February 14, 2019 | Policy Brief

Huawei Breaks the Law… Again

February 14, 2019 | Policy Brief

Huawei Breaks the Law… Again

Chinese telecommunications giant Huawei stole patented technology and violated U.S. export controls, according to a Bloomberg investigative report released last week. This disclosure – coming on the heels of two sets of federal indictments against Huawei for Iran sanctions violations and trade secret theft – reinforces concerns that Huawei knowingly violates U.S. laws.

As the Bloomberg report explains, the U.S. startup Akhan Semiconductor Inc. provided a prototype of its diamond-coated, super-scratch resistant cell phone glass to Huawei for testing at U.S.-based facilities in March 2018. The testing, which is part of the normal sales and marketing process, was supposed to take only 60 days. The contract also prohibited testing that would damage the product.

Huawei, however, did not return the prototype until August and, according to Bloomberg, broke it in efforts to reverse engineer the technology. Moreover, Huawei representatives admitted to Akhan that they shipped the sample to China for testing. Nevertheless, the representatives brushed off accusations that this action might violate U.S. export controls, which prohibit the export of goods with defense applications. “Diamond coatings are on the list because of their potential for use in laser weapons,” Bloomberg noted.

These latest accusations – reportedly part of an ongoing FBI investigation – echo the Department of Justice’s indictment against Huawei for theft of trade secrets. The indictment, issued last month, alleges that Huawei directed its employees to steal T-Mobile’s smartphone testing robot. Similarly, in 2017, a jury in Seattle awarded T-Mobile $4.8 million in its own civil suit against the Chinese company for misappropriating trade secrets and contract violations related to those incidents. Last year, a jury in Texas fined Huawei $10.6 million for LTE technology patent infringements.

The recent indictments and judgements vindicate a 2012 House Permanent Select Committee on Intelligence report on Huawei and another Chinese telecommunications company, ZTE, which concluded that Huawei “exhibits a pattern of disregard for the intellectual property rights” of other companies.

A separate Justice Department indictment charges that Huawei and its CFO engaged in bank fraud, wire fraud, and conspiracy to commit money laundering in furtherance of its efforts to violate U.S. sanctions on Iran. A Reuters investigation revealed that Huawei may also be violating Syria sanctions by using front companies and local affiliates to skirt the law.

But it is not only U.S. law that Huawei seems to flaunt. In January, Poland arrested a Huawei sales director on espionage charges. The company, though denying involvement, promptly fired the employee. Denmark, meanwhile, expelled two Huawei employees earlier this month for violating residency and work permit regulations. While mundane, the case provides yet another example of Huawei’s belief that the laws do not apply to it.

In August of last year, Australia banned the company from participation in next-generation 5G technology bids, stating that Huawei is “subject to extrajudicial directions from a foreign government that conflicts with Australian law.” In November, New Zealand followed suit, noting that the company poses significant national security risks. A British cybersecurity oversight board warned in July that Huawei’s processes “fall short of industry good practice,” and “have exposed new risks in the UK telecommunication networks.”

In a letter to British lawmakers trying to reassure London that Huawei is not assisting Chinese espionage, Ryan Ding, president of the company’s carrier business group, wrote, “Were Huawei ever to engage in malicious behavior, it would not go unnoticed.” But the United States and its allies have noticed. Washington must therefore investigate and prosecute the full range of Huawei’s apparent illegal and illicit activities, and bar any lawbreaker from contributing to U.S. critical telecommunications infrastructure.

Annie Fixler is deputy director of the Center on Cyber and Technology Innovation at the Foundation for Defense of Democracies. Follow her on Twitter at @afixlerFollow FDD on Twitter @FDD. FDD is a Washington-based, nonpartisan research institute focusing on national security and foreign policy.


China Cyber Cyber-Enabled Economic Warfare Sanctions and Illicit Finance