“If the U.S. does discover Huawei’s violations,” the Chinese giant said in a statement on Wednesday (February 12), “we again solemnly request they disclose specific evidence instead of using the media to spread rumors.” The angry tirade from the company came in response to a Wall Street Journal article that alleged proof of backdoors built into Huawei network equipment around the world.
Well, the U.S. has now responded—and then some. A new 16-count superseding indictment, charging the Chinese giant and four subsidiaries with racketeering, was filed in New York on Thursday (February 13). The U.S. government has ratcheted up the stakes in the aftermath of a U.K. decision to ignore its pleas for a ban on Huawei equipment and as Germany and France waiver.
“We are very indignant,” Huawei had said earlier in the week, “that the US government has spared no efforts to stigmatize Huawei by using cyber security issues.” And so the U.S. response, the timing of which could not be better played, is designed to publish a “beyond doubt” case of illegal activity against Huawei. The decision earlier in the week to add fuel to the cybersecurity claims and now these detailed charges, all in the same week, suggests a new approach by Washington to address Huawei’s lack of “smoking gun” defense.
In its response to the U.S. backdoor allegations, Huawei turned the tables on Washington, referencing the Snowden leaks and U.S. “covert accessing of telecom networks worldwide, spying on other countries.” The Chinese company also linked the U.S. claims to another story that ran this week, this one reporting the CIA had secretly acquired a Swiss crypto business to facilitate data interception on countries around the world for generations. The point the company was trying to make is that the U.S. is the real villain of the piece.
The U.S. has now laid out details of IP theft piece by piece, running through product lines and the methods of operation behind the industrial espionage. Huawei tried to dismiss the U.S. backdoor allegations as “nothing but a smokescreen.” This will not be batted away as easily.
The Department of Justice charges extend and expand the legal action already underway in the U.S., where the authorities have accused the tech giant of a concerted and persistent program of trade secrets theft. The stolen IP included “source code and user manuals for internet routers, antenna technology and robot testing technology,” and the statement claims that the company and its subsidiaries “agreed to reinvest the proceeds of this alleged racketeering activity in Huawei’s worldwide business, including in the United States.”
According to the DOJ, the IP theft was “successful,” and enabled Huawei “to drastically cut its research and development costs and associated delays, giving the company a significant and unfair competitive advantage.” Allegations of unfair market practices, including state subsidies and financing arrangements have played a central part in the U.S. campaign against Huawei.
The detailed nature of the charges are a major challenge to Huawei’s fervent denials of wrong-doing, and are designed to put enough information into the public domain to prevent any blanket response. The 55-page document provides an insight into the alleged campaign within the company that would seem to implicate its most senior execs. “Acting at the direction of the Rotating Chairman of Huawei,” begins one of the claims into choreographed IP theft.
In response to the latest U.S. action, Huawei said in a statement that “this new indictment is part of the U.S. Justice Department’s attempt to irrevocably damage Huawei’s reputation and its business for reasons related to competition rather than law enforcement. These new charges are without merit and are based largely on recycled civil disputes from the last 20 years that have been previously settled, litigated and, in some cases, rejected by federal judges and juries. The U.S. government will not prevail on its charges, which we will prove to be both unfounded and unfair.”
This latest action by the U.S. now puts immense pressure on the U.K. government to reverse its decision, and presents a stark choice to other European governments balancing China’s threats with U.S. warnings. Accusations of sanctions breaches and alleged theft to accelerate business growth will fuel the political campaign in the U.K. to challenge the government’s decision.