S22: New Productive Forces

• Founded in 1987, Huawei grew from a small reseller to become the largest of the four major global network equipment makers, along Finnish firm Nokia, Swedish firm Ericsson, and Chinese firm ZTE.
• $138 billion in revenue in 2020; Operates in over 170 countries.

Huawei

• 1987: Founded as a small supplier of telephone switches
• 2015: Supplied half of Europe’s 4G equipment
• 2018: CFO Meng Wanzhou arrested in Vancouver
• 2019: Added to US entity list
• 2020: Became world’s bestselling smartphone maker

US-China Relations

• 2012: Xi Jinping becomes leader
• 2016: Trump 1.0; trade war
• 2019: Covid-19
• 2020: Biden elected president

• What is Huawei? How did it become China’s national champion? How did it thrive, despite US sanctions and export control?
• China’s industrial policy: How did China catch up in science and technology?
• What kind of “war” are the US and China in – tech war, trade war, cold war? How can the two countries balance trade and national security?

• Who is Ren Zhengfei, Huawei’s founder? How did he become an entrepreneur?
• When and where was Huawei founded?
• What was Huawei’s initial business?

• China relied completely on telecommunications equipment from foreign companies, such as Ericsson, Nokia, and Siemens in the 1980s.
• What should China do to catch-up?

• Chinese leaders saw dependence on foreign telecommunications equipment as a critical threat to the country’s technological sovereignty.
• To develop its telecom industry, China used its large domestic market to attract foreign equipment makers.
• Foreign companies formed joint ventures with Chinese firms: Shanghai Bell, the first telecom joint venture, was established in 1984.
• By the 1990s, China was producing most telecom equipment domestically through these ventures.

• Chinese scientists and engineers who studied Shanghai Bell’s tech to create their own digital switches.
• Four major Chinese equipment makers: Great Dragon, Huawei, ZTE, and Datang.
• These companies all benefited from Shanghai Bell’s diffused technology to compete in China’s expanding telecom market.

• How did Huawei gain traction?
• What challenges in Huawei face in its early years?
• How did Huawei end up becoming the national champion?

R&D

• Huawei established R&D centers globally and partnered with foreign companies.
• Over 20 research and development centers.
• At the same time, the company faced accusations of stealing intellectual property.

“Wolf culture”

• Competitive, military-style work: Employees worked extremely long hours, often sleeping in the office.
• Nationalism was used as a motivator for workers.

• Why (and when) did Huawei begin pursuing business overseas?
• Where did Huawei find success internationally? How was it successful there?
• How did Huawei try to enter the US market?

• What’s the corporate ownership structure of Huawei?
• How does it compare with SOEs / private firms?
• What’s the connection between Huawei and the CCP?

• Millions of US citizens’ communication records were collected indiscriminately under Obama.
• Snowden’s leak revealed Huawei was a US hacking target, shortly after China’s leadership change.
• This prompted China to seek data sovereignty and develop a secure quantum global network.

• What was the campaign against Huawei?
• How did Huawei respond to these accusations and restrictions?
• How effective have these measures been?

Sanctions against ZTE

• Apr 16, 2018: U.S. Commerce Department activates a denial order against ZTE, effectively banning U.S. exports to the company.
• Jul 13, 2018: U.S. Commerce lifts the ZTE export ban after ZTE pays a $1.4 billion penalty and meets other conditions.

Pressure on US allies

• 2018: Australia became the first country to explicitly ban Huawei and ZTE from building its 5G infrastructure. More countries followed.
• 2020-2021: Reports found Huawei had developed sophisticated surveillance systems for use in Xinjiang and elsewhere in China

• Dec 6, 2018: Meng’s bail hearing adjourned; she remains under house arrest in Vancouver.
• Jan 28–29, 2019: U.S. DOJ unseals two indictments (23 counts total) charging Huawei and Meng — including allegations of sanctions violations, bank/wire fraud, and trade-secret theft.
• May 27, 2020: Supreme Court of British Columbia ordered the extradition to proceed, after lengthy debates

• How should Huawei have responded to the U.S.’s accusations and restrictions?
• If you are Huawei, who are your U.S. stakeholders, and how would you court them?
• Was “adopting a lower profile” the right move for Huawei?

• September 24, 2021: A deferred prosecution agreement was reached between the DOJ and Meng on
• Meng admitted to making false statements to HSBC regarding Huawei’s business in Iran, violating U.S. sanctions, but the DOJ will dismiss charges on December 21, 2022, if Meng commits no new crimes.
• Meng returned to China without having to pay a fine or plead guilty to her main charges.
• The two Michaels detained in China were also released and returned to Canada.

• Huawei was placed on a U.S. “Entity List” in May 2019.
• This cut off access to U.S. chips and software, like Android.
• Huawei sold its Honor smartphone unit in 2020; revenue fell by 27% in 2021.

The U.S. cut China off not only from advanced semiconductor chips, like the most powerful versions of Nvidia’s GPUs, but also from the very tools China needed to make its own high-end chips, such as state-of-the-art lithography machines from the Netherlands’ ASML.

Long-arm jurisdiction

• May 2020 rule: Extension of US legal control over the export of its allies, the Netherlands, Taiwan, South Korea and Japan.
• Any company in the world that uses any US technology or product in its manufacturing is subject to the US export control regime.

Subsidiary crackdown

• Sept 29, 2025: expansion of US export controls to subsidiaries of blacklisted foreign firms.
• Subsidiaries owned 50% or more by listed firms are now blacklisted.
• In retaliation, China extended extraterritorial jurisdiction of its rare earth export controls to products made using Chinese technologies abroad.

• Tech war, trade war, Cold War: What war are the US and China in exactly?
• Is it a winnable war? What’s the end goal?
• What should Huawei do? What should China do? Is there a difference?
• What should the US do?

• “Chokepoints for foundational technologies have to be inside that yard, and the fence has to be high—because our strategic competitors should not be able to exploit American and allied technologies to undermine American and allied security.”
• “Our export controls will remain narrowly focused on technology that could tilt the military balance. We are simply ensuring that U.S. and allied technology is not used against us. We are not cutting off trade.”

• 2023-08: Mate 60 Pro smartphone using advanced 7nm processor chips
• 2024-12: Fully in-house operating system, HarmonyOS Next
• 2025: Ascend 910C combines two Ascend 910B processors into a single package to match Nvidia’s H100 chip’s performance.

• Did US export controls on semiconductor chips backfire by spurring Chinese innovation?
• What, if anything, could break the tit-for-tat cycle in US and China relations?

• This is something much bigger than tariffs and trade deficits; Taiwan or semiconductors.
• The US and China are now locked in a global contest of power that is playing out along every dimension: economic, technological, military, cyber, soft power, global prestige.

• Neither side has escalation dominance: both sides have already gone far beyond trade measures.
• Both sides are searching for any tool, any weapon, any piece of leverage they can use against the other — (hopefully) short of direct military action.

• US and China’s deep integration means their actions hurt both sides.
• The focus is on inflicting more pain on the opponent than on oneself.
• China sees critical minerals as an asymmetric weapon.
• The US views semiconductor export controls as its asymmetric weapon.

• Trade, geopolitics, and national security lines are blurring, with different policy goals increasingly mixed together.
• Actions in the US-China trade war now affect areas beyond trade: e.g. blocking Chinese EV imports mixes trade, protectionism, and security goals.
• Risk: What are the end goals? Also, mixing goals and tools can make policies less effective.

• US actions like trade deals and chip export controls fuel China’s fears that it tries to contain its development.
• US actions may boost China’s government legitimacy and focus on security, with China’s reaction in turn provoking even stronger backlash in the US.
• These fears are deeply entrenched and hard to reverse.