Huawei's ambitions for Canada stalled by rift with China, security expert says

TORONTO -- Huawei Technologies Co.'s push to become a leading supplier of 5G technology in Canada appears to be in jeopardy after the Chinese tech giant's CFO suffered a legal setback in a B.C. court, prompting an angry response from Beijing.

"The chance of them being a leading supplier is next to none. I think the chance of them being involved at all in the network is still up in the air," Jonathan Berkshire Miller, an expert in international security issues with the Macdonald Laurier Institute, said Thursday.

His comments came a day after a B.C. Supreme Court judge ruled that the U.S. extradition case against Meng Wanzhou, a senior Huawei executive and daughter of the founder, can proceed to the next stage.

Miller said Canada has attempted to keep its decision about Huawei's role in 5G networks separate from the Meng case but said China has retaliated by arresting two Canadians -- ex-diplomat Michael Kovrig and entrepreneur Michael Spavor -- and blocking some Canadian exports to China, including canola.

China's behaviour in the Meng case adds to the perception that it can't be trusted to allow Huawei to be independent of Beijing and abide by the local laws where it does business, Miller said.

"I think there's going to be significant pressure (against Huawei) both domestically -- from parts of the national security community -- and also from our allies."

For Canada's telecom industry and the federal government in Ottawa, Huawei has long been known as an important equipment supplier -- one that U.S. officials consider a significant threat to national security.

That's largely because Huawei is a major supplier of the equipment needed for wireless networks that could potentially be used to gather sensitive information for the Chinese government.

IDC Canada vice-president Lawrence Surtees agreed that the Meng case may have given the Trudeau government a way to defer its decisions on Huawei but noted that the main government agency involved with the decision, the Canadian Security Establishment, hasn't found a reason to block the company.

In addition, he said, excluding Huawei from Canada could be costly and complicated for some of the wireless networks building out their 5G networks, particularly the antennae and tower base stations that Huawei has installed in Canada for a decade.

Besides that, he said Huawei has a major research and development centre for 5G and 6G technology in Ottawa.

Fifth-generation technology -- which the government and carriers expect to be a catalyst for future economic growth -- will be introduced in stages over about a decade, although the exact timing of the stages is uncertain.

Bell and Telus have used Huawei extensively in their fourth-generation networks and would be more affected by a Huawei ban than their rival Rogers Communications, which has predominantly used network gear from Sweden's Ericsson, Surtees said.

He added that Telus has been a more outspoken supporter of Huawei than Bell, which announced in February that Nokia of Finland -- another of Huawei's two long-standing rivals -- would be its first 5G supplier.

Bell Canada said in its first-quarter results that it will continue investing in network and innovation, with no changes planned for its 2020 capital budget despite uncertainty caused by the COVID-19 pandemic.

"Bell works with multiple network equipment providers, including Nokia, Cisco, Huawei and others. All of our suppliers must abide by Bell's strict security and conduct requirements including all necessary federal oversight and regulation," Bell spokesman Marc Choma said in an email.

Miller said he's had conversations with senior officials at Telus and they're "deeply frustrated" by the process.

"I'm not in a position to say whether they're going to give up on Huawei, but I think this has become much, much more complicated than they ever imagined it would be," Miller said.

"The Meng Wanzhou case, the two Michaels and so many other elements in the international geopolitical realm vis-a-vis China has complicated this decision so much."

Founded in 1987 by a former officer of the People's Liberation Army, Huawei has seen explosive growth over the past 10 years and reported revenue of US$123 billion for 2019.

It has operated in Canada since 2008 and currently employs about 960 people in this country -- about 600 in research and development.

Huawei's Canadian head office is in Markham, Ont. while its Canada Research Centre is based in Ottawa. The company also has research facilities in Markham, Waterloo, Ont., Montreal, Vancouver and Edmonton.

Huawei also makes smartphones for current wireless networks, sold in Canada by Bell, Rogers, Telus, and Videotron under their main brands as well as some secondary brands such as Virgin Mobile, Fido and Koodo.

This report by The Canadian Press was first published May 28, 2020.