Huawei crucified in UK parliament

Via The Telegraph:

The Chinese tech giant Huawei was compared to the company that produced the lethal gas for Nazi extermination camps, as one of its executives was probed by MPs.

John Suffolk, the company’s Global Cyber Security and Privacy Officer, left MP’s frustrated as he was accused of refusing to answer “simple questions” when he appeared before the Science and Technology Select Committee Monday.

He repeatedly answered queries about Huawei’s links to the Chinese state and alleged human rights abuses by saying the company worked within the laws of the countries it operated in.

Following a tense exchange, Labour MP Graham Stringer asked: “Do you think when we come to write our report it would be fair to compare your company with IG Farben who manufactured Zyklon B and sold it to the German government during the Second World War?”

Mr Suffolk replied: “I would paint a different picture. I would say if you are asking us should we ignore the law I am sure you would say no you should not ignore the law.”

…Mr Suffolk was also questioned about Huawei’s role creating surveillance equipment for Xinjiang province, where the Chinese state has been accused of orchestrating a brutal campaign of repression against the Muslim Uighur population.

The executive said that the company’s supply of equipment to the province was conducted through a “third party”.

This prompted a scathing response from the committee’s chair, Norman Lamb, who said: “Essentially, what you are saying is as long as we comply with the law that is fine – you are amoral.

“You have no interest in what’s happening, like with the 1.5 million Chinese people who have been incarcerated in Xinjiang province. You don’t care.”

Good news for Five Eyes, at the SMH:

The Science and Technology committee is examining UK telecommunications infrastructure amid a row within the governing conservative party as to whether or not the Chinese company should be allowed to supply parts for Britain’s 5G network.

A preliminary decision taken in the National Security Council to approve Huawei involvement was leaked, leading to the sacking of the then defence secretary Gavin Williamson who is now co-chairing Boris Johnson’s leadership campaign.

Williamson favoured Britain following Australia and the United States’ lead in banning the company from the rollout but denies divulging classified material.

Two of Johnson’s backers, Williamson’s predecessor Sir Michael Fallon and the prominent Brexiteer Jacob Rees-Mogg have both told The Sydney Morning Herald and The Age that the decision should now be made by the new prime minister, and not Theresa May who on Friday stepped down as leader of the Conservative party after losing the support of her MPs, primarily over her handling of Brexit.


Meanwhile, Aussie pollies are finding new and wondrous ways to twist language in our defense of the indefensible, via the ABC:

Former deputy prime minister and Nationals MP Barnaby Joyce has labelled China a “benevolent tyranny”, in response to the arrival in Sydney Harbour of three of the Asian superpower’s warships last week.

The People’s Liberation Army Navy ships cruised into the harbour last Monday, docking at Garden Island for a four-day stopover.

Prime Minister Scott Morrison dismissed suggestions it was a “surprise” visit, saying it had been planned for some time after an earlier visit by Australian ships to China.

It was later revealed New South Wales Premier Gladys Berejiklian did not know the warships were due to arrive in her state.

Mr Joyce said Australia needed to respond to the rise of China as an economic and military superpower with strength, rather than simply rolling over and allowing Beijing to act without criticism.

“We can see the issues happening in Hong Kong as we speak,” he told Channel Seven.

“They are not a democracy, they’re basically a benevolent tyranny.

“I think Australia obviously has to recognise the economic strength and trade with them, but we want to trade with them as a partner, not as a servant.”

Late last week former minister Concetta Fierravanti-Wells launched an extraordinary spray against Mr Morrison and the Government in The Australian newspaper for allowing the warships to arrive on the eve of the Tiananmen Square massacre, describing it as insensitive and as evidence Beijing could boss Canberra around.

“I think waking up and going for a walk around The Domain and seeing three Chinese warships there could’ve been a bit startling,” Mr Joyce joked.

Former Defence Department secretary Dennis Richardson also argued the visit could have been better handled, but rejected suggestions it should not have been allowed to occur.

“I’m not quite sure what happened there; I suspect there are elements of simply muck-up,” he told ABC RN.

“But having said that, we ought to be welcoming visits by Chinese naval vessels.

“There’s a touch of paranoia in some of the commentary at the moment in respect of China.”

No, there isn’t. We’re a decade late to the party and still way behind the curve in dealing with it.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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  1. The company that produced the lethal gas for Nazi extermination camps, IG Farben, is still around, it is just called Bayer these days. IG Farben spun off its pharmaceutical division, known as Sanofi these days.

  2. Do you guys actually understand just how narrow the market for supply of these products really is?
    In the Communications equipment sector we’ve had 20 plus years of relentless price pressure coupled with an incredible once in a generation change from a switched line to a packet based communications infrastructure.
    The old world order of Ma Bell (or Alcatel or GEC or or or) looking after our telephone needs with their ultra reliable stuff is all ancient history. Seriously where is AT&T (ahm I mean Lucent… Alcatel-Lucent…Nokia …Erickson…). Over the last 20 years there has been massive structural and product change and it doesn’t look like slowing any time soon.
    OK so what’s my point: Huawei is a serious new (well not so new) player and it does not look like they’re about to fold, they’re looking increasingly like one of the pillars of the new global communications business. Banning them is akin to the 19th century trend for banning steel ships because we only knew how to build wooden ships.
    From a commercial perspective if you ban Huawei than you practically gift your market to one of a few competitors at whatever price that care to quote. (the market is honestly that narrow)
    I’m not in love with the idea that Huawei has such a powerful presence in our modern day telecommunications sector but I do accept this as a fact of life, it’s something that I need to deal with.

    • John Howards Bowling Coach

      fisho, while you are correct, they are likely the lowest cost supplier that is not the reason to hand the Chinese Government control of the world and especially our part of it. The drive to lowest cost supply has been a very effective game for China and now the world has largely given up the ability to feed itself without China. That doesn’t mean it can continue. It is hugely important to stop handing our wealth to China on mass. It’s also hugely important to no allow China any further avenue for leverage as they are like a young man with power, they always use and abuse it.

      • I think you’re missing one of Hauwei’s most important selling points which is that they’re the only End to End provider of Wireless telecommunications systems (especially wrt most smaller countries)
        There is no other company that has a presence in ALL of the puzzle parts
        they make everything from Consumer hand sets to internet routers and 5G base stations including the Fibre optic links. Huawei is no longer a bit player, they’re the main game AND they’re leveraging their market position (just as At&T did back in their day) to expand beyond the specification.. This means that the agreed specification is the minimum that’s required but what happens if Huawei smart phones and Huawei routers and Huawei base-stations all finds ways to collaborate that’s way beyond what’s specified in today’s Network construction specs?
        Well countries like Australia still have a lot of elderly network design experts that can maybe make something equivalent from off-the-shelf telecom parts but does the same analysis apply to say Indonesia of Nigeria or or or.
        You see where I’m heading?
        There are no commercial reasons for Huawei not moving full steam ahead with plans to leverage their market position to create advantage for both them selves and their customers. It’s worth a thought that this advantage might come at a cost for our wireless Telecom companies. Imagine for instance that they find ways to completely and seamlessly integrate consumer level WiFi with Telecom level 5G in such a manner that they can create a “Synthetic” country wide 5G network provider over-night and not just in Australia but globally
        Now what’s that capability worth?
        that’s where they’re headed….now who’s up for the challenge to best them?
        Btw give me a call when you secure the funding

      • John Howards Bowling Coach

        @ fisho I understand where your thinking is 100%. However I think it might play out differently for a few reasons. In a previous life I spent some time in product development in Consumer Electronics in the data comms area and I saw that Taiwan was almost always better than China although they killed themselves by greed and migrating their factories into the mainland. Few have survived that well, Foxconn the obvious exception. But I also saw that some others beat China when they get away from price and innovation is a driver. Japanese are more creative, so even though they are somewhat crippled they still pump out a lot more innovation and of course quality than China although they have their hands tied by Korea who are in an ongoing ideological battle the destroy Japan for past wrongs (much like the Chinese in fact) and Korea keep taking profitability away from Japan on purpose. Albeit the Koreans are not so great at innovation and tend to borrow almost as much as the Chinese. You see that when you go to Korea, bland place, food ok, but nothing compared to Japan, you’d be unlikely to take a long tour of the place it’s just too bland, a result of a culture this is not that creative. The Chinese have the same issue they are not that good at innovation as their culture breeds it out of them. Success in School is not from creative thinking but rote learning and that is from the very foundation of learning the language, it’s all out repetitive reproduction of the same thing. This occurred to me years ago when I was learning it myself. So while Huawei are great at churning out a cheap version of the innovation from others, they are not so great at being the origin or technology. Which lead me to ponder who else? My thoughts head towards India, the reason why is they are equal to the Chinese in gaining a foothold in the world, especially the developing world. However they are also excellent in tech innovation albeit usually with US guidelines. Have a look at so many in silicon valley and you see the Indian ability to lead creative mathematics puts them head and shoulders above the Chinese for next generation development. So given Huawei are in a market constantly in a state of renewal through tech innovation I think India could produce a challenger, because being a cheaper copy only works until you don’t have access to the next generation of tech development (until too far after the fact). Just some ponderings, might be wrong, but I don’t think the world should let Huawei continue to become the all conquering giant their true master (the CCP) wants them to be, unchecked.

      • @JHBC
        In general Chinese engineers are not very creative that’s true. However Huawei product development does not rely on Chinese engineers anymore, Today Huawei is the main game so it is where the best Telecommunications Engineers from around the world are working either directly or indirectly. I know quite a few French Communications Protocol Engineers that graduated fro prestigious Universities like Ecole Polytechnique who are now working for Chinese concerns including Huawei.
        It’s a new world. so I wouldn’t be overly concerned with the level of Innovation from Chinese born / educated engineers, they’ll do just fine leveraging foreign expertise….remember the west fired all these guys 10 or 15 years ago (they weren’t Financial engineers so they were useless. (turns out they weren’t completely useless after all)

    • Ronin8317MEMBER

      Huawei will go bust if the US get serious apply the ‘trade with them and you go to prison’ mandate. It is a targetted assassination of a company because they DARE to be bigger than Apple.

      • what utter rubbish. as Nokia proved (almost 20 years ago) wrt Telecommunications the Rest-Of-the-World is a much more important market than the US. Huawei knows this and will act accordingly. Third world countries know this and will act accordingly. US companies (and officials) know this and they’re acting in their own selfish best interests to maximize the end-of-life value for their products and knowhow.
        Now if someone really wants to step up to the plate than count me in…otherwise it’s all just talk.

    • given how small telecoms spending is in my total spending, id be quite happy to pay a 5% or 10% premium not to have Huawei. I really don’t care, I just don’t want them and their CPC Slave-Masters. Period.

      • Just to be clear we’re not talking about 5% extra, not even a 50% markup would be sufficient to entice western companies back into this sector …
        Tell me that you’re willing to pay 500% extra… now you’re talking, now people are listening.
        I’d have no problem putting together a 5G handset team that could knock out a product in say 3 years with a development budget of say $350M and 100M unit pa guaranteed orders at 100% mark-up to market price. Mind you that’s just one piece of the puzzle and it’s likely to take 5 years to get technical equivalence with where Huawei is today.

      • fisho, I’m not doubting your knowledge of the field, but…

        …I know of no other industry where not having a certain player means a 500% markup vs other options, or anything like it (that could just be my ignorance, too!).

        I will agree with Peter on this one – I’d warrant that markups would be “significant” but not catastrophic, such as nowhere near 500%, and probably no more than 50% Perhaps a short-term spike could be an issue until other companies ramp up production, expand product lines, and fill the gap – this is the norm, to my knowledge.

        This is my gut feel based on many other things, as I can’t accept that this is so-special an industry (but I could be wrong).

        I will pay a premium to reduce the reach and long-term power of the CCP – I believe they act in their own interests, in that of an entity they call “China”, more than they do the Chinese people. If I pay some 50% more for a few years until other producers pick up the slack, then so be it.

        My 2c

      • @burbwatcher
        If you paid for the development cost (as in it was not my risk capital) than I’d willingly supply you with appropriate chipsets at 2 times the price paid by Hauwei but only if you guaranteed me something like 100M units per year.
        If you wanted me to accept all market and technical risks and pay for the development up front than I think my estimate of 5 times their price (as motivation) is not far from the mark.
        At 100M units I’d have enough volume to interest the biggest mobile chipset fabs (TSMC & Global foundries) but you need to be aware of the games that they’ll play because they’re also supporting your competitors Qualcomm, Broadcom, Mediatech,,,,) all of whom have much greater market share and therefore much more pull when it comes to getting fabs to act in their interest. That might mean that my business strategy is better served by going with an unproven fab and accepting all the costs that come with this decision, that’s why I need lots of margin to make this happen.Think about what happens when each actor in the value chain doubles their prices…. where does the final customer price end up?
        Remember that everyone will doubt your (read your backers) resolve since you are trying to make this happen for Political (aka Strategic) reasons rather than sound commercial reasons (as in wow look at the profits we’ll make)
        I do respect your 2c’s input sorry but in this case that’s about all it is actually worth.
        Think about it, your asking me to walk into Morris Chang’s office and beg for commitment and significant fab resource allocation with nothing but my d1ck in my hand…Morris would call me on that and demand to be compensated (up front) for the commercial risk of mis-allocating Fab resources.

    • Even StevenMEMBER

      @ fisho

      Buying 5G from Huawei is not the answer. If need be, you set up a government owned enterprise to compete with it and provide the end to end services you’re talking about. Expensive? Sure. Probably inefficient? Sure. But better than the alternative you present.

      • I agree 100% there’s a solution and it doesn’t require any threatening words just mountains of good old fashioned cash. If we’re to cheap to pay the price for our dreams than we don’t deserve outcome we wished for.
        nothing complicated here at all.
        If you doubt what I’m saying than get in your way back machine and see how successful you would have been getting funding for creating Hauwei alternatives say 5 to 10 years ago (oh F’it middle of the GFC we’ve got bigger problems to solve)
        That’s how it was trust me on this point.

      • If you’re interested in really understanding the problem wrt creating viable long term solutions to Chinese dominance in the Telecommunications Infrastructure sector than I’m open for discussion. That said I’m not interested in wishful thinking, if you really want something than you put your money where your mouth is, I guess I’m a simple bloke because in my world it’s that simple.
        There are a lot of structural reasons why this sector died in the west and one of the most important is Patents.
        Patents are great tools for promoting investment and encouraging development, however there’s a flip side to this which is the Monopoly right that comes with a Patent is actually worth more to an industry outsider than it will ever be worth to someone in the development community. We saw exactly this happen in the Wireless Infrastructure Patent business where the monopoly rights of patent holders were so thoroughly protected that local manufactures simply closed up shop.
        When you break the Patent of another company in your sector the usual industry recourse is to arbitrate a deal …I’ll give you access to these patents that I own if you give me access to your critical patent. That’s how it used to work however post 2000 techwreck a lot of the industries patents ended up in the hands of Patent Troll (legal companies) these companies have zero interest in horse trading patent rights. The patent that they’ve purchased gives them an absolute monopoly right to control the underlying Intellectual Property. These legal entities have no need to behave reasonably, they own the rights to something and they’ll squeeze till it hurts.
        Now this would be OK if there was only one troll, unfortunately there are hundreds of patent trolls all owning portfolios of patents all covering essential aspects of Wireless Network design or operations. Many different patents cover EXACTLY the same core function but with slightly differing language, so how many times do you have to pay when the patent troll comes knocking…frankly it’s an unknown…how much will each troll demand …legally it’s unlimited (they own a monopoly right that has over time become a corner stone of modern wireless technology) each and ever one of these trolls have a legal right to suck you dry.
        If you think about it in these terms it’s hardly surprising that no western technology company wants to work in the Wireless Infrastructure space. To be compatible with the industry specifications you have to implement Protocols exactly but you don’t own the underlying IP. So Legally you’re F’ed
        You can only hope to operate efficiently in this space if you can step outside the US/Western patent system. Hauwei did exactly this until it got big enough to tell the Trolls to just F-off. Huawei is so big now that the trolls need Hauwei ….
        Bottom line: There’s a lot more to this problem than simply developing the required technology, but that’s always where you need to start.

    • I’m left wondering how retarded the people of New England are too when he got re-elected.

      Also, unfortunately the watergate scandal appeared to have been swept under the rug.

    • The one good thing the Chinese gummint does is treat islam how it should be treated.

  3. Anyone who works for Huawei necessarily has an ethical bypass. This organisation is a Trojan horse and we must not allow it to control our telecommunications.

    • This organisation is a Trojan horse and we must not allow it to control our telecommunications.
      Yep that sentiment and $5 will get you a cup of coffee.
      Now if you’re actually interested in controlling (or preventing others from controlling) our Telecommunications than you’ll need to ante-up a little more than just an emotive plea.
      Show me the money!

  4. I’d love to have a business where: 1) I don’t pay the cost of capital because I’m hugely favoured, 2) I have a captive market with 1.4bn peopl. 3) where I don’t need to worry about development costs because it’s either stolen or subsidised by the military, and where: 5) I pay my workers slave wages.

    oh wait, isn’t that Huawei?

    Come on guys, they’re not that powerful in the industry. They can die just as easily as Motorola or Nokia

    • It’s not a complex problem, the west needs to stop waving its finger and instead just open its check book.
      I’ll tell you when to stop writing zero’s (but if you really want it to happen add one or two more zero after I say stop)
      It doesn’t matter what the answer is because we spend more than $100B pa on Military / Security interests and it’ll all be for naught if our global telecommunication systems are completely compromised.