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  • Business Impact

    The 6 reasons why Huawei gives the US and its allies security nightmares

    The biggest fear is that China could exploit the telecom giant’s gear to wreak havoc in a crisis.

    The detention in Canada of Meng Wanzhou, Huawei’s CFO and the daughter of its founder, is further inflaming tensions between the US and China. Her arrest is linked to a US extradition request. On December 7 a Canadian court heard that the request relates to Huawei's alleged use of Skycom Tech, a company that dealt with Iranian telecom firms, to sell equipment to Iran between 2009 and 2014 in contravention of US sanctions on the country. China says her detention is a human rights violation and is demanding her swift release.

    Behind this very public drama is a long-running, behind-the-scenes one centered on Western intelligence agencies’ fears that Huawei poses a significant threat to global security. Among the spooks’ biggest concerns:

    • There could be “kill switches” in Huawei equipment …

     The Chinese firm is the world’s largest manufacturer of things like base stations and antennas that mobile operators use to run wireless networks. And those networks carry data that’s used to help control power grids, financial markets, transport systems, and other parts of countries’ vital infrastructure. The fear is that China’s military and intelligence services could insert software or hardware “back doors” into Huawei’s gear that they could exploit to degrade or disable foreign wireless networks in the event of a crisis. This has led to moves in the US to block Chinese equipment from being used.

    •  ... that even close inspections miss

    Since 2010, the UK has been running a special center, whose staff includes members of its GCHQ signal intelligence agency, to vet Huawei gear before it’s deployed. But earlier this year, it warned that it had “only limited assurance” that the company’s equipment didn’t pose a security threat. According to press reports, the center had found that some of Huawei’s code behaved differently on actual networks from the way it did when it was tested, and that some of its software suppliers weren’t subject to rigorous controls.

    • Back doors could be used for data snooping

    Huawei claims its equipment connects over a third of the world’s population. It’s also handling vast amounts of data for businesses. That’s why there’s fear in Western intelligence circles that back doors could be used to tap into sensitive information using the firm’s equipment. This would be tricky to do undetected, but not impossible. Huawei doesn’t just build equipment; it can also connect to it wirelessly to issue upgrades and patches to fix bugs. There’s concern that this remote connectivity could be exploited by Chinese cyber spies.

    The company is also one of the world’s biggest makers of smartphones and other consumer devices, which has raised the prospect that China might exploit these products for espionage. In May, the US Department of Defense ordered retail stores on US military bases to stop selling phones from Huawei and ZTE, another big Chinese tech giant, because of fears they could be hacked to reveal the locations and movements of military personnel.

    • The rollout of 5G wireless networks will make everything worse

    Telecom companies around the world are about to roll out the next generation of cellular wireless, known as 5G. As well as speeding up data transfers, 5G networks will enable self-driving cars to talk to each other and to things like smart traffic lights. They’ll also connect and control a vast number of robots in factories and other locations. And the military will use them for all kinds of applications, too. This will dramatically expand the number of connected devices—and the chaos that can be caused if the networks supporting them are hacked. It will also ramp up the amount of corporate and other data that hackers can target. Both Australia and New Zealand have recently banned the use of Huawei equipment in new 5G wireless infrastructure. This week, the UK's BT followed suit.

    • Chinese firms will ship tech to countries in defiance of a US trade embargo

    The US has been investigating claims that Huawei shipped products with US tech components to Iran and other countries subject to a US embargo. In the court hearing, a lawyer for the Canadian government said that Ms Meng is accused of telling US bankers there was no connection between Skycom and Huawei, when in fact there was. The alleged fraud caused the banks to make transactions that violated US sanctions against Iran. Chinese officials have repeatedly said they don’t consider China's companies to be bound by other nations’ trade edicts.

    • Huawei isn’t as immune to Chinese government influence as it claims to be

    Huawei has repeatedly stressed it’s a private company that’s owned by its employees. The implication is that it has no incentive to cause customers to lose confidence in the integrity of its products. On the other hand, its governance structures are still something of a mystery, and its founder, Ren Zhengfei, who was once an officer in the Chinese People’s Liberation Army, keeps a low profile. Such things “make you question just how much independence it really has,” says Adam Segal, a cybersecurity expert at the Council on Foreign Relations in New York.

    In its defense, Huawei can point to the fact that no security researchers have found back doors in its products. “There’s all this concern, but there’s never been a smoking gun,” says Paul Triolo of the Eurasia Group. While that’s true, it won’t change the view of the US, which is stepping up its efforts to persuade its allies to keep Huawei out of all their networks.

    This story was updated on December 7 to include details of a court hearing in Canada about Ms Meng's detention.

     

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