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China's Huawei, a Big Tech Seller Globally, Runs Afoul of US

FILE - A sales clerk looks at his smartphone in a Huawei store at a shopping mall in Beijing Wednesday, July 4, 2018.
FILE - A sales clerk looks at his smartphone in a Huawei store at a shopping mall in Beijing Wednesday, July 4, 2018.

The recent arrest of a top Huawei executive in Canada has put a spotlight — again — on the Chinese telecommunications giant.

Huawei (pronounced Wah Way) is little known inside the U.S. except as a target of U.S. security agencies. Yet the Chinese telecommunications firm recently passed Apple as the No. 2 seller of smartphones worldwide after Samsung and is in a race with other telecom firms to build out the next generation wireless network, known as 5G.

What is Huawei?

Huawei, based in Shenzhen, is a Chinese telecommunications equipment and hardware firm, the largest supplier of networking equipment used by communications firms. It has more than 150,000 employees and has stood out from other Chinese tech firms because of its large presence outside of China.

In addition to selling laptops and TVs, it is the leading smartphone maker in its home market and is increasingly selling its high-end phones ($600-$800) in countries across Africa and Asia. But it is nearly locked out of the U.S. market.

What are the U.S. government concerns?

Since 2012, the U.S. government has raised the alarm on suspicions that Huawei's hardware may have a technical backdoor that could be used by the Chinese government to gather intelligence. This concern has only increased in the race between the two countries to create the 5G network, which will provide faster internet technology.

Huawei has denied that its products pose any security risk and says it is a private company.

This week Canadian authorities, at the behest of the United States, arrested the firm's chief financial officer over allegations that the company has done business with Iran, in violation of U.S. trade sanctions.

What has the U.S. done to limit Huawei?

This year, the FBI and CIA were among federal security agencies that warned U.S. consumers not to buy phones built by Huawei or its affiliate Honor branded phones that were sold in Best Buy and on Amazon's online site.

More recently, the U.S. has lobbied countries not to buy Huawei products. New Zealand and Australia announced they were banning their wireless carriers from using Huawei's equipment. BT, a United Kingdom telecommunications group, said it would not buy equipment from Huawei as it builds its 5G network. And AT&T didn't go through with a deal with the Chinese smartphone giant to sell its phones to U.S. consumers.

What might happen next?

It's unclear if Huawei can keep growing if it doesn't gain a foothold in the U.S. consumer market. And, as China and the U.S. race to build the 5G network, there will be more scrutiny of the Chinese telecom firm. But one observer says the tensions between the two countries are bigger than the 5G race.

"These huge Chinese tech companies are bulking up and they are getting into everything," said Rebecca Fannin, founder and editor of Silicon Dragon, a media and events group covering the tech industry worldwide. "They are innovating fast, sometimes faster than U.S. firms, and there are growing tensions over that issue, which is going to be more pronounced as it goes forward."