Huawei Is an Asset, Not a Threat

Among the world’s most inspiring business voices is Ren Zhengfei, founder-philosopher of Huawei, the disruptive and now condemned Chinese telecom-equipment company. Vilified as a cat’s-paw of the Chinese government, Mr. Ren has decided to place his trust in America’s legal system and launch a court challenge to the U.S. government’s campaign against his company — and family. His daughter, Huawei chief financial officer Meng Wanzhou, is fighting extradition to the U.S. from Canada on murky charges that she helped financial institutions violate American sanctions on Iran. She has been under house arrest in Vancouver, British Columbia, since December.

The U.S. is about to learn not to underestimate Mr. Ren. In three decades he turned the equivalent of $3,000 into China’s telecom-equipment champion and a multinational colossus. Huawei boasts $105 billion in annual revenue, operates in 170 countries, and employs 180,000 people. Its finance division, run by Ms. Meng, is staffed by hundreds of graduates of Harvard, Cambridge, Wharton and Yale.

In the U.S., anxious experts and rivals have offered many explanations and alibis for the rise of Huawei. Mr. Ren, they say, is an ex-officer of the People’s Liberation Army who created his company as a Trojan horse for communist hackers and spies. Huge subsidies and heists of intellectual property allegedly account for Huawei’s ascent.

Mr. Ren’s army career, however, was routine for Chinese youths and focused on engineering. As the son of a “capitalist roader,” Mr. Ren launched one of the first fully private firms in mainland China, pioneering a U.S.-style employee stock-ownership plan. Huawei triumphed by outperforming the state-owned enterprises that had previously dominated China’s telecom industry. Huawei’s independent auditor, KPMG, reports no major state subsidies and verifies Huawei’s private ownership structure, with 98.6% owned by employees and 1.4% by Mr. Ren.

Mr. Ren is a vocal admirer of American openness. “Throughout history, China has shut itself away from the outside world for long periods of time, making it impossible to become strong,” he has said. “The U.S. is the world’s most open nation, and thus the world’s strongest.” A supply-side admirer of President Trump’s tax cuts, he says: “Benefits from increased investment can offset loss of revenue.”

The claim leveled most frequently against Huawei is that it steals. But rival technology companies necessarily imitate one another and use common components under industry standards, provoking tensions over intellectual property. In January 2003, the American router pioneer Cisco hit Huawei with a wide-ranging lawsuit alleging Mr. Ren’s company had copied Cisco’s software code and violated several of its patents. Mr. Ren saw the lawsuit as an opportunity, declaring his trust in the U.S. legal system and sending Huawei lawyers and engineers to remote East Texas to defend the company. The two firms eventually settled their dispute.

In the years since the settlement Huawei has become a prime mover in the telecommunications industry. It has paid U.S. chip maker Qualcomm more than $1 billion in royalties in recent years and last year bought $11 billion worth of chips from American companies such as Intel and Broadcom. Today, with some 2,300 patents, Huawei is the world leader in the new 5G generation of broadband wireless architecture and offers the only turnkey system that can be installed in a working network. 

In recent months the U.S. government has begun backpedaling on specific claims of wrongdoing by Huawei, reverting to a more general argument that it does the bidding of Beijing, which requires Chinese companies to cooperate with its intelligence services. Anathematizing Chinese companies simply for being Chinese would cripple the world economy. The international trading system and its global supply chains have allowed America to build the world’s four most valuable companies: Microsoft, Amazon, Apple and Google. Each outsources manufacturing to China and Taiwan.

If U.S. telecom companies and network managers are worried about Huawei, they should ask to see the company’s software source codes. If consumers interpret the continual patter of software upgrades as a threat to privacy, Washington should assign the role of managing them to domestic telecommunications companies. Telecom pioneer Daniel Berninger has proposed creating a new Network Integrity Board to mitigate fears of sabotage or breakdown because of equipment flaws. Its model would be the National Transportation Safety Board, which investigates plane crashes. 

With a steady stream of news stories about data breaches and international hacking, people have grown understandably nervous about what the future holds for personal privacy, economic growth and national security. Easing these fears will require the development of a new and secure internet architecture. The good news is that technologists around the world are developing such a system.

Huawei isn’t a problem. It’s an opportunity to revitalize the U.S. economy and enhance its digital infrastructure. The U.S. should embrace Huawei as a triumph of the American-led system rather than push it into the arms of Chinese hard-liners who revel in autarkic dreams.