"House of Huawei
By Eva Dou
Portfolio, 448 pages, $34
In a speech in March 2000, President Bill Clinton hailed China's imminent entry into the World Trade Organization. Mr. Clinton was particularly excited about Beijing's promise to open up its telecom market to foreigners, a key American demand in the WTO negotiations. "In the new century," the president enthused, "liberty will spread by cell phone and cable modem."
This was wishful thinking of the highest order. Over the following years, Huawei, China's leading telecom-equipment company, developed the tools that transformed the People's Republic into the world's most advanced surveillance state.
Huawei's technological advances and rapidly expanding foreign sales also threatened America's tech supremacy and global influence.
In "House of Huawei," Eva Dou provides a comprehensive and instructive account of the firm's rapid ascent to become "China's most powerful company."
Founded in the city of Shenzhen in 1987 by Ren Zhengfei, a former engineer with the People's Liberation Army, Huawei started out assembling analog telephone switches copied from another domestic manufacturer, as Ms. Dou relates. When the firm launched into sophisticated digital switches, one Western executive said that it appeared to have copied an AT&T switch. Later, as Ms. Dou reminds us, Cisco claimed in a lawsuit that certain bugs in the source code for its routers were replicated in Huawei's own routers. The suit was dropped after certain code was changed.
Not that Huawei's activities put off Western firms eager for Chinese business. In the early 1990s, Motorola placed Huawei on its priority customer list. IBM provided Huawei with consultancy services for more than a decade. Meanwhile, Huawei enlisted Western policy elites to advance its cause. Adm. Bill Owens, a former vice chairman of the Joint Chiefs of Staff, represented Huawei in its 2010 bid for a Sprint contract. Huawei became one of the top lobbying spenders around the world. It also wooed leading universities, partnering with Oxford, Stanford and the University of California, Berkeley, among others.
The Chinese state played a key role in Huawei's success. In 2000 the Far Eastern Economic Review ran an article asserting that Huawei had originated as a "military-backed company." The article opened with a description of the reporter's visit to Huawei's headquarters, during which, as Ms. Dou writes, "he saw several room-sized switching systems waiting to be shipped -- with shipping labels that said they were headed for the People's Liberation Army." At the time, the company denied any connection to any government or military organization in China.
It's clear that early in its history Huawei was selected as a national champion for the development of homemade telecom gear. This was a strategic priority, as Ms. Dou thoroughly demonstrates. As Mr. Ren himself put it: "A country without its own program-controlled switches is like one without an army." Mr. Ren had frequent meetings with leading politburo members, including Jiang Zemin, the Communist Party's general secretary, in 1994. On a company visit in November 1996, Vice Premier Wu Bangguo promised funds for Huawei to develop its own mobile-phone technology. Wu later praised the firm for "breaking the monopoly of Western companies." In 2007 the company's internal Communist Party committee was given veto power over executive appointments. Ms. Dou notes that a former chairwoman, Sun Yafang, is believed to have worked for the Ministry of State Security.
Huawei's rapid overseas expansion was driven not just by the competitive pricing of its gear but also by the provision of cheap credit to customers. Such vendor-financing wouldn't have been possible without the support of China's state-controlled banks. In 2005 the China Development Bank allocated $10 billion for Huawei's overseas expansion, a sum equivalent to twice the firm's annual revenue at the time. While loans provided a carrot, there was also a stick. When Kenya's mobile-network company Safaricom sought to cancel a contract with Huawei because of late delivery, its chief executive was told that Chinese foreign assistance to the country was at risk. The contract went ahead.
According to Ms. Dou, a reporter at the Washington Post, Mr. Ren installed a "wolf culture" in Huawei, demanding extraordinary sacrifices from his employees. Researchers would work night and day, some becoming sick with exhaustion. During the Arab Spring, beginning in 2011-12, Huawei executives stayed on in Libya when the employees of other foreign telecoms suppliers fled.
Mr. Ren offered rapid promotion for staff members who worked in the troubled province of Xinjiang, where Huawei's equipment was used to keep the oppressed and rebellious Uyghur population under constant surveillance.
Huawei's aggressive culture eventually landed it in trouble with the American authorities. The firm was discovered to have used shell companies to provide telecom equipment to North Korea and Iran. The name of Mr. Ren's daughter Meng Wanzhou, who was (and still is) also Huawei's chief financial officer, appeared on a list of directors of the shell company supplying Iran. In December 2018, Ms. Meng was detained at the airport in Vancouver, Canada, on an American extradition request for fraud and conspiracy to commit fraud. A yearslong legal battle ensued, ending in an agreement that allowed her to return to China.
"House of Huawei" contains few groundbreaking revelations, but it is well-written and informative. There's probably no better account of China's rise to economic dominance as seen through the prism of a single company. Inevitably, the narrative often reads like a cautionary tale.
The Americans took the lead in excluding Huawei from its telecoms networks on the grounds that its equipment might provide a "back door" for access by the Chinese state. Over time, several U.S. allies followed suit. The Biden administration sought to cut the supply of advanced chips and chip-making equipment to China. By then, however, Huawei had developed its own advanced 5G semiconductors and smartphone processors. It is uncertain whether sanctions will impede the firm's future growth. What is clear from Ms. Dou's account is that Huawei's ascent is as much the product of Western myopia as of Chinese ingenuity and graft.
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Mr. Chancellor is the author, most recently, of "The Price of Time: The Real Story of Interest."" [1]
1. The Path To Dominance. Chancellor, Edward. Wall Street Journal, Eastern edition; New York, N.Y.. 15 Jan 2025: A15.
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