Would Huawei End-up Like Toshiba?

Huawei is China’s tech giant producing smartphones and telecoms equipment. It comes second to Samsung in being the world’s largest manufacturer of smartphones, being the likes of Apple. Huawei is also making remarkable steps in the next generation of telecoms infrastructure with its creation and use of 5G. The success of Huawei is attributed to its “wolf-culture” work-ethic whereby it is both fearless and aggressive. The question is with Huawei’s extensive growth and technological advancement, how long will it last before it is embroiled in scandals and international trade wars?

Huawei isn’t free of scandals itself. In 2014, Huawei was accused by T-mobile in misappropriating robotic technology from one of T-mobile’s labs. However, Huawei denies this and claims it was a unique incident that involved misconduct from two of its employees.

Recently, the daughter of Huawei founder, Sabrina Meng Wanzhou was detained in Vancouver airport, on request by the United States Government. She was allegedly involved in falsifying claims that Skycom, a subsidiary of Huawei was not linked to Huawei when seeking financing from banks in Vancouver. Skycom had businesses in Iran and Meng thought this would be the best way to overcome Iran sanctions imposed by the US and Europe.

Even before these scandals, the United States has long been a skeptic of Huawei due to the founder’s ties with the Chinese military, the CCP and the government. In February, Huawei was accused by US intelligence for having the ability to spy on its users. This resulted in the failure of Huawei failing to acquire a deal with AT&T. In fact, the US has enacted a National Defence Authorisation Act which bans officials working in government to use Huawei and ZTE technology. Japan, Australia and New Zealand have followed suit in banning Huawei’s 5G infrastructure.

Likesie, Toshiba was an innovation hub producing Japan’s first radar system, TAC digital computer, microwave oven, coloured video phone and a Japanese word processor. It pushed the boundaries of global technological advancement in the development of video recorders and air conditioners. Toshiba was also the global pioneer in the production of largely integrated circuit coloured television and mechanized mail-processing equipment.

In December 1985, one of the employees of a small Japanese trading firm, Wako Koeki threatened to leak information of an illegal sale of silent propeller submarines between Toshiba Machinery (one of Toshiba’s 50 subsidiaries) and the Soviet Union (and several other parties). The ultimatum being that he is paid to remain silent by either Wako Koeki or Toshiba. Both companies did not budge on these threats. This resulted in the very employee to contact Paris CoCom and subsequently the news broke in the United States and Japan. Japan was one of the members of Coordinating Committee for Multilateral Export Controls (CoCom), a party established at the end of the 2^nd World War and carried on during the Cold War. Members were not allowed to sell arms to the countries belonging to the Council for Mutual Economic Assistance (Comecon). The Soviet Union was a member of Comecon.

This clearly sparked outrage in the White House and Toshiba had to immediately clean the mess. Toshiba ran an advertisement in 91 newspapers apologising to the American people of their blunder. The main group tried to distance itself from its subsidiary but instead faced sanctions from the United States and Japan. This cost them USD320 million in revenue from the United States market alone. Four senior executives of Toshiba Machinery were arrested. In the wake of the scandal, the president and chairman of Toshiba group stepped down. Further to that, Toshiba was barred from exporting goods to communist countries, which cost them another USD100 million.

Toshiba’s rate of innovation slowed down since the Soviet scandal. Now one wonders, if Huawei would follow suit or rise up against the giants and the odds of internal corruption and big power play.

References:

1.         “Why Huawei and its CFO Meng Wanzhou are caught up in the US-China trade war” by Meng Jing, South China Morning Post.

2.         “ Why the Huawei scandal will reignite the US-China Trade War” by Sam Bourgi,CCN.

3          “Toshiba Apologises to Nation for Sale of Submarine Technology”, by Anthony Miller, Archives ( July 20, 1987),UPI.

4.         “Toshiba Caught Between Tokyo and Washington”, Archives ( June,20,1987), The New York Times.