Meng Wanzhou, daughter of Huawei’s founder and CEO Ren Zhengfei, has finally returned to China, but Huawei is a very different company from when she left.
Photo from CFP
By LU Keyan, PENG Xin
MENG Wanzhou, daughter of Huawei’s founder and CEO REN Zhengfei and chief financial officer of the company, was released on September 24 after being illegally detained for nearly three years in Canada. She was arrested in December 2018 on charges of wire fraud related to Huawei’s business dealings in Iran. While the extradition request moved through Canadian courts, the case has become a symbol of US-China tensions. Under an agreement with the US Department of Justice, prosecutors will terminate extradition proceedings and defer the charges against her.
Meng landed in Shenzhen on Saturday.
Meng was accused, among other charges, of concealing Huawei’s transactions with Iran from banks. The Foreign Ministry spokesperson HUA Chunying called the indictments “an incident of political persecution” and “an act designed to hobble Chinese high-tech companies.” HSBC, one of the banks involved, has disclosed materials that are sufficient to prove Meng's innocence, she said, thus the detention was arbitrary and unjust.
It was clear from the very beginning that the case was not simply about wire fraud. Shortly after Meng’s arrest, several countries including the UK and Australia banned Huawei from their telecommunication networks. In 2018, two US senators pressed Canada to exclude Huawei from its 5G development.
US prosecutors had been trying to extradite Meng from Canada since January 2019. Meng’s lawyers maintained that the alleged misrepresentation does not constitute a criminal offense. They also argued that the US allegations did not meet the test of “double criminality” in the Canadian legal system, since the alleged wrongdoings were not against the law in Canada.
A judge approved Meng’s deferred prosecution agreement with the US Department of Justice on September 24. The charges will be dropped in December 2022 provided that she adheres to the agreement’s terms.
Huawei is a very different company from three years ago. In May 2019, it was added to the US sanction list, which prohibited American companies from selling components and software to Huawei without US government approval. The restrictions became even harsher a year later, which essentially barred Huawei from buying chips from any company that uses US software and technology.
The sanctions dealt a hard blow to Huawei’s smartphone business. In its push to be self-reliant, Huawei developed and launched its self-developed Android alternative called Harmony OS. But it proved much more difficult to find a substitute for the Kirin chips that powered its high-end smartphones.
Supply chain constraints forced Huawei to sell its budget smartphone line Honor so that Honor would continue to have access to key parts. The spin-off launched its first device in January 2021. ZHAO Ming, the CEO, said in the release conference that Honor has established relationships with important foreign suppliers including Qualcomm and that the brand will gradually pivot to the mid-to-high-end market.
Huawei has made it clear that it doesn’t wish to part with its flagship brands despite rumors of potential sales, but a solution to the chip shortage is yet to be found. XU Zhijun, a Huawei executive, admitted that the company faced “tremendous challenges” and that it might be “another few years before Huawei smartphones return to the market.
The future of Huawei’s non-smartphone businesses is unclear. Several countries have banned Huawei from their 5G networks on national security grounds. Its server business, which had made up a fourth of the company’s total income before the sanctions, has also been severely affected by the chip shortage.
In H1 2021, Huawei’s income fell 29 percent year over year. With smartphone sales kneecapped, consumer business halved. In the search for new growth opportunities, Huawei has been exploring various fronts such as IoT and even cars. But the priority is still to overcome the supply chain bottlenecks.