have done is lie low for six months, without getting the government involved or allowing itself to become the subject of a diplomatic incident. From today, the company needs to continue to work quietly with technology buyers in the West.

Already, the UK and New Zealand, two “Five Eyes” intelligence allies, have said that Huawei’s equipment is safe enough in particular circumstances. Huawei should take that foot in the door gratefully.

Huawei needs to do something striking to rebuild its global reputation and to prove its independence from the Chinese government. The one move to fit the bill would be to list its shares in New York. This would establish world-class transparency, provide oversight and enhance trust.

Finally, the company should shut up about its successes and focus on building its business modestly, one contract at a time.

Huawei has achieved a great deal in the last 20 years but it has a lot to learn about promoting itself in a crisis. Regardless, by 2025, 1.2 billion people are likely to have access to 5G networks – a third of them in China. Huawei should work on that first. This tech race is a marathon, not a sprint.

Richard Harris is chief executive of Port Shelter Investment and a veteran investment manager, banker, writer and broadcaster, and financial expert witness 

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