State Support Helped Fuel Huawei’s Global Rise

https://www.wsj.com/articles/state-support-helped-fuel-huaweis-global-rise-11577280736

by jimmy2020 • 7 years ago

75 83 7 years ago

jimmy20208• 7 years ago

A Wall Street Journal review of Huawei’s grants, credit facilities, tax breaks and other forms of financial assistance details for the first time how Huawei had access to as much as $75 billion in state support as it grew from a little-known vendor of phone switches to the world’s largest telecom-equipment company—helping Huawei offer generous financing terms and undercut rivals’ prices by some 30%, analysts and customers say.

bjornjaja• 7 years ago

Someone’s gotta put up the great surveillance blanket of China

deforciant• 7 years ago

In my first real IT job we were buying and installing networking equipment for phones, internet in one big government project. It was hard to not choose Huawei when comparing to Ericsson, they completely copied their equipment, even the Ericsson manuals would suit Huawei while the price was 10x lower. Obviously since it was a public tender Huawei won, it did feel wrong though.

10001115• 7 years ago

The obvious lesson for any Western state is to formally protect its critical industries. Of course, some brain damaged opposite lesson will be taken, such as 'China must liberalize'; good luck with that gents, LOL.

taeric• 7 years ago

Isn't that predicated on them having a lasting presence? That burning money can propel someone to the top seems given. Keeping them there, though?

Granted, I would think some market protections would also make sense.

jimmy20208• 7 years ago

that's not how things work in free markets. Not even during the cold war.

sct2022• 7 years ago

But should America for example support Nokia and Ericsson which are not American. Most of the major American telecom equipment companies were sold off to European companies after the telecom bubble burst.

Al-Khwarizmi• 7 years ago

US: "You must embrace the free market, open the markets, liberalize everything, avoid protectionism. It's better for you because it's more efficient, you will be richer, blah blah."

Western countries: "OK."

China: applies protectionism, obtains unprecedented growth, steamrolls markets

US, Western countries: "Free market is obviously much better, protectionism and planned economies are inefficient and can't work, but... but... they're cheating!"

At least the US acts in their own interest (anarchy, i.e. the free market, makes sense if you're the strongest). What's pathetic is that European countries believe all the neoliberal dogmatic BS when we don't even benefit from it.

rjzzleep• 7 years ago

It's pretty much this. Except that the US seems to try backdoor subsidies, which isn't really addressing the core issue. There was a pretty good analysis of the whole thing about exactly this issue but I just can't remember where it was.

I used to see the Ericsson guys once a year and they seemed to be pretty busy bragging about all the new 5G patents they have.

https://www.sdxcentral.com/articles/news/us-eyes-nokia-erics...

utopian3• 7 years ago

Agreed. Does Ericsson have a comparable 5G offering? I’m wondering why I never see their name come up when articles are written about avoiding Hauwei

jimmy20208• 7 years ago

That's the whole point of state support. In the end, you will have a winner that being able not only to copy the technology but also have enough capital to create new one. Which is why Huawei is shining in 5G technologies.

mechhacker• 7 years ago

There have been many instances of tech like this going through the same cycle where they copy tech after some period of cooperation.

A lot of the execs in various companies downplay this concern, say "it's not going to happen this time" and then dip out with 7 figure bonuses before it happens again, this time. The majority of the people doing actually work seem to see right through it.

adventured• 7 years ago

https://outline.com/UGYFJ3

uyuioi• 7 years ago

As if state support didn’t build any American based tech\data company

10001115• 7 years ago

When US still supported its non-welfare industries (and allowed smoking) they put a man to the moon.

Retric2• 7 years ago

We are talking about 75 billion for a single company, not just any support for any tech company. It’s scale that makes it interesting, like comparing a bottle rocket vs a manned spaceship.

est31• 7 years ago

The US spends $1 trillion on defense each year. A large component of that money is fuelling the military industrial complex, basically suppoort for the domestic industry. And it isn't just limited to the "classical" military companies. Look up how the CIA helped Oracle.

geofft2• 7 years ago

Lockheed Martin had $51 billion in government contracts in 2017 alone. Their total revenue that year was a whole $54 billion. This article is complaining about Huawei getting $75 billion over many years.

cdmckay• 7 years ago

It’s also a bit different when you’re catching up due to interference/imperialism by foreign countries (like the US) in your country’s affairs from the past 100+ years.

Why wouldn’t the state help develop its industries?

throwaway2048• 7 years ago

China was very much in a similar situation pre-WW2, significantly worse infact.

kiba• 7 years ago

Just because somebody practiced imperialism against you in the past doesn't make you free from moral responsibility.

grecy• 7 years ago

What you said is 100% true, but of course you're getting down voted because China=bad and America=good.

People don't seem to realize the USA has poured billions of dollars into Boeing, Hewlett-Packard Company, Honeywell, GE, IBM, etc. etc

Those companies wouldn't have nearly the global presence they do if the government contracts hadn't paid for billions in R&D over the decades.

Full list here: https://en.wikipedia.org/wiki/Top_100_Contractors_of_the_U.S...

dang• 7 years ago

Please keep the swipes about downvotes out of your HN comments. Those break the site guidelines. They also usually end up being wrong. In this case, the GP has been heavily upvoted, but your comment lingers on adding wrong information and noise to the thread.

https://news.ycombinator.com/newsguidelines.html

Bostonian• 7 years ago

If a foreign government subsidizes a company that "dumps" its products at low costs on our markets, I think we should pocket the gift and focus on other industries. The overall benefit to consumers outweighs the loss to the affected domestic industry.

"In 1962, Milton Friedman made the case for unilateral free trade as the best and fastest path to economic prosperity" https://www.aei.org/carpe-diem/in-1962-milton-friedman-made-...

NeedMoreTea• 7 years ago

Of course he did. All nations make the case for free trade after they have arrived, to pull away the ladder they used to get there.

See Bad Samaritans: The Myth of Free Trade and Secret History of Capitalism by Ha Joon Chang. Highly recommended read.

https://en.wikipedia.org/wiki/Bad_Samaritans:_The_Myth_of_Fr...

mechnesium• 7 years ago

My industry forbids purchase of Chinese hardware (Lenovo, Huawei, ZTE, etc.) over security concerns. China has targeted various organizations in my industry and this hardware opens the back door wide open for them.

jimmy20208• 7 years ago

legit concerns:

https://www.bloomberg.com/news/features/2018-10-04/the-big-h...

saagarjha3• 7 years ago

That article is likely false.

thecleaner• 7 years ago

I don't understand why this is written in a complaining or condescending tone. I think it is true for any state that manufacturing be provided protection especially in its infancy. One great thing which China did was to protect their infant industry while simultaneously weeding out non-performers based on global competitiveness. This kind of discipline is really important to build up the skills required to become globally competitive. I think it is better to have regulated free trade first and then open markets once you are competitive. This IMF doctrine on open your freaking markets it is awesome is very stupid. Africa has completely open textile markets, that didn't really work out very well for them.

10001115• 7 years ago

I don't understand why this is written in a complaining or condescending tone. As per liberal understanding of history and progress, China was supposed to 'open up'(the silent part: to be open for exploitation by West). China was not supposed to become global techno-military challenger against Trans-Atlantic alliance. Oops, they did.

Spooky23• 7 years ago

That was a white lie to justify the strategic necessity and short term macroeconomic benefit of opening China.

The West didn’t have a choice. A chaotic, desperately poor, nuclear armed Chinese state was a wildcard that wasn’t sustainable, which is why Nixon and Kissinger opened the door.

Everything since then has been a great money grab. The price of peace has been selling off everything and shifting the “axis” of power east.

corporate_shi112• 7 years ago

"exploitation"... I guess you consider trade and mutual investment "exploitation". China's integration into the global system was both for their benefit and our benefit.

jimmy20208• 7 years ago

Sure, when the company is basically free of government leverage. Or, when the country itself not seeking building entire empire using the economy-based influence. This has to be viewed in wide angle. What a communist party is doing is far from strengthen local company to be competitive globally. It's simulating the soviet model using free market as blanket.

sct2022• 7 years ago

Are there any good articles on how they were making the SOE's compete against each other. It seems like every province seems to prop it's own competing SOE in certain industries, but I always wondered if they act together or if they compete against each other.

pm905• 7 years ago

They compete against each other. It’s a good question as to how they evaluate different SOEs. I would imagine monitoring for discrepancies in metrics is easier with modern technology so you can’t fudge metrics easily but IDK.

rdlecler12• 7 years ago

China did exactly what they should have done for their own self interest. However that self interest is not in the best interest of the US and western democracy.

imraj96• 7 years ago

This!!!

Every advanced economy in the world (UK,US,Germany,Japan, NorthEast Asian Countries etc) at one point or the other protected and supported it's industry at infancy till they became globally competitive.

Economic historian Paul Bairoch dubbed the United States ‘the mother country and bastion of modern protectionism’

Why shouldn't China support and protect it's industries?

As a Nigerian living in Nigeria. It's sad to see how a lot of sub-sahara africa countries take certain actions that hurts them in the name of free trade.

naruvimama• 7 years ago

Ericsson is a dominant player in the standards committee. By making patents that it own a part of the standard, it is able to "compulsorily" license its patents. Through this route it now owns a lot of "essential patents".

So every time you make a call, or buy a phone you pay Ericsson a royalty. Ideally these patents like those backing web technologies should be open. Or at the very least expire after a limited time because it is globally enforced by a cartel.

Ericsson has a lot of R&D labs in the western world working on core technology related to essential patents. But do not do much outside, strangely not even in India or China, which not only has a large pool of engineers but also contribute substantially to the royalty.

It was only a matter of time before the Chinese figured this out. Wireless communication R&D unlike semiconductor is mostly done through computer simulations and experiments with off the shelf equipment and does not require enormous upfront cost.

The genius of Huawei and the hand of China was not in subsidy but the captive market. Huawei was refused entry into the standards club, and China threatened to go with its own standard. This I believe started as early as with 3G standards.

Neither "standardization by a cartel" nor "compulsory licensing" is Free market. MS bundling IE with Windows is just peanuts in comparison. Entire nations have no choice but to pay to this cartel.

pm905• 7 years ago

Low cost Chinese equipment and technology was what has allowed eg India (and many other countries Im sure) to build up the telecom infrastructure and make cellphones available to the masses at extremely low costs. The economic and social effects of this are simply staggering. I was around when cellphones started being ubiquitous: many families never had a landline jumped directly to using cellphones. It was amazing.

downrightmike• 7 years ago

Those last to modernize will be the most modern. Skipping whole generations of tech for the newest.

foob4r• 7 years ago

60 of America's biggest companies paid no federal income tax in 2018 - https://www.cbsnews.com/news/2018-taxes-some-of-americas-big...

"Just the 20 companies in our study reported in excess of $175 billion in total deferred tax liabilities at the end of 2013. They do not pay any interest to the government on this amount, even if it takes 20 years to pay it." - https://www.usnews.com/opinion/economic-intelligence/2014/08...

lettergram2• 7 years ago

Deferred taxes are different than receiving funds from government. In Huawei’s case, they also received stolen IP and granted a monopoly in certain areas.

I think it’s fair to say that’s “state support”.

Tax deferment is not “support” rather just not burdening the companies directly.

chishaku2• 7 years ago

Subsidies and preferential tax treatment are textbook methods of state support for enterprise.

This is acknowledged in the article with literally the first sentence.

China’s tech champion got as much as $75 billion in tax breaks...

edit:

In any case, state support for American businesses goes way beyond preferential tax treatment.

Boeing, TBTF bank bailouts, farm subsidies and bailouts, wars to open up foreign markets, the list goes on for centuries...

geofft2• 7 years ago

How dare China, a communist government, give a private company billions of dollars in tax breaks? Here in America, where we value free markets and democracy, we always tax our companies heavily, at the tax rate that Nature demands.

This is why we can't let communism come to America - the Reds just want to lower our corporate tax rates.

just_steve_h• 7 years ago

Do any of the folks writing these articles know anything about ARPA (now DARPA) and the US government's foundational role in funding the development of technologies like radar, transistors, microchips, the Internet...?

Honestly, the United States scolding China's state support for their domestic tech manufacturer is about as ridiculous as a nation founded upon human slavery lecturing the world about human rights!

...

What?

10001115• 7 years ago

State Department fighting for Muslim rights in China while CIA drone operators bomb them in Middle East is true schizo-politics.

intosh• 7 years ago

The state has always been a major contributor the long term major tech innovation and evolution.

Private enterprise contributes to the “last mile” but grabs all of recognition. AI is the latest example of this. The Googles and Facebooks of this world have been hoarding AI researchers and experts who have been working on AI for the last 30+ years thanks to public money.

The US DoE invested in Tesla Motors when not a single private investor dared to touch it.

But the masses are not only too ignorant to recognize the state’s major role and contribution, they religiously believe private enterprise alone made it all possible and that the state is a roadblock.

State Support Helped Fuel Huawei’s Global Rise

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