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Uncertainty and speculation on Huawei’s future role in India continues, with journalists and pundits attempting to predict the government’s decisions on future engagement with the Chinese telecommunications giant. Major business relief for the firm came on March 6 when mobile carrier Bharti Airtel awarded Huawei a telecom infrastructure contract worth $41.12 million to expand its National Long Distance Network (NLD), which is presently run by Huawei. However, just five days later, on March 11, a media report quoted two anonymous government officials claiming that the center is likely to block mobile carriers in the country from using telecom equipment made by Huawei amidst security fears.
Huawei, which was forced to lay off a majority of its local staff in July 2020 due to sidelining by the Indian government, remains resolute in its bid to remain in the Indian market. Speaking with the Business Standard on January 16, Huawei India CEO David Li made it clear that “Whenever there’s a chance, we make our point that we have a good record and we create value… Also, we are here as a big contributor and are fully compliant.” He further stressed that while the road map of the 5G auction is uncertain, they will continue to engage with stakeholders.
Since the breakdown in Sino-Indian relations following the Galwan Valley border clashes in June 2020, Chinese technological presence and investments in India have been facing the heat. A slew of restrictions on Chinese tech including the banning of several Chinese apps and a press note placing cumbersome restrictions on foreign direct investment in India (indirectly aimed at China) give the impression that Huawei’s inroads into India may be faltering at the hands of regulatory intervention, even though India is yet to articulate a clear official stance on the company’s future.
All the while, there are many open questions about how the Biden administration in the United States will maintain or alter the Trump administration’s decisions on Huawei and on Chinese technology writ large, from entity list export controls to broader diplomatic engagement on the security risks of Chinese technology and Beijing’s influence over the Chinese tech sector.
The two countries’ decisions around Huawei thus have implications not just for the future of Sino-Indian relations or U.S.-China relations, but for relations between India and the United States as well.
Huawei in India: Past, Present, and Future
Huawei first entered India as far back as 1999 when it set up a research and development (R&D) center in Bangalore focusing on telecom hardware. This remains its largest overseas R&D center. Since then, it has made inroads both into the retail market segment, where it sells consumer goods like smartphones, and into the telecom segment selling equipment and software to network carriers. While Huawei could easily be replaced in the consumer segment (for example, Huawei only has a 2.5 percent share of the mobile phone market across India), shunting Huawei out of the telecom segment throws up more complexities.
Several major network carriers rely on Huawei for 4G network equipment, including Bharti Airtel and Vodafone Idea, which together hold just under a 55 percent share in the wireless telecom market in India.
Despite oscillations around Huawei’s inclusion in the 5G sector, Bharti Airtel went ahead with India’s first 5G network trial using Huawei equipment in 2018. Vodafone Idea also announced a partnership with Huawei, ZTE, Ericsson, and Nokia for its 5G trials. Experts believe that Huawei’s inroads into the market have been made through deft negotiations — low prices and long-term repayment schemes combined with a challenging phase in the market for Airtel and Vodafonet. Mukesh Ambani (India’s richest man), who owns telecom giant Reliance Jio, has provided tough competition to both these players. This is the same man who proudly claimed in a February 2020 meeting with former U.S. President Donald Trump that Reliance uses no Chinese equipment — a stance that had been robustly endorsed by then-U.S. Secretary of State Mike Pompeo.
Vodafone Idea posted a loss of around $600 million for the October-December 2020 quarter, while Bharti Airtel was able to post a consolidated net profit for the quarter only due to a one-time gain after the merger of a subsidiary Bharti Infratel Ltd. with Indus Towers. Further, both these giants have huge outstanding dues to the government, which increases the necessity for financial thrift. Analysts believe that any ban on Chinese vendors, including Huawei and ZTE, could push up procurement costs by 15-20 percent as the European alternatives, Ericsson and Nokia, are more expensive and have limited gear availability in India.
Huawei equipment is also considered superior to that of its European counterparts by industry players. Speaking at the World Economic Forum in 2019, Bharti Enterprise (Airtel) Chairman Sunil Mittal was quick to dismiss the notion that 5G should be politicized, and further stated that “[Huawei’s] products in 3G and 4G are significantly superior to Ericsson and Nokia. I use all three of them.”
It is no surprise, therefore, that the Cellular Operators Association of India (COAI) — which counts Airtel and Vodafone as its members — have come out in support of Huawei many times. In December 2018, after the Telecom Equipment and Services Export Promotion Council argued for a ban on the grounds of national security, COAI sent a letter to the Department of Telecommunication (DoT) arguing that Huawei was “suitably equipped” to build 5G capabilities in the ecosystem and comply with government requirements. In December 2020, there was another letter to the DoT asking for country-of-origin based restrictions and import duty to be waived for equipment vendors, indicating that the department wants Chinese vendors, including Huawei and ZTE, to be a part of India’s 5G deployments.
The Indian government has been much less welcoming, though, across party lines. In December 2010, India blocked the import of Chinese telecom equipment over suspicions that the equipment may have spying technology embedded to intercept sensitive conversations and government communications. In 2014, Huawei was investigated after a media report alleged that Huawei had hacked into state-run telecom carrier Bharat Sanchar Nigam. The distrust of Huawei, despite its long association with the Indian market, stems from an adversarial relationship with China, with acrimony primarily over historical disagreements on the demarcation of their land border. Huawei has been perceived (the world over) as a private entity operating at the behest of the Chinese state, further compounding the mistrust.
The geopolitical acrimony and Huawei’s troubles deepened after India-China border clashes in 2017 and 2020. Despite calls for a ban from members of the security and policy establishment, in December 2019, Huawei was seemingly approved to participate in 5G trials in India. Media reports indicated a possible change in stance in July 2020 following the Galwan Valley clashes, when DoT officials hinted that Huawei and ZTE may be excluded from 5G trials. Airtel and Vodafone followed suit within a couple of months — their “clean telco” bid signalling intent to exclude Huawei from wireless networks. Skepticism around their future role in India at this time caused Huawei to lay off about 60-70 percent of its local staff, and slash Indian revenue targets by 50 percent.
In September 2020, the government’s written response to a parliamentary question inquiring about Huawei and ZTE’s role in the Indian telecom market did not indicate any proposal or policy to ban or exclude these Chinese vendors. Ambiguity around Huawei’s future continued till the end of 2020.
With the thaw in the border conflict in the new year — brokered by sound diplomatic engagement — Huawei may have been feeling more bullish about its presence in India. This bullishness was surely propped up by the Airtel contract it bagged in March. All the while, the government amended the licenses both of telecom operators and Internet Service Providers by adding a clause stating that the licensee would only be able to use “trusted products” in its network and would need to seek permission from the Designated Authority (which is the National Cyber Security Coordinator) to upgrade existing networks that were utilizing telecom equipment not designated as trusted sources. While the list of “trusted sources” has not yet been published, news reports suggest that Chinese vendors will not be included on this list. However, given continuous pressure from the COAI, outright exclusion is far from certain.
Airtel earlier this month and Vodafone last year filed fresh applications to the Department of Telecommunications to start 5G trials using U.S.-based firm Mavenir’s OpenRan technology. Even though Airtel continues to use Huawei and ZTE equipment in its 4G network, there appears to be a shift away from Huawei when it comes to 5G. Similarly, Vodafone has stated that it will not give core network contracts to Chinese players, and will renew radio and transport network expansion deals only after the government clarifies a policy on Chinese vendors in India.
The Biden Administration and Huawei
Compared to India, Huawei has a vastly smaller presence in the U.S. domestic market. The House Permanent Select Committee on Intelligence issued a report in 2012 on Chinese telecoms Huawei and ZTE, their links to the Chinese government, and national security risks to the United States based on both classified and unclassified sources. It wrote that “Private-sector entities in the United States are strongly encouraged to consider the long-term security risks associated with doing business with either ZTE or Huawei for equipment or services. U.S. network providers and systems developers are strongly encouraged to seek other vendors for their projects.” Since then, restrictions have tightened through export controls and other designations of Huawei as a national security threat (discussed further below), but it is clear that many companies shied away from using Huawei telecommunications equipment since the report’s 2012 publication.
The presence that Huawei does have in the United States is therefore extremely limited. As of the fall of 2020, the Federal Communications Commission reported that several dozen U.S. firms were using Huawei components or equipment in some capacity, such as América Móvil, CenturyLink, Cincinnati Bell, and Verizon. However, some of these companies’ dependence is relatively low in practice. Verizon, for instance — whose CEO initially (and falsely) claimed in 2019 that the company had no reliance on Huawei equipment — said in response to the FCC report that the company’s only use of Huawei equipment is VoiceLink, a voice-call device used by some customers; on top of that, it has also moved to contract alternative suppliers to Huawei, like Samsung. In the smartphone market, Huawei’s presence is even weaker: by some counts, the firm controlled less than 1 percent of the U.S. smartphone market as of February 2021. Headed into the Biden administration, then, Huawei already had a notably small footprint in the United States, due in significant part to concerns raised and restrictions implemented by previous administrations, especially the Trump White House, for (at least nominally) national security reasons.
Throughout his campaign for the U.S. presidency, Joe Biden, and especially his aides, made numerous references to security and economic challenges posed by the Chinese government, and technology has remained a consistent part of that theme. The buildout of a comprehensive National Security Council staff structure focused on China and the Indo-Pacific — as well as the creation of numerous positions at the White House focused on technology, competitiveness, and national security (including restoring the White House cyber coordinator position eliminated by Trump’s National Security Advisor John Bolton) — gives further reason to believe that economic and security risks of Chinese technology will be a mainstay of Biden administration foreign and technology policy.
The Trump administration’s handling of Huawei’s alleged security risks was at best sloppy. A protracted diplomatic campaign was hindered by unclear messaging and poor articulation of, and delineation between, different alleged risks. Despite the fact that some tides began shifting toward the end of 2020, U.S. allies and partners’ decisions to exclude Huawei equipment from their 5G networks were also driven by a variety of political factors; it was hardly the result of a suddenly effective pivot in the U.S. diplomatic campaign. Not to mention, Trump’s blatant use of real national security issues for self-serving political ends — most notably his December 2018 suggestion that he would look into stopping the investigation of a Huawei executive in exchange for trade deal concessions — ripped the rug out from under the civil servants who tried to make the campaign against Huawei work.
Such moves leave the Biden administration in a tricky spot of working to restore diplomatic relationships around the world, including as it builds out its policies on Chinese technology. Yet many domestic policy decisions made during the Trump administration, such as imposing numerous export controls on technology to Huawei, also require attention from the new White House.
Unlike India, which is yet to explicitly target Huawei through any restrictions or sanctions, the U.S. has been far more specific with its targeting of the telecom company. On February 4, Gina Raimondo, Biden’s then-nomination for secretary of commerce (now confirmed), said she saw “no reason” to lift the restrictions in the U.S. on selling technology to Huawei. Shortly thereafter, Huawei’s CEO Ren Zhengfei said he welcomed conversation with Biden and stated that “the message is around joint development and shared success.”
Other executives from the company subsequently expressed their desire to meet with Biden administration officials, including on the issues of “adjustments and issuing of temporary general licenses” to U.S. suppliers so that they could sell to Huawei. Tim Danks, vice president at Huawei Technologies USA, added that “In the near term, selling in the U.S. is not a priority for Huawei. Our priority is the supply chain” — ostensibly in reference to the placement of Huawei and many of its non-U.S. affiliates to the Department of Commerce’s Entity List in May 2019, which (generally speaking) blocks U.S. companies from selling or exporting goods to those companies without permission from the federal government.
If Huawei seeks to have these restrictions, originally imposed under the Trump administration, lifted in the new administration, that has not yet panned out. On March 11, Reuters reported that the Commerce Department had tightened its restrictions on U.S. companies selling to Huawei. It specifically targeted items that could be used in or with 5G devices, according to Reuters.
The following day, the Federal Communications Commission released a list of companies it designated as presenting an “unacceptable risk” to national security. Huawei was one of those companies. Despite its prompt filing of a legal challenge to the designation, that contestation is unlikely to succeed. The federal government had already made the same designation under the Trump administration, and the climate in the U.S. toward Chinese technology, as well as Huawei’s position within the global supply chain and potential influence by the Chinese government, is not considerably different now than it was a few months ago. The U.S. National Security Commission on Artificial Intelligence recently recommended that the White House focus on “choke points” in global semiconductor supplies. Export controls were expected to be a key point of conversation in the Biden administration’s first official meeting with Chinese government leaders. Many individuals now in key positions in the administration have long been raising concerns about Chinese government influence-projection through companies like Huawei.
Yet much of this hinges on how much the Biden administration will further extend its restrictions on Huawei as well as other Chinese technology companies like ZTE, and how much priority it places on positioning vis-à-vis Chinese technology in its dialogues with allies and partners around the world, relative to other issues. As history has shown, the presence of technological security risks does necessitate their prioritization in foreign policy.
Prospects for India-U.S. Cooperation and Discord
One major question is whether the Biden administration will pressure the Indian government on Huawei like the Trump administration did — which, despite the bonhomie between Modi and Trump, was hardly a fruitful plan of attack in getting the Indian government to ban or at least sideline Huawei 5G equipment (it didn’t do the former and only did the latter at the end of 2020). And the answer, for now, is unclear. U.S. Secretary of Defense Lloyd Austin’s visit to India on March 19 was one possible opportunity for the Biden administration to raise concerns, broadly speaking, about Chinese technology, recognizing that the Department of Defense has not been the primary agency (and rightfully so) involved in federal policy battles and developments on Huawei 5G specifically. Some argue the visit portends closer defense and security ties between India and the United States. Yet again, it remains to be seen what that will mean for policy on Huawei 5G. It will take more of these visits and engagements to get a clearer sense of what elements of the U.S.-India relationship — from trade policy to human rights — the White House wants to prioritize.
There very well might be continued disagreements between the Indian and U.S. governments on Huawei. Even if the countries agree in principle that Huawei could or does pose national security risks because of Beijing’s influence over its technology sector, that does not mean both parties will pursue the same response to the challenge. Both countries have other competing interests (potential business costs in the Indian case for one) and strategic priorities.
While the precise nature of Huawei’s future in both countries remains unknown, they have adopted slightly different approaches to Chinese tech in general. The Indian government has been banning dozens of Chinese technology software applications from the country and pushing to scrutinize Chinese investment in the country more broadly. In contrast, Washington’s pursuit of software bans was limited to Trump’s TikTok and WeChat executive orders — bad decisions that should not be a template for future policy on the security risks of foreign software — the former invalidated by multiple courts and the latter effectively abandoned by the Trump administration once it left the news cycle. At the same time, however, just because the governments may not reach consensus on the best policy toward Huawei 5G technology, or even toward Chinese mobile software applications, does not mean that disagreement will spill over into the India-U.S. tech relationship in general, at least in the security domain.
In fact, recent developments indicate greater convergence in the tech relationship. The joint statement of the leaders of the Quadrilateral Security Dialogue (comprising the U.S., Australia, Japan, and India) underscores the need for cooperation on critical technologies, and the setting up of an “emerging-technology working group to facilitate cooperation on international standards and innovative technologies of the future.” Even though China was not explicitly mentioned in the joint statement, the messaging was clear.
Notwithstanding the thaw at the Sino-Indian border, India remains skeptical of tech encroachments by Beijing, much like the United States. Rather than a shared historic commitment to democratic values, it is this skepticism that will fuel the tech relationship forward — and continue to make life difficult for Huawei — in both countries.
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