From the first time I attended CES and Comdex, I became keenly aware of what would be loosely called corporate espionage. Some of this corporate espionage was rather blatant as Japanese businessman pulled out their cameras and took pictures of competitors products. Many instances where clandestine and used tiny cameras to try and get all of the details they could on a product or technology of interest.
I served on the advisory board of Comdex for 17 years, and early in one of our board meetings, we were asked to keep an eye out for any serious spying going on as part of our role. I was somewhat naive in those days and was way too trusting about the people doing this type of illegal spying and thought a lot of the Japanese businessmen taking pix of their competitors products harmless.
But at one Comdex show, I observed what turned out to be a Russian agent trying to get confidential details on a particular PC design and the processor it used and mentioned this to a Comdex Official. This was when I learned that the FBI also attended Comdex and they were called into this situation and took this Russian agent offsite to interrogate him.
As I have studied this issue of intellectual property theft of US-based technology, I have found that this has been going on for centuries. I am a student of the Royal Academy of Sciences, and on one of my trips to the UK, I looked into how various characters tried to rip off designs and steal IP developed by grants from the Royal Academy of Sciences since its inception.
So, I was not to surprised to find that the FBI had a sting operation at CES in January where they wired an executive from Akhan Semiconductor, who makes a synthetic diamond glass cover for smartphones, and had him take a meeting with Huawei officials to discuss the possibility that Huawei tried to steal their intellectual property.
TechCrunch reported on this sting and explained that the FBI asked Akhan Semiconductor’s CEO, Adam Khan, to go ahead with a meeting with Huawei officials, who had been doing due diligence on one of their samples.
Here is an exert from that article:
“So, Akhan had to work out specifics with Huawei before shipping the sample to its California lab. Not only did Huawei miss the deadline for sending the material back last summer, but it returned the 4-inch square panel in pieces, and some pieces were missing. Was Huawei trying to steal the technology?
Khan and COO Carl Shurboff asked Huawei what happened, and a representative feigned ignorance. The sample, he said, had been in China. This set off alarm bells because of the potential ITAR violation, so Khan and Shurboff contacted the FBI. The agency took a keen interest in the case, gathering documentation from the company and even shipping the broken sample off to an FBI laboratory for testing.
Several weeks passed, and the FBI rendered a verdict. Khan and Shurboff say the FBI researcher found that the sample had been hit with a 100-kilowatt laser, which is powerful enough to be used as a weapon. The agency asked Khan and Shurboff to continue their contact with Huawei and meet with the company’s representatives at CES in January to record their conversation. A Bloomberg reporter observed this meeting from a distance.
During that meeting, the Huawei representatives denied that sending the sample to China was a violation of ITAR but continued to express interest in licensing Akhan’s diamond glass. The FBI ultimately raided Huawei’s San Diego facility on January 28th, but we don’t yet know if there is good evidence of wrongdoing.”
Corporate espionage and intellectual theft have been a big problem for tech companies for decades as well, but this Huawei case is most interesting. If they did send this to China to try and reverse engineer it, it would be a blatant attempt to rip off IP. No wonder the US Government and US companies are wary of dealing with Huawei and have little trust in their corporate citizenship.
Indeed, the US Government is close to banning Huawei and ZTE products from being bought or used in any US telecom products and governments in Europe are considering similar actions against Huawei and ZTE.
Both companies are considered a severe threat to the US and EU security as they are not viewed as a trusted entity. Allowing their equipment into US and EU Networks, underscored by this blatant attempt to steal IP from Akhan Semiconductor as well as other instances of Chinese companies potential to embed spying chips into their processor designs is making many countries rethink using any Huawei or XTE products in their networks.
But Huawei is not taking this threat to them lying down. Today they ran an ad in New Zealand trying to counter this banning threat and appeal to the user directly by suggesting “ 5G without Huawei is like Rugby without New Zealand. From this ad one can assume that Huawei may soon take their message directly to potential users in the US and UK to try and pressure their carriers to use their technology by appealing their high-speed mobile communication needs and demands.
While I consider Huawei and XTE real threats because of their ties to the Chinese government, not all Chinese companies follow in their footsteps. A company like Lenovo, which is a Chinese based company as well as an International one, has played by the rules from the beginning. They also have no direct tie to the Chinese government other than an investment from a major Chinese University Consortium that is not controlled by the Chinese Government.
I believe that a crackdown on Huawei and ZTE in terms of allowing the US or EU companies to use their equipment in local networks is a wise move and needs to be vetted at the most extreme level. I also expect the Chinese Government as well as Huawei and ZTE to fight this ban in the US and EU and this New Zealand type of ad could be used in these markets to try and appeal to directly to the customers to try and get them to influence their network suppliers.
On this issue, I am in total agreement that Huawei and ZTE are too much of a risk given their past behaviors. Because of their close ties to the Chinese government, the US and EU needs to keep the pressure on them by not using their technologies in these countries networks and to set an example to other parts of the world who might be Huawei and ZTE customers, that the risk is just too high for them to trust these companies.
