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What is Huawei? China crown jewel now in US crosshairs

Daniel Howley
Technology Editor

Just days after President Donald Trump signed an executive order banning U.S. tech companies from doing business with companies in countries Trump deems “foreign adversaries,” Google, on Monday, announced that it is cutting off smartphone maker Huawei’s access to the company’s Android operating system.

Though Trump’s executive order, which was signed May 15, doesn’t mention individual companies or countries, it has been widely interpreted as a strike against Chinese tech giant Huawei.

In addition to the executive order, U.S. Commerce Department added Huawei and 70 of its affiliate companies to a list of firms banned from purchasing equipment from U.S.-based businesses without getting prior approval from government officials.

Cutting Huawei’s access to Google’s Android means that any new Huawei devices that roll off of the company’s assembly line would have to use Google’s publicly available version of Android. That version of the operating system, however, blocks users from accessing services like Google’s Play Store, Gmail, Google Drive and more.

To download apps, users will have to access third-party Android app stores, which increase risk of malware and spyware.

This is just the latest move in the battle between the U.S. and China to become the leader in 5G technologies going forward. The next generation of high-speed wireless connectivity, 5G is expected to touch nearly all aspects of American businesses and consumers from autonomous cars to improved media consumption.

And while Huawei is considered by U.S. authorities to be a puppet of a Chinese Communist regime bent on spying on American communications via the company’s infrastructure equipment, many Americans might not have a clear picture of what Huawei really does.

Here’s where the company has been, what it does, and where it’s going.

The Trump administration issued an executive order Wednesday apparently aimed at banning Huawei’s equipment from U.S. networks, and said it was subjecting the Chinese company to strict export controls. (AP Photo/Ng Han Guan)

What is Huawei

Founded in 1987 in Shenzhen, China, Huawei, pronounced “wa-whey,” is one of the crown jewels of China’s tech industry. And, outside of the U.S., it’s one of the most well-known technology brands in the world.

The company says it employs more than 180,000 people in 170 countries, and sells its devices everywhere from Europe and Asia to the Middle East, Africa, and Latin America. Much of the firm’s recognition is built on its smartphone business. The second largest smartphone maker in the world, Huawei owns 14.6% of the smartphone market, according to International Data Corp. Only Samsung has a larger market share with 20.3% of the market.

Huawei also provides the infrastructure equipment that serves as the backbone of the internet for countries around the world.

It’s that infrastructure equipment that the Trump administration wants to keep out of the U.S. The fear, according to officials in the administration and Pentagon, is that China will be able to force Huawei to use its equipment to spy on, or disrupt U.S. communication, during a conflict.

As one of the largest companies in the world to offer such infrastructure equipment, Huawei is uniquely positioned to benefit from the global rollout of 5G wireless technologies. But since the U.S. is not using Huawei, it will instead have to rely on companies like Nokia and Ericsson, which also produce 5G equipment.

Huawei, meanwhile, is able to offer its services at lower prices than its competitors thanks to subsidies it receives from Chinese state banks, making the company a more attractive option for many countries.

Huawei pulled in roughly $92.5 billion in revenue in 2017, releasing a slew of consumer products along the way including several highly regarded smartphones. That same year, the company launched its business cloud and enterprise intelligence offerings.

Huawei’s most important segment, though, is consumer technology. Major tech industry trade shows like Mobile World Congress in Barcelona, Spain and Computex in Taipei, Taiwan regularly feature massive press events where Huawei announces its latest and greatest products.

Many of those products, however, never make their way into the U.S. marketplace, due to the perception that Huawei will be able to spy on consumers including government workers.

The arrest of a key Huawei executive in Canada at the request of the United States signals a worsening of already strained US-China relations (AFP Photo/WANG ZHAO)

Skirting sanctions and spying

In December,  Canadian authorities arrested Huawei CFO Meng Wanzhou at the request of U.S. officials, who accused her of violating sanctions against Iran by selling equipment to the country via shell companies. Wanzhou is still awaiting a Canadian extradition hearing to see if she will stand trial in the U.S.

In an interview with CNBC Huawei’s founder, Ren Zhengfei, who was an officer in China’s People’s Liberation Army, said that his daughter’s arrest will make her stronger in the long run. It’s Zhengfei’s ties to the Chinese military, as well as fears that the regime could force the company to carry out its bidding, that has rankled U.S. officials and led to the current situation.

The fear that Huawei and the Chinese government could use the company’s technology to spy on U.S. government employees, resulted in a prior ban on the use of the company’s devices by government entities. Huawei has since filed a lawsuit in a Texas federal court claiming that it’s unconstitutional to single out the company for punishment without allowing it to receive a fair trial first.

In a separate case in Washington state, Huawei employees have been accused of stealing a part of a robot from a T-Mobile lab designed to test smartphone displays. According to the indictment, a Huawei engineer sneaked into T-Mobile’s lab with the help of another Huawei employee and snatched the part to measure and photograph it.

Huawei has also been sued by Motorola and Cisco for alleged theft of intellectual property.

Huawei’s offerings in the U.S.

There was a time when Huawei was getting ready to hit the big-time in the U.S. smartphone market. Carriers including AT&T and Verizon (Yahoo Finance’s parent company) were gearing up to offer the tech giant’s handsets at their stores, which would have been a boon for the brand.

But political pressures pushed the carriers to drop those plans. In the end if you wanted to buy a Huawei device, you had to purchase it from Amazon, Best Buy, B&H, and NewEgg. Best Buy, however, has stopped selling Huawei smartphones and, according to The Wall Street Journal, will eventually stop carrying the company’s products entirely.

Amazon currently sells Huawei’s P20 Pro, one of the company’s newest and best handsets for $749. But there’s no guarantee that an international smartphone like that will work on U.S. carriers. There are a number that function on AT&T’s and T-Mobile’s networks, but you’ll have a much harder time getting one that works with Verizon or Sprint.

Outside of smartphones, Huawei sells the MateBook X Pro, a well-built laptop with plenty of power and a gorgeous display. The company also offers its MediaPad M5 line of tablets, as well as its Huawei Band 3 Pro fitness tracker.

Will Huawei ever be a player in the U.S.?

Huawei is huge everywhere except for in the U.S., so will Americans ever be able to get their hands on the company’s devices? Chances are no. The arrest of Wanzhou has put a significant strain on Huawei’s relationship with the U.S. And with the company’s name in tatters in the eyes of American consumers, it’s doubtful executives will waste the effort trying to win over customers who already believe Huawei could be spying on them.

The fact that the U.S. government has effectively banned Huawei from being able to roll out 5G wireless internet technologies in the country all but guarantees that the company will never gain a foothold in the States.

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Email Daniel Howley at dhowley@oath.com; follow him on Twitter at@DanielHowley. Follow Yahoo Finance on Facebook, Twitter, Instagram, andLinkedIn.finance.yahoo.com/