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Canada Huawei and Canada: What we know about the company, the arrest and China’s reaction

Dec. 7, 2018: In this courtroom sketch, Meng Wanzhou, far left, the chief financial officer of Huawei Technologies, sits beside a translator during a bail hearing at B.C. Supreme Court in Vancouver.

Jane Wolsak/The Canadian Press

The latest

  • Twice this year, spy chiefs from the Five Eyes intelligence network warned Prime Minister Justin Trudeau about the national-security risks posed by Chinese telecom firm Huawei, sources have told The Globe and Mail. Those warnings came before Canada’s arrest of the company’s chief financial officer at Washington’s behest, a move that has strained relations with Beijing.
  • So far, Chinese authorities have detained two Canadians in what is widely seen as retaliation for the Huawei case. The Chinese government has said both are being held on suspicion of “engaging in activities that endanger the national security" of the country. On Friday and Sunday, Canada’s ambassador to China got consular access to the two men, ex-diplomat Michael Kovrig and entrepreneur Michael Spavor. 
  • Meng Wanzhou, Huawei’s chief financial officer, is free on $10-million bail in British Columbia, kept under 24/7 surveillance and ordered to stay in the Vancouver area. U.S. prosecutors accuse Ms. Meng of fraud in a scheme to violate American trade sanctions against Iran, which she denies. 
  • China’s ambassador to Canada, Lu Shaye, called the case against Ms. Meng a premeditated “witch-hunt” by the United States in an opinion piece published last week in The Globe and Mail. He blamed the current Sino-Canadian tensions on a “stale cold-war mentality” and said the incident had “chilled” Chinese people’s opinions of Canada. 


What is Huawei?

Huawei Technologies Co. Ltd. is a Chinese telecommunications company founded in 1987 by Ren Zhengfei. Based in Shenzhen, it has 180,000 employees and creates such products as smartphones, tablet computers, mobile and fixed broadband networks. Its products account for a sizeable chunk of the global smartphone market.

While its market share in Canada – where it has operated since 2008 – is still small, its presence here has grown dramatically over the years. Here’s a deeper look by The Globe and Mail’s Susan Krashinsky Robertson and Joe Castaldo at how Huawei built its brand in this country.

top 5 smartphone companies

market share

Q3 2018

World

Canada

Samsung

20.3%

49.6%

Apple

Huawei

14.6%

Apple

13.2%

Xiaomi

9.7%

30.8%

Samsung

OPPO

8.4%

Other

33.8%

LG: 6.5%

Huawei: 3.8%

TCL: 3.4%

Other: 5.9%

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: idc

top 5 smartphone companies market share

Q3 2018

World

Canada

Samsung

20.3%

49.6%

Apple

Huawei

14.6%

Apple

13.2%

Xiaomi

9.7%

30.8%

Samsung

OPPO

8.4%

Other

33.8%

LG: 6.5%

Huawei: 3.8%

TCL: 3.4%

Other: 5.9%

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: idc

top 5 smartphone companies market share

Q3 2018

World

Samsung

Huawei

Apple

Xiaomi

OPPO

Other

20.3%

14.6%

13.2%

9.7%

8.4%

33.8%

Canada

Apple

Samsung

LG: 6.5%

Huawei: 3.8%

49.6%

30.8%

TCL: 3.4%

Other: 5.9%

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: idc

What is Canada’s connection?

CHINA STRINGER NETWORK/Reuters

A Globe and Mail investigation published in May revealed Huawei Technologies has established a vast network of relationships with Canadian universities to create a steady pipeline of intellectual property to aid in the development of next-generation 5G mobile networks. Around the same time, members of the Five Eyes intelligence-sharing alliance were warning Prime Minister Justin Trudeau about the national security risks posed by Huawei’s technology.

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Following The Globe’s report, Mr. Trudeau was urged to gather security agencies and top policy makers to determine the security threat and economic cost of transferring Canadian intellectual property to Huawei. Since then, other critics have added their voices to those expressing concern, including U.S. lawmakers and senators. In September, the government launched a national-security analysis to minimize cyber threats to the country from equipment made by foreign telecommunications companies, including Huawei.

But last month, the federal government backed away from previous assurances that Canadian security agencies were capable of containing any cyberespionage threat and said it is not ruling out barring Huawei from supplying equipment for Canada’s 5G mobile networks.

What are the concerns with Huawei’s 5G technology?

Minister of Public Safety and Emergency Preparedness Ralph Goodale.

Justin Tang/The Canadian Press

Huawei has begun working on advanced security technology together with the Public Security Bureau in China’s far western Xinjiang region, which is becoming a pilot zone for advanced new surveillance and population-control techniques. Chinese authorities have spent heavily to build Xinjiang into a test bed for the use of facial recognition, digital monitoring and artificial intelligence in policing.

Chinese law requires companies in China to “support, co-operate with and collaborate in national intelligence work” as requested by Beijing. Researchers worry about how technologies developed for authoritarian purposes in China could be brought into other countries under different guises. The United States and Australia have barred Huawei 5G telecommunications, and last week New Zealand blocked the first request from one of its wireless carriers to install the Chinese company’s equipment on its 5G network, citing a “significant network security risk.” U.S. spymasters say Huawei’s smartphones and networking equipment could be used to conduct undetected espionage, especially the next, advanced generation of 5G technology.

Who is Meng Wanzhou?

HANDOUT/Reuters

Meng Wanzhou, 46, is the daughter of Huawei’s founder, Ren Zhengfei. Her rise to success has been as meteoric as the company’s; she was a high-school dropout in 1993 when she started there as a secretary, but now she is its chief financial officer. She is also effectively the global face of the company, appearing on panels with titans of industry and travelling around the world to bolster Huawei’s image amid concerns about its technology.

How do Iran sanctions factor in?

Since at least 2016, U.S. authorities have been reviewing Huawei’s alleged shipping of U.S.-origin products to Iran and other countries in violation of American export and sanctions laws. Those sanctions are at the heart of the case against Ms. Meng: U.S. prosecutors allege that Huawei was accessing Iran through a Hong Kong company called Skycom, which the prosecutors consider to be a subsidiary of Huawei. They allege that Ms. Meng committed fraud in 2013 by telling financial institutions that they were separate entities. She denies this: In B.C. court, her lawyers have argued that while Huawei did own Skycom between 2008 and 2009, it divested from it.

The U.S. Justice Department probe, first reported by the Wall Street Journal, follows a series of actions aimed at stopping or reducing access by Huawei and Chinese smartphone maker ZTE Corp. to the U.S. economy amid allegations the companies could be using their technology to spy on Americans. The probe is reportedly being run out of the U.S. attorney’s office in Brooklyn, the Wall Street Journal sources said. However, the prosecutor’s office declined to confirm or deny the existence of the investigation.

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Canadians detained in China

Former Canadian diplomat Michael Kovrig and entrepreneur Michael Spavor.

The Associated Press

Only days after Ms. Meng’s arrest, and after Beijing threatened “serious consequences” if Ms. Meng was not released, two Canadians were detained in China in apparent retaliation. China’s foreign ministry says both men – former Canadian diplomat Michael Kovrig and entrepreneur Michael Spavor – are being held on suspicion of endangering national security. “The legal rights of the two Canadians are being safeguarded,” a spokesman for the ministry, Lu Kang, told reporters in Beijing on Dec. 13.

Canada’s Foreign Affairs Minister, Chrystia Freeland, has said freeing the men is a top priority for Canada, but so far has not directly linked their fate to Ms. Meng’s.

U.S. vs. China, and Canada in the middle

Canadians have grown accustomed to a warm reception in China, which still lionizes Norman Bethune, the Ontario-born doctor who helped Mao Zedong’s Communists in the 1930s. But the arrest of Ms. Meng has infuriated China and sown fear among Canadians living in the country that, after Mr. Kovrig and Mr. Spavor’s detention, they might be next.

Initially, China faulted both Canada and the United States for Ms. Meng’s arrest, but later its foreign ministry and state press focused their attention on Canada specifically. That has called into question Canada’s stated goal of pursuing a trade deal with China. The Sino-American relationship has been rocky recently because of U.S. President Donald Trump’s trade policies targeting Chinese businesses, but after months of escalating retaliatory tariffs, the two countries reached a fragile truce in December. Mr. Trump suggested he might look into Ms. Meng’s case personally if he believed it would help preserve that peace and secure a U.S.-China trade deal.

Further reading

Features

How does extradition to the U.S. work? A look at what may be next for arrested Huawei executive

The Huawei saga has further damaged the myth of Chinese invincibility

How Canadian money and research are helping China become a global telecom superpower

How 5G will change your life

Opinion

Editorial: China, Huawei and the next Cold War

Campbell Clark: On Huawei, Trump has harmed his own government’s case

Jeffrey D. Sachs: The U.S., not China, is the real threat to international rule of law

Robert J. Currie: On the Huawei extradition case, Canada’s legal system better stand up to scrutiny

John Ibbitson: Canada will pay a price no matter what for its part in the worsening U.S.-China conflict

Richard Fadden and Brian Lee Crowley: On Huawei and 5G, Canada must unapologetically pursue our national interest

Wenren Jiang: After Huawei arrest, China should take a deep breath and wait for the evidence



Compiled by Globe staff

With reports from Robert Fife, Nathan VanderKlippe, Steven Chase, Sean Silcoff and Christine Dobby

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