Canada vs. China, & Huawei

[Randy W]

from the Global Times dumps on Canada

 

Resignation reveals political interference

 

What happened to the "legal state"? The only explanation lies probably in a guilty conscience. Ottawa has recognized clearly that arresting Meng was against the basic legal spirit. McCallum commented on Meng's case several times and didn't even stop after apologizing as the entire Canadian political arena swayed.

As a senior politician, McCallum unexpectedly played the role of the little boy laying bare the facts in The Emperor's New Clothes. How embarrassed those who try hard to preserve political correctness must be!

Ottawa is forcibly creating a favorable public opinion atmosphere toward extradition. Is that appropriate behavior for a country ruled by law: To set the tone for right and wrong before the court trial begins?

Meng's case has revealed the weakness of the rule of law in Canada. Many commentators consider that this case has stuck Ottawa in the middle of Washington and Beijing. The truth is that they knew the geopolitics in the case from the very beginning, but were afraid to point them out.

As a Chinese folk saying goes, "You cannot live the life of a whore and expect a monument to your chastity." Canada is a country worthy of respect, but some Canadians must be reminded that they are now refusing to face up to the moral predicament. They are against moral righteousness while deceiving themselves to believe that they can be honored as moral models.

Meng's case seems to be protracted. If Canada insists on wrong practice, it must pay for it.

 

[Randy W]

. . . and the New York Times

 

Huawei and China Have Limited Ways to Answer U.S. Charges

Now that the United States has laid out its case against Ms. Meng in greater detail, neither Huawei nor the Chinese government has easy options for responding or retaliating.

 

. . .

 

China is in the middle of a trade war that it is anxious to end as its vast economy slows. Any effort to get tough on the United States — such as by detaining American nationals, as it did to Canadians after Ms. Meng was arrested — could scuttle the negotiations.

 

. . .

 

The broad language of the Justice Department’s indictments suggests that other Huawei leaders, including Mr. Ren, a former officer in the People’s Liberation Army, might wish to exercise caution while traveling to countries that have an extradition treaty with the United States.

 

. . .

 

The indictment also said that Skycom employed at least one United States citizen in Iran, a violation of American law. And it said that after Huawei found out that the United States was pursuing a criminal investigation in 2017, the company destroyed evidence and tried to move unspecified witnesses who knew about its Iranian business to China, beyond the reach of the American government.

The other indictment, which concerns the theft of trade secrets from the American wireless provider T-Mobile, refers to internal emails describing a plot to steal testing equipment from T-Mobile’s lab in Bellevue, Wash.

. . .

The evidence presented in this week’s indictments bolsters the American case for extraditing Ms. Meng, said Mr. Ku of Hofstra University.

“The standard for extradition is whether a Canadian court would send her to trial,” Mr. Ku said. “Essentially, is there enough evidence to indict someone? I think this will help meet that standard.”

 

 

[Allon]

Aside from the polemics at a higher level, some research is here into what exactly happened with regard to the stolen technology. Who did what?

 

Among many problems with Huafei, the one apparently with the most evidence, is about a glass made from nanodiamond technology, that makes an iPhone or Android 6 times stronger and 10 times more scratch resistant than your current phone’s Gorilla Glass. It also is a major element in military laser technology. That's where the FBI enters quite an interesting story. It was a sting that was only part of a larger operation.

 

The Bloomberg piece, if you want to save some reading time, is much more comprehensive and deep, as the reporter was in on the FBI sting from the beginning with Akhan. You will have 7 shots at reading Bloomberg without a subscription. Just my opinion, this piece is likely worth losing one of them.

 

So, no matter the kidnapping of Canadian citizens in response, (and kidnapping, it is) or trade consequences, the FBI has been after this issue for a long time. (All emphasis mine.)

 

 

https://www.androidpolice.com/2019/01/28/huawei-and-its-cfo-wanzhou-ming-charged-with-financial-crimes-by-us-justice-department/

According to the Justice Department, the charges stem from a multi-year scheme by Huawei to hide business activities in Iran from international financial authorities and the US government. One of the subsidiaries cited in the documents is Skycom, which has operated extensively in Iran. Huawei claimed it sold its interest in Skycom, but the feds say that was a lie.

The indictment claims that Wanzhou Meng was a key figure in the planning and execution of this game plan, giving presentations to banking partners about the company's non-association with Skycom. Huawei officials also provided assurances to the US Congress that its business didn't run afoul of any US law pertaining to Iran. The government claims to have evidence to the contrary.

The case goes all the way up the food chain to Huawei's founder Ren Zhengfei, who allegedly lied to the FBI when he said the company had no dealings in Iran and was fully compliant with US export restrictions. The other subsidiary facing charges is none other than Huawei USA. Here, the Justice Department claims Huawei USA colluded with its parent company to obstruct the investigation into its alleged financial crimes by moving potential witnesses from the US to China.

https://www.businesswire.com/news/home/20190204005211/en/AKHAN-Statement-IP-Theft

CHICAGO--(BUSINESS WIRE)--AKHAN Semiconductor recently cooperated with a U.S. federal investigation into what appears to be a theft of its intellectual property by Huawei Technologies Co., Ltd. When AKHAN agreed to send its proprietary Miraj Diamond® technology to Huawei pursuant to an agreement, AKHAN expected that Huawei would abide by the agreement and its material would be returned unharmed. Unfortunately, AKHAN believes that Huawei destroyed our product, shipped it to China without authorization, subjected it to tests that it was not authorized to conduct, and returned most of it to us in pieces. We still have not recovered all of our product from Huawei, despite repeated written and oral requests and inquiries to Huawei.

https://www.bloomberg.com/news/features/2019-02-04/huawei-sting-offers-rare-glimpse-of-u-s-targeting-chinese-giant

 

February 4, 2019, 2:00 AM MST

 

The sample looked like an ordinary piece of glass, 4 inches square and transparent on both sides. It’d been packed like the precious specimen its inventor, Adam Khan, believed it to be—placed on wax paper, nestled in a tray lined with silicon gel, enclosed in a plastic case, surrounded by air bags, sealed in a cardboard box—and then sent for testing to a laboratory in San Diego owned by Huawei Technologies Co. But when the sample came back last August, months late and badly damaged, Khan knew something was terribly wrong. Was the Chinese company trying to steal his technology?

Like all inventors, Khan was paranoid about knockoffs. Even so, he was caught by surprise when Huawei, a potential customer, began to behave suspiciously after receiving the meticulously packed sample. Khan was more surprised when the U.S. Federal Bureau of Investigation drafted him and Akhan’s chief operations officer, Carl Shurboff, as participants in its investigation of Huawei. The FBI asked them to travel to Las Vegas and conduct a meeting with Huawei representatives at last month’s Consumer Electronics Show. Shurboff was outfitted with surveillance devices and recorded the conversation while a Bloomberg Businessweek reporter watched from safe distance.

This investigation, which hasn’t previously been made public, is separate from the recently announced grand jury indictments against Huawei. On Jan. 28, federal prosecutors in Brooklyn charged the company and its chief financial officer, Meng Wanzhou, with multiple counts of fraud and conspiracy. In a separate case, prosecutors in Seattle charged Huawei with theft of trade secrets, conspiracy, and obstruction of justice, claiming that one of its employees stole a part from a robot, known as Tappy, at a T-Mobile US Inc. facility in Bellevue, Wash. “These charges lay bare Huawei’s alleged blatant disregard for the laws of our country and standard global business practices,” Christopher Wray, the FBI director, said in a press release accompanying the Jan. 28 indictments.

Even then, before Trump’s trade war and the indictments, the Huawei name carried plenty of baggage. In 2002, Cisco Systems Inc. accused the company of stealing source code for its routers. Motorola said in a 2010 lawsuit that Huawei had successfully turned some of its Chinese-born employees into informants. And in 2012 the U.S. House Intelligence Committee labeled Huawei a national security threat and urged the government and American businesses not to buy its products. Huawei denied all the claims. The Cisco and Motorola lawsuits ended with settlements.

Since 2012, under pressure from the government, the major U.S. telecommunications companies have essentially blacklisted Huawei, refusing to carry its smartphones or use its equipment in their networks. But most of the world kept on buying from Huawei, choosing not to believe (or to ignore) the allegations that the company has consistently denied. At the same time, U.S. tech companies have remained free to sell parts to Huawei. Qualcomm Inc. is one of Huawei’s big suppliers. So are Micron Technology Inc. and Intel Corp.

So there was nothing out of the ordinary when an email from Huawei came to Akhan on Aug. 8, 2016. The sender was Angel Han, a Huawei engineer in San Diego. In email exchanges and calls that followed, Han conveyed a sense of urgency. In one email on Nov. 7, 2016, Han said Huawei was “actively looking for new technologies for our innovative product in this fast pace [sic] consumer electronics industry,” according to a copy reviewed by Businessweek. “Vendor’s capability to move fast and deliver is also crucial for us.” Reached on a mobile phone number that appeared on text messages exchanged with Akhan, a woman who identified herself as Angel Han denied knowing anyone at Akhan; then, when she was presented with specific details about interactions with Akhan, she said, “I can’t recall.” Then she hung up.

By February 2017, the two companies had a deal. Akhan would ship two samples of Miraj to Huawei in San Diego. According to a letter of intent, signed by both parties, Huawei promised to return any samples within 60 days and also to limit any tests it might perform to methods that wouldn’t cause damage. (The latter provision is standard in the industry and is designed to make it hard to reverse-engineer any intellectual property.) Shurboff noted in documents he sent to Han that Huawei had to comply with U.S. export laws, including provisions of the International Traffic in Arms Regulations, or ITAR, which govern the export of materials with defense applications. Diamond coatings are on the list because of their potential for use in laser weapons.

Khan and Shurboff decided early on that Akhan would license the first generation of its Miraj glass to a single handset maker, hoping the promise of exclusivity would give their startup some leverage. Huawei, Khan says, indicated it was eager to stay in the race, and on March 26, 2018, Akhan shipped an improved sample to Han. “We were very optimistic,” Khan says. “Having one of the top three smartphone manufacturers back you, at least on paper, is very attractive.”

[Randy W]

I THINK this may be the Bloomberg article you were referring to - I'll have to check it out tomorrow

 

 

Huawei Sting Offers Rare Glimpse of the U.S. Targeting a Chinese Giant

Diamond glass could make your phone’s screen nearly unbreakable—and its inventor says the FBI enlisted him after Huawei tried to steal his secrets.

[Allon]

https://www.bloomberg.com/news/features/2019-02-04/huawei-sting-offers-rare-glimpse-of-u-s-targeting-chinese-giant

 

Haha. I forgot to include the link for Bloomberg. Sorry. Thanks, Randy.

Edited February 6, 2019 by Allon
I was right! (same link) (see edit history)

[Randy W]

Because there's nothing like having your government behind you in these things . . .

 

from the SCMP

 

 

Beijing backs Huawei in legal fight against US for first time

• Foreign Minister Wang Yi calls on Chinese firms not to be victimised like ‘silent lambs’
• Chinese government will take ‘necessary measures’ to protect legal rights

 

“People can tell right and wrong, justice will prevail. What we are standing up for is not just the interest of a company but also a nation’s right to development, and by extension the basic right of all countries who wish to climb up the technology ladder,” Wang said.

“We hope all parties will follow rules, overcome prejudice, create a level playing field for all countries, and provide a safe environment for interactions for people of all nationalities,” he added.

 

 

[Randy W]

from the SCMP

 

Huawei’s US government lawsuit may lift the air of ‘mystery’ around the Chinese telecoms giant

• The US Congress has banned federal agencies from using equipment made by the Shenzhen-based firm due to national security concerns
• Professor He Weifang says the case ‘would be fantastic’ if it helped reveal details of Huawei’s ownership structure and relationship with the Chinese government

 

“It would be fantastic if the US judicial system could help to reveal Huawei’s ownership structure and its relationship with the Chinese government, which has remained mysterious to the Chinese public,” Peking University professor He Weifang told the South China Morning Post in what has now become a rare interview. “The US doesn’t conceal the judicial procedure from the public. The legal reasoning and adversary system in the United States is charming, the process of the case will be a great legal education to the Chinese public and its authority.”

 

 

[Allon]

Very, very interesting comment from a professor in China remarking on the US judicial system. I hope he does not suffer for his candor.

[Allon]

Huawei is in trouble now. Seems their network for the new 5G upgrade is defective. Bad code. "No end to end integrity." The British really criticized them. Others like the US say it opens their equipment to hacking by the Chinese government itself. Trouble is major networks across the world are going to install it.

 

The article is long but I cut it down a bit. Emphasis mine.

 

From NYTimes today:

 

https://www.nytimes.com/2019/03/28/technology/huawei-security-british-report.html?emc=edit_NN_p_20190328&nl=morning-briefing&nlid=87628746ion%3DwhatElse&section=whatElse&te=1

 

 

The British authorities are trying to differentiate Huawei’s security flaws from a broader effort by Beijing to infiltrate its networks. The report on Thursday described a company with poor engineering practices and problems stemming from those engineering flaws, more than one operating at the orders of Chinese authorities.

In the report, British officials determined that Huawei could not replicate much of the software it built, meaning that the authorities could not be sure what code was being introduced into the country’s wireless networks. They added that Huawei had poor oversight of suppliers that provided components for its products.

“There remains no end-to-end integrity,” the report said.

---

Since 2010, Britain has had an oversight board, now led by the National Cyber Security Center, tasked with overseeing Huawei’s operations. The company’s products and code are reviewed at a security lab about 70 miles outside London. In November, after British officials raised questions with Huawei about its practices, the company pledged to spend $2 billion over the next five years to improve its software and security processes.

The approach is seen as a potential model for other countries looking to add more safeguards over Huawei. Germany has opened a security lab in Bonn where Huawei’s equipment and code can be reviewed. The company has also opened a facility in Brussels to appease the concerns of European Union officials.

---

British officials have remained confident the Huawei risk can be managed. Ciaran Martin, the head of the National Cyber Security Center, said this year that an outright ban wasn’t necessary because the country had strong oversight and kept Huawei equipment outside the most sensitive areas of the country’s networks.

[Randy W]

from the SCMP

 

Canada pressures US to help resolve dispute with China over arrest of Huawei executive Meng Wanzhou

• In a sign of increasing frustration at what it sees as a lacklustre US response, Ottawa might withhold cooperation on major issues
• China has upped the pressure on Canada in recent weeks over the arrest of Meng

 

China has upped the pressure on Canada in recent weeks over the arrest of Huawei Technologies Co Ltd Chief Financial Officer Meng Wanzhou, arrested last December on a US warrant. It halted Canadian canola imports and last week suspended the permits of two major pork producers.

 

. . .

 

Beijing is refusing to allow a Canadian trade delegation to visit, forcing officials to use video conference calls as they try to negate a major threat to commodity exports.

With no cards to play against China without risking significant economic damage, Canada has launched a full-court press in Washington, which is negotiating its own trade deal with Beijing.

 

 

 

. . . and our friend gweilo60 weighs in on "little potato" (what he calls Justin Trudeau) - more than a little long-winded, but he makes some good points

 

 

 

[Randy W]

from the SCMP

 

Chinese cash fuels vast luxury car laundering scheme in Canada

• Report finds explosion in Canadian grey market worth US$410 million last year
• More than 4,000 fake buyers help China’s wealthy dodge sales taxes

 

 

“Due to the tax structure and soaring demand that exists for high-end cars in China, dealerships charge much higher prices in that marketplace than they do in North America,” the report said.

 

Under the scam, car dealers in British Columbia employed locally-based “straw buyers” to act as the purchasers of luxury vehicles, who then exported the cars to the true buyers in China.

By doing so, provincial sales taxes (PST) of up to 20 per cent on luxury cars were dodged by the straw buyers, because products purchased for resale are eligible for PST to be refunded. The dealers meanwhile thwarted manufacturer rules which ban them from selling directly to buyers in China.

The scheme is premised on the big difference between luxury car prices in China and Canada; for instance, a Lamborghini Aventador which costs about US$430,000 on the road in Vancouver costs more than US$1 million in China.

And the scheme has become enormous: there were 4,452 applications for PST refunds on cars in 2018, compared to fewer than 100 per year in 2013.

In the 2016-2017 financial year government finance staff identified 4,108 individual straw buyers, 1,000 of whom were linked to a single exporter. Although most such buyers were only involved in one or two transactions that year, 48 buyers made more than 11 exports each, and one buyer made more than 25.

 

[Randy W]

from the SCMP - Huawei phones sold internationally will be pretty much the same as what's sold in China

 

Google ‘suspends some business with Huawei in wake of Trump trade blacklist’

• Huawei will immediately lose access to updates to the Android operating system except those available through an open source license
• Next version of its smartphones outside China will also lose access to popular applications and services such as Gmail

 

 

 

The next version of its Android smartphones will also lose access to popular services including the Google Play Store and Gmail and YouTube apps.

“Huawei will only be able to use the public version of Android and will not be able to get access to proprietary apps and services from Google,” the source said.

 

 

[Randy W]

from the NY Times

 

U.S. Tech Suppliers, Including Google, Restrict Dealings With Huawei After Trump Order

 

 

 

The mass flight of American technology companies from Huawei, one of China’s proudest corporate champions, is a stark escalation in the high-tech battle that has simmered between the two powers for years.

China has long prevented many American internet giants from providing services within its borders, and it has placed tight strictures on how other American technology firms can operate. The enormous commercial potential of the Chinese market made it hard for the companies to put up much of a fight as Beijing declared, in effect, that their business interests were subservient to China’s national security interests.

Now, the United States government is showing that it, too, has ways of getting foreign companies to play by its rules in the name of upholding national security. Its asset is not a giant, untapped market for technology products, but the technology itself — the know-how and capabilities without which Huawei would not have achieved so much of its success.

“We have made substantial contributions to the development and growth of Android around the world,” Huawei said in a statement about Google’s pullback. “As one of Android’s key global partners, we have worked closely with their open-source platform to develop an ecosystem that has benefited both users and the industry.”

 

 

[Randy W]

from the NY Times

 

U.S. Tech Suppliers, Including Google, Restrict Dealings With Huawei After Trump Order

 

 

 

The mass flight of American technology companies from Huawei, one of China’s proudest corporate champions, is a stark escalation in the high-tech battle that has simmered between the two powers for years.

China has long prevented many American internet giants from providing services within its borders, and it has placed tight strictures on how other American technology firms can operate. The enormous commercial potential of the Chinese market made it hard for the companies to put up much of a fight as Beijing declared, in effect, that their business interests were subservient to China’s national security interests.

Now, the United States government is showing that it, too, has ways of getting foreign companies to play by its rules in the name of upholding national security. Its asset is not a giant, untapped market for technology products, but the technology itself — the know-how and capabilities without which Huawei would not have achieved so much of its success.

“We have made substantial contributions to the development and growth of Android around the world,” Huawei said in a statement about Google’s pullback. “As one of Android’s key global partners, we have worked closely with their open-source platform to develop an ecosystem that has benefited both users and the industry.”

 

 

[Allon]

This will be very interesting. Google will not be able to sustain this boycott for a long time. They will lose money and steam in other areas of the China market, even Asia in general. The implications with the 5G development will be quite challenging indeed. Meanwhile, the markets will be volatile and investors will get a bit anxious. But so far, I bet with Google and the others.