When National Champions Can No Longer Become Global Champions
Newsstands at Japanese train stations are usually fronted by racks full of front-page news from the country's vibrant tabloid newspapers. On a recent day, half a dozen tabloids lined up on the racks spoke a uniform voice against Huawei, the Chinese smartphone-cum-telecom equipment manufacturer that is currently under massive scrutiny across much of the developed world. "Huawei Smartphones: the Spying Devices that are Just around Us," one tabloid declared. Others concurred and added in extra details about the aftermath of the ongoing saga over Huawei CFO's arrest in Canada.
It is certainly not a good time to be a Chinese technology firm right now. Despite Huawei phones being top recommendations on Amazon Japan and the company's Japanese corporate entities reported offering an unbelievable 400,000 JPY (3,560 USD) per month salary to inexperienced new grads straight out of undergraduate programs, the company's image is taking a nosedive here in Japan. And that massive damage to the company brand is a phenomenon being replicated across much of the US, Europe, and a wide swath of Asia-Pacific region.
Huawei top leadership's near radio silence in response to the investigations and PR damage the company suffered recently certainly has not helped. To the outside observer, the company almost willingly let the Chinese government talk for it, as governments from the US to Japan move ahead with decisions to ban its products on the ground of national security threats. The Chinese government's usual clumsy responses, including brutish arrests of Canadian citizens residing in China and directly criticizing governments that are working to ban Huawei, have only served to further weaken Huawei's image outside China.
What is more, Huawei's inability to speak up even while the Chinese government remain noisy on the topic only serves to confirm the suspicions of foreign governments that Huawei is indeed not a private-held company as its corporate records state, but an agent of the Chinese government working not on commercial logic, but prioritizing the political interests of the Chinese government abroad. From the understanding of outsiders, Huawei, as a private firm, should be able to deny connection with the Chinese government. The fact that it has not explicitly done so means it is in the pockets of the Communist Party.
Of course, things are more nuanced than that. Even if Huawei is a private firm, its status as a designated national champion of China as it seeks to become an innovative leader in high-tech devices means that it is often hamstrung in what it can do and say when dealing with foreigners. Even if the firm did not want attention from the Chinese government, the government's active cultivation of the firm as a tool of its state-led capitalist expansion has made it a target of anger and anxiety on foreign shores. Huawei's leaders, even if they want to, cannot simply say no to the Chinese government and get out of the situation.
Ultimately, Huawei rapidly and deliberately being kicked out of foreign markets is the result of the Chinese government being too heavy-handed in its attempt to make its tech sector much less dependent on foreigners. It took some shortcuts that are legally and diplomatically problematic, whether it be targeted purchases of high-tech firms, unimpeded financial support to national champions that defy the logic of commercial competition, and outright espionage that gives its designed champion a leg up in the race for technological dominance. The likes of Huawei have simply been complacent, with no choice to behave otherwise.
Such a situation is worrying in that the integrated global supply chain of electronics manufacturing is now prone to splintering. Anxieties about Huawei will quickly spread to other Chinese firms, considering that whatever know-how Huawei have can be transferred to many other firms that are not yet widely known outside China. As the Internet of things become a reality with 5G, smartphone and telecom equipment are no longer the only ways to spy. Any electronic goods, including "dumb" white goods like TVs, fridges, and washing machines will also be able to send and collect information.
As far as Huawei is concerned, it can kiss its dreams of international prominence goodbye. Perhaps it can still get business done in South America, Africa, and the Middle East, where there are few competitors and little security consciousness, but it is only a matter of time before the anxieties of Western and Asian governments become global concerns shared by all authorities. Huawei can push back against the tide but openly denying connections with the Chinese government now, but it is hard to imagine its leaders, having been showered with praise and money by the Chinese political leaders, being able to act so independently.
It is certainly not a good time to be a Chinese technology firm right now. Despite Huawei phones being top recommendations on Amazon Japan and the company's Japanese corporate entities reported offering an unbelievable 400,000 JPY (3,560 USD) per month salary to inexperienced new grads straight out of undergraduate programs, the company's image is taking a nosedive here in Japan. And that massive damage to the company brand is a phenomenon being replicated across much of the US, Europe, and a wide swath of Asia-Pacific region.
Huawei top leadership's near radio silence in response to the investigations and PR damage the company suffered recently certainly has not helped. To the outside observer, the company almost willingly let the Chinese government talk for it, as governments from the US to Japan move ahead with decisions to ban its products on the ground of national security threats. The Chinese government's usual clumsy responses, including brutish arrests of Canadian citizens residing in China and directly criticizing governments that are working to ban Huawei, have only served to further weaken Huawei's image outside China.
What is more, Huawei's inability to speak up even while the Chinese government remain noisy on the topic only serves to confirm the suspicions of foreign governments that Huawei is indeed not a private-held company as its corporate records state, but an agent of the Chinese government working not on commercial logic, but prioritizing the political interests of the Chinese government abroad. From the understanding of outsiders, Huawei, as a private firm, should be able to deny connection with the Chinese government. The fact that it has not explicitly done so means it is in the pockets of the Communist Party.
Of course, things are more nuanced than that. Even if Huawei is a private firm, its status as a designated national champion of China as it seeks to become an innovative leader in high-tech devices means that it is often hamstrung in what it can do and say when dealing with foreigners. Even if the firm did not want attention from the Chinese government, the government's active cultivation of the firm as a tool of its state-led capitalist expansion has made it a target of anger and anxiety on foreign shores. Huawei's leaders, even if they want to, cannot simply say no to the Chinese government and get out of the situation.
Ultimately, Huawei rapidly and deliberately being kicked out of foreign markets is the result of the Chinese government being too heavy-handed in its attempt to make its tech sector much less dependent on foreigners. It took some shortcuts that are legally and diplomatically problematic, whether it be targeted purchases of high-tech firms, unimpeded financial support to national champions that defy the logic of commercial competition, and outright espionage that gives its designed champion a leg up in the race for technological dominance. The likes of Huawei have simply been complacent, with no choice to behave otherwise.
Such a situation is worrying in that the integrated global supply chain of electronics manufacturing is now prone to splintering. Anxieties about Huawei will quickly spread to other Chinese firms, considering that whatever know-how Huawei have can be transferred to many other firms that are not yet widely known outside China. As the Internet of things become a reality with 5G, smartphone and telecom equipment are no longer the only ways to spy. Any electronic goods, including "dumb" white goods like TVs, fridges, and washing machines will also be able to send and collect information.
As far as Huawei is concerned, it can kiss its dreams of international prominence goodbye. Perhaps it can still get business done in South America, Africa, and the Middle East, where there are few competitors and little security consciousness, but it is only a matter of time before the anxieties of Western and Asian governments become global concerns shared by all authorities. Huawei can push back against the tide but openly denying connections with the Chinese government now, but it is hard to imagine its leaders, having been showered with praise and money by the Chinese political leaders, being able to act so independently.
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