U.S. Government charges Huawei with stealing T-Mobile’s trade secrets
Depending on which analytics company you ask, Huawei is the second or third biggest smartphone manufacturer in the world, surpassing even Apple in some fiscal quarters, and the number one provider of telecommunications equipment internationally. With privacy concerns mounting following the arrest of the company’s Chief Financial Officer Meng Wanzhou, it was only a matter of time before we saw the list of charges released. The U.S. Government has now officially charged Huawei with stealing T-Mobile’s trade secrets along with bank fraud to violate U.S. sanctions on Iran. Violation of U.S. sanctions on Iran is exactly what landed ZTE in hot water, which could have led to them having their Android software license entirely revoked.
We’ve heard for a while now that Huawei was under investigation by U.S. authorities, with the company being deemed a national security threat overall. Despite the company’s failure to enter the American market (though they certainly did try), they have done very well for themselves in Europe and Asia. U.S. authorities have identified Meng Wanzhou, the daughter of the company’s founder, as playing a lead role in their attempt at using subsidiaries to conduct business in Iran. She is currently living in a family home in Vancouver, Canada on bail, as she awaits a decision on a U.S. extradition request. Retaliation against Canada came in the form of two Canadians being arrested in China on the grounds of national security.
Huawei’s power in the mobile telecommunications market has many Western world leaders worry. FBI Director Christopher Wray said the cases “expose Huawei’s brazen and persistent actions to exploit American companies and financial institutions, and to threaten the free and fair global marketplace.” He said that he is concerned about Huawei devices in U.S. telecommunications networks. “That kind of access could give a foreign government the capacity to maliciously modify or steal information, conduct undetected espionage, or exert pressure or control.”
The company has also been accused of stealing trade secrets from T-Mobile, a dispute that was settled with T-Mobile back in 2017 for $4.8 million. Huawei has been accused of stealing technology that powered a robot called “Tappy” back in 2012. Tappy replicates human fingers on a touchscreen and can be used for testing smartphones. Huawei’s devices were found to be failing Tappy’s tests, so the company tried to create its own robot (called xDeviceRobot) that would allow them to make sure that their devices would pass the test before sending them to T-Mobile.
Huawei stands accused of having employees take photos of the robot, make measurements, and even take one of the arms of the robot for closer analysis. Huawei claimed that this was the work of rogue employees, but court documents released by the Department of Justice show that Huawei China had repeatedly requested staff members send information back and had kept in close contact with Huawei USA’s engineers to steal as much information as possible about Tappy. A “competition management group” was later created by Huawei China which went through submissions of highly secret data, rewarding employees for the most valuable information stolen from competitors.
The company feared for its relationship with T-Mobile, so they attempted to cover up their tracks by publishing a 23-page “Investigation Report” document. The document aimed to intentionally mislead those it was sent to, concealing the full scope of what the company had tried to do to its first major US-based customer. In the report, Huawei claimed that the rogue employees had their contracts terminated and that there were very few emails sent back to Huawei China in general. In reality, it was the Chinese engineers who kept requesting information about Tappy.
While the allegations of what Huawei did to T-Mobile are very serious, the potential violation of sanctions on Iran can be dangerous for the company. The company stands accused of operating Skycom Tech Co Ltd. as a subsidiary, a Hong Kong-based firm that operated primarily in Iran. Huawei claimed that Skycom was a local business partner in Iran when it actually was operated as an unofficial subsidiary and violated U.S. export laws. Meng served on Skycom’s board of directors for over a year back in 2008. Huawei has been charged with bank fraud, as they intentionally mislead both U.S. authorities and multiple financial institutions by telling them that they were conducting business in Iran through legal means when ultimately they were not.
Huawei has declined comment to Reuters and other publications.
Source: Reuters Source 2: Department of Justice (Iran export violations) Source 3: Department of Justice (Stealing of trade secrets from T-Mobile)