Weaponized Ip and Collateral Damage: Lessons from Huawei vs US

The month of May, 2019 will remain a historical threshold in the annals of Technology, Innovation and Intellectual Property (IP).On May16 2019, the world woke up to the news that Huawei has been added to a US blacklist that essentially prohibited US companies from doing business with Huawei. Ostensibly, the reason are legion from Huawei breaking sanctions ( for which her CFO is being extradited from Canada), to Huawei and other Chinese technology companies stealing US intellectual property to Huawei being a spying agency for the Chinese government. All these are happening in the midst of an escalating trade war between China and the US. The US had already utilized this strategy to attempt to cripple ZTE, Huawei’s much smaller Chinese sibling. You know, ZTE of the security camera contract.

How Long Can Huawei Survive?

According to Sebastian Hou at CLSA Investment, Huawei subsidiary HiSilicon, which designs chips for Huawei equipment, has been increasing its capability in the last few years, and is able to supply 80% to 90% of Huawei’s needs. But Huawei’s survival is ultimately dependent on other critical alternatives such as the Taiwanese chipmaker TSMC.

However, in the face of the US action, large swaths of western companies have announced that they aredisengaging from doing business with Huawei. These companies ranges from suppliers of intellectual property, suppliers of software and software tools, tosuppliers of chips and tools to customers of Huawei. Huawei has made a strong statement on her ability to withstand the onslaught having prepared for it over time.

I think Huawei is bluffing and the US action is sending a tremor, a seismic tremor into the globalised technology supply chain.

Huawei’s Capabilities

Huawei rated to have about 80,000 R&D staffs in her HR arsenalsmakes mobile phones, laptops, servers, batteries, manufactures her own chips ( up to 60% of her needs ), builds data centres, produces various grades of routers, switches and other communication gear. And Huawei has grown very big, raking inrevenues of more than $170bn from more than 170 countries. Huawei’s products often go into the digital core of a nations’infrastructure targeted at developing countries. In Nigeria for example, Huawei is the dominant provider to the telecom network, a big player in the mobile phone market, managed service provider to the Nigerian government (managing systems as disparate as immigration, customs, prisons and many more). Huawei holds this same position across many other countries and even the US despite US opposition. But can it survive if the US pulled the plug long term? And what are the consequences to developing countries whose technology Ecosystem is deeply dependent on Huawei?

It is easy to say the Chinese or Huawei in particular has the potential to build fallbacks and jettison businesses with the Americans. Forget for the moment that Huawei imports more than $10bn worth of chips and other technology that it uses for building her products. With ARM declining to continue working with Huawei, Huawei will lose her access to cutting edge processor core technology. There are few providers of this core technology outside the reach of the US. The processor cores powering Huawei’s mobile phones, servers and other products have significant dependency on the technology from ARM.

Discontinuing business with ARM will significantly set Huawei back in her march to produce cutting edge processor cores. Of course Huawei will have access to what she already has and she will go ahead to advance them without ARMs help — essentially making a hard fork of the technology. No question that Huawei has not been leaders in processor design and will therefore make a hard going of becoming one without the support of the western ecosystem. Even more devastating is that the tools especially the software tools required for designing complex integrated circuits like processors are dominated by few industry heavy weights once again based in the US and likely to distance themselves from Huawei. So, Huawei will have to build new generations of these tools by herself in order to be able to build the new chips that will go into her new products. This is doablebut definitely an enormous task. Same scenario plays out in the operating systems and applications that Huawei builds into her products as well as the technologies that Huawei uses for her own operations. Microsoft could withdraw support for her office products.

Entering the Technology Cold War?

The position of Huawei reflects the position of any large manufacturer in the globalised supply chain that has been constructed to allow both the manufacture and use of technology products around the world. Few companies or indeed few nations have the capacity to support or participate in the unfolding 4th industrial revolution on its own. However, some companies and some nations depend far more significantly on the IP and technology of others. The US action has shown however that this dependence can be weaponised.

First the IP weapon is now being used against companies like Huawei. But also against countries like China and by logical extension more to countries like Nigeria — who have been negligent in building critical mass of capacities and capabilities in science, technology and innovation.What would happen if the US forbade technology companies from doing business in Nigeria? In short order, Nigeria will be crippled. Banks will struggle. Telcos will die. Our army will grind to a halt and government will be blinded. Why? Because, Nigeria is totally bereft of ownership of any of the core technologies she blithely uses and depends on. Oracle databases run the entire country. Microsoft owns messaging. Huawei owns communications. Our so called tech sector builds financial application on top of stacks of technology provided essentially by US companies from their databases, operating systems, application servers, computer languages, web servers to cloud services.

While China at least can be seen to be making efforts to reduce her dependence and could achieve that over time,Nigeria is not making any overt or covert attempt.Without considering whether the US is justified or not, some of the reasons given by the US will also ring a bell for all other nations on the risks of the globalized technology supply chain especially as hitherto mechanical things become smarter and controllable over the internet and digitized process generate mountains of data that can be used for surveillance or manipulation.

Experience in Tech-Competition Phobia?

With Huawei aiming to be embedded into the 5G networks, aiming to control the infrastructure of communications, and aiming to dominate the handsets through which millions of people will be connected to the network, it is not difficult to see that Huawei will be able to control critical infrastructure and also have access to the data flowing through these networks.

In theory this access can be blocked, in practice no one can verify that it can be blocked 100%. In recent times, ransomware has crippled companies like Maersk and government agencies like NHS in the UK. Stuxnet famously tried to destroy the Iranian uranium enrichment centrifuges while the Ukrainian power sector was compromised allegedly by Russia. As Ken Thompson famously demonstrated, even your compiler can be hacked to introduce backdoors into your code talk less of the microcode hidden in a billion-transistor integrated circuit or models hidden in multiple layers of neural networks. A recent WhatsApp hack allowed attackers to install malware just by making a call which need not be answered and which the called party may not even know happened. It is interesting that UK has claimed to be doing an ongoing and thorough security review of Huawei systems and software.

Entire nations are clearly vulnerabe to be held hostage by the companies or countries that control the technology and infrastructure for communication and data management. One can understand US paranoia or phobia for Huawei from this angle. US also has experience of what they were previously able to do with these same technology capability in the past.

ICT — National Vulnerabilities

It is fair to state that Nigeria, though a fairly intelligent and literate nation is an endangered captive and deeply vulnerable to the IT environment at the press of a button! Nigeria is in dire straits here. With our total dependence on foreign technology, we can become crippled as collateral damage when US or other more advanced countries start fighting with weaponised IP. When they are not fighting, we stand the risk of being held hostage by companies like Huawei or even Oracle who have full access to our communication networks and data infrastructure not to talk of the cloud providers like Amazon. These companies might profess their good intentions but then we are not even in a position to check or enforce these good intentions . With the Huawei experience, this has become imperative and a state of emergency — desirous of Presidential Executive Order.

While not sounding alarmist, it is time that Nigeria starts taking the threat of becoming not just a technology slave but also the real danger of becoming collateral damage, road kill. The technology sector must be enabled, supported and challenged to start building alternative core technologies preferably building on the freely available open source frameworks and designs. The Nigerian government needs to take ownership of the systems underpinning her critical infrastructure and systems by demanding and receiving source codes for these systems, conducting ongoing security audits and putting in place concrete defensive and offensive counter measures.

Any nation not putting these kinds of strategies into action urgently will sadly be either a slave of other countries or corporations or become part of the roadkill when IP weapons are being exchanged.