Huawei, controversial in the West, is going strong in the Gulf

DUBAI - Chinese telecoms giant Huawei is enjoying an extended honeymoon with oil-rich Gulf nations, despite being criticized in the United States and Europe as a potential security threat. 

Arab Gulf countries -- strategic partners of Washington that are seeking to diversify their economies -- are investing heavily in the sector as their appetite for technology grows.

Huawei has struggled in recent years in the face of US sanctions, as Washington claims it has close ties to China's military and that Beijing could use its equipment for espionage -- accusations the company denies.

Britain and Sweden have banned the use of Huawei equipment in their 5G networks, while France has also imposed restrictions. 

Yet Gulf countries including Saudi Arabia and the United Arab Emirates have not only chosen Huawei for their 5G rollouts, but have also partnered with the company to develop "smart cities."

These feature enhanced digital services and security surveillance -- a Huawei speciality Gulf states value highly for monitoring their populations.

Gulf countries' "use of technologies for population surveillance is closer to the practices of China than those of Western countries," said Camille Lons, of the International Institute for Strategic Studies.

Concerns about Huawei voiced in the US and Europe "weren't convincing" in the region, she told AFP.

Mitigating 'political pressures' 

While the telecoms giant has had a strong presence in the Gulf since the 1990s, its deals and big announcements there have multiplied in recent years.

In January, Saudi Arabia announced it would open the largest Huawei store outside China in Riyadh, a few months after a deal with the company on developing artificial intelligence to support public and private sector growth.

Last summer, Saudi investment firm Batic cemented a deal with Huawei to work on "smart city" projects in the kingdom, where it is already a main partner in the Yanbu Smart Industrial City project on the Red Sea.

Huawei has also developed apps and digital infrastructure to support Muslim pilgrims visiting Mecca and Medina, Islam's two holiest sites.

"By gaining the trust of our partners in the Middle East, we have been able to mitigate external political pressures like those pursued by the US," Charles Yang, Huawei's Middle East chief, told AFP from the company's headquarters in Dubai.

In the high-tech emirate, one of 7 that make up the UAE, Huawei has launched projects ranging from data storage to online payment services for public transport networks. 

Dubai-based Emirates, the Middle East's largest airline, last year chose Huawei to build a center to boost the company's surveillance and security capabilities.

An Emirates spokesperson declined to elaborate on the precise nature of the technology, but said "such solutions are utilized... around the world primarily for public safety and security reasons."

'Risk' for the US

China remains one of the Gulf's leading trade partners.

UN figures show its 2019 trade with Saudi Arabia -- the world's largest exporter of crude oil -- reached about $36.4 billion, while with the UAE it exceeded $50 billion.

"Digital infrastructure has become a key pillar of (Gulf states') national transformation strategies," Yang said.

Huawei said this month it hoped for a reset with Washington, after former US president Donald Trump targeted the firm as part of an intensifying China-US trade and technology standoff.

But Lons from the International Institute for Strategic Studies warned the apparent Huawei-Gulf honeymoon could cause security worries for the US.

She noted the presence of American military bases in the region, and that Gulf countries are "major buyers of US military equipment."

There could be concerns about the "risk that sensitive US military information or technology is being spied on and transferred to China," she said.

Agence France-Presse

Huawei revenue growth wilts under 'intense pressure'

SHANGHAI - Huawei’s revenue growth slowed significantly in the first nine months of 2020, the Chinese telecom giant said Friday, citing "intense pressure" on operations during the coronavirus and as the US moves to cut off its access to vital components.

Huawei, the leading global supplier of telecoms networking equipment and a top smartphone producer, said it grossed 671.3 billion yuan ($100.7 billion) in revenue in January-September, up 9.9 percent year-on-year.

That’s down from 24.4 percent growth over the same period last year, while its profit margin fell to 8.0 percent from 8.7 percent last year.

Washington views Huawei, founded in 1987 by former People's Liberation Army engineer Ren Zhengfei, as a Chinese espionage threat and has lobbied allies to shun its gear while attempting to block its access to global semiconductor supplies.

"As the world grapples with Covid-19, Huawei’s global supply chain was put under intense pressure and its production and operations saw increasing difficulties," the company said.

It vowed to "do its best to find solutions, to survive and forge ahead". 

The brief announcement made no direct reference to the US pressure, nor did it include a performance breakdown for its various segments, such as smartphone sales. Privately held Huawei provides such details only for half-year and full-year earnings.

Bad news has been mounting for Huawei, which the United States alleges is controlled by Beijing. 

Washington fears Huawei's equipment could contain security holes that China could use for spying but the firm and the Chinese government reject the claim, saying the US has never provided any evidence.

Washington has essentially barred Huawei from the lucrative US market and pressured allies to do the same.

Britain in July banned mobile providers from using Huawei equipment in their new 5G networks, giving British companies until 2027 to rip out any existing hardware.

France has also placed heavy restrictions on use of Huawei gear and Sweden this week banned thje company and Chinese rival ZTE from its own 5G network for security reasons.

Writing on the wall

Much of the full impact from the US measures to cut off access to semiconductors and other components has been postponed so far by the Trump administration's granting of a series of waivers delaying full implementation while it carried out long-running talks on a trade deal with China.

But analysts said the writing is on the wall for Huawei, which will likely need to make major business adjustments.

US moves to prevent Huawei's access to much of the Google Android system could damage its global market position on smartphones, said Marc Einstein, Chief Analyst at ITR Corporation in Tokyo.

But it should remain strong in China's domestic market, and Huawei maintains a solid foothold in Latin America, the Middle East and Africa, even if more developed markets such as Europe appear to be closing.

"It's completely feasible that if a huge (US-China) trade deal is reached, some of these challenges could recede," Einstein said.

"Huawei is not going anywhere."

Huawei overtook Samsung as the world's top smartphone seller in the second quarter on strong domestic demand, industry tracker Canalys said in July, adding that it was the first quarter in nine years that a company other than the South Korean giant or Apple held the top spot.

Huawei said last month that its nascent homegrown operating system could be available on smartphones from early next year as it rushes to build an alternative app ecosystem.

Phil Marshall, chief research officer with Tolaga Research, said Huawei may "lose some of the edge" that it enjoys in networking gear and 5G technologies, but that it had racked up so many 5G patents over the years that it should remain a global player.

The US pressure also will force Huawei to achieve tech self-reliance by making its own chips.

"We know how successful they have proven to be at developing technology. You just can't rule them out," Marshall said.

Agence France-Presse