LONDON — When new employees join Huawei, they are given books about the Chinese telecommunications company’s achievements. One featured accomplishment is how the company has thrived in Europe.
A chapter in one of the books describes the hard work of Huawei employees to win over European telecom providers and sell them equipment that forms the backbone of mobile wireless networks. It says little about how the company has also subtly lobbied, promised jobs and made research investments to ingratiate itself with European governments over the last 15 years.
In Britain, for example, Huawei set up a special corporate board, led by John Browne, a former chief executive of the oil giant BP. It donated to schools, including Cambridge University; held parties for political leaders; and sponsored prominent charities such as the Prince’s Trust, founded by Prince Charles. In Germany, Huawei opened facilities to conduct research on new innovations and sponsored events, including the recent convention of Germany’s governing Christian Democratic Union party.
European governments have been welcoming. Last year, after Huawei announced a five-year commitment to spend 3 billion pounds, or about $3.8 billion, to expand in Britain, where the company employs 1,500 workers, Prime Minister Theresa May met in Beijing with Sun Yafang, Huawei’s chairwoman. Chancellor Angela Merkel of Germany posed for pictures at the company’s booth at a trade show last year.
Yet despite the careful cultivation, Huawei’s position in Europe is now at risk of unraveling. The United States has moved to restrict the use of Chinese technology because of concerns that it is being used for espionage. Last month, the American authorities asked Canada to detain a Huawei executive, who is the daughter of the company’s founder, on charges of committing bank fraud to help the company’s business in Iran. And federal prosecutors in Seattle are also investigating Huawei for intellectual property theft.
The fallout is growing across Europe, which has become Huawei’s biggest market outside China, foreshadowing what the company faces in the rest of the world. This month, one of its employees was arrested in Poland and charged with espionage.
Officials in Germany, France and the Czech Republic are now among those considering restricting Huawei from the next-generation wireless networks, known as 5G. The head of Britain’s intelligence service, MI6, has raised alarms about using Chinese networking technology. European carriers, including Deutsche Telekom, are reassessing their use of Huawei. And on Thursday, Oxford University announced that it would suspend donations and scholarships from Huawei.
“Until there were red flags on security risks, it was smooth sailing for them in Europe,” Thorsten Benner, a founder and director of the Global Public Policy Institute, a policy think tank in Berlin, said of Huawei. “The movement that you’ve seen over the past three months is all in one direction: to find regulatory measures to curtail the use of Chinese equipment in Europe.”
Heli Tiirmaa-Klaar, an Estonian diplomat involved in cybersecurity discussions with American and European officials about Huawei, said Europe was shifting on Huawei because of suspicions about China rather than specific actions by the company. She highlighted China’s history of hacking and stealing trade secrets, its poor record on human rights and internet censorship, and Chinese cybersecurity rules that could require network operators to defend national security interests.
“The Chinese are increasingly departing from the common vision that we’ve had at the U.N. level about what are cybernorms and how we follow international law in cyberspace,” she said. “They have no willingness to play along in this space.”
Huawei (pronounced “HWA-way”) has steadfastly denied wrongdoing. In a statement, the company said it had “established strong relations with customers, suppliers and governments across Europe, where cybersecurity has been our top priority.” It added that its growth in Europe was the result of its strong track record, not lobbying. Interacting with government officials is common among large corporations, Huawei said.
For European countries, disentangling from Huawei won’t be easy. Its equipment is a crucial part of wireless infrastructure in Europe, and the company has spent hundreds of millions of dollars on 5G research, opening testing hubs in Britain, Germany and Poland. The company has said countries that ban Huawei, such as the United States, risk delaying construction of the new hyperfast network.
Huawei, based in Shenzhen, China, entered Europe in 2001 but struggled to gain a foothold. It kept pushing because it wanted to expand internationally. The European market became even more important after the company was mostly shut out of the United States in 2012 over security concerns.
At one point in 2004, Huawei was so eager to woo European customers that it outfitted a shipping container with its wireless equipment and parked it in front of the headquarters of phone carriers in Germany. The marketing stunt was intended to get employees of those carriers to stop and look.
“A lot of them said, ‘Who are you?’” said Stefan Scheuerle, a former Huawei sales manager in Europe who is now chief revenue officer at Sensorberg, a German tech company.
In a breakthrough, Huawei struck a deal to provide equipment to BT Group, the British telecom giant, in 2005. To prepare its bid for the BT project, Huawei moved about 100 Chinese workers to hastily rented apartments outside London, according to “Growing Up in a Hail of Gunfire,” a collection of essays used as training material for new hires. The employees often worked until 3 or 4 a.m., and because they didn’t have credit cards, they had to use wads of cash to buy groceries.
In 2005, Huawei also secured a deal with the European carrier Vodafone to sell about $1 million of gear. Even so, Mr. Scheuerle said, he was quickly given a new goal: Sell Vodafone $1 billion of equipment within three years. Huawei soon opened an office within steps of Vodafone’s complex in Düsseldorf, Germany.
“When I left less than three years later, we were at $850 million — we were almost there,” Mr. Scheuerle said.
Huawei moved other employees from China to help in Europe, and hired many non-Chinese employees. It was a jarring cultural change for newcomers unfamiliar with Huawei’s blunt management style; Mr. Scheuerle said staff emails criticized people by name for unsatisfactory work.
Mr. Scheuerle held workshops for new employees to help them adapt to the company. He advised them to befriend Chinese colleagues with better knowledge of what was happening at Huawei headquarters in Shenzhen.
Today, 12,000 of Huawei’s 180,000 employees are in Europe, up from 7,300 in 2013. The company has vowed to hire nearly 3,000 more by next year. In 2017, it earned more than $20 billion in revenue in Europe, the Middle East and Africa, roughly a quarter of its total business.
Even when American officials warned allies of Huawei’s risks, the company largely deflected the concerns. It opened a testing center where British officials inspected its products. It opened 23 research and development facilities in 14 European countries, and supported work at more than 150 universities. The company also hosts government officials and business leaders from Europe at its Shenzhen headquarters.
In 2011, Huawei created the board to oversee operations in Britain. In reality, the group has a limited view of Huawei’s inner workings and few responsibilities beyond quarterly meetings and attending some corporate events such as annual summer and winter parties, two people familiar with its activities said.
Huawei said the board had legal responsibilities of directors overseeing compliance with laws, health and safety, and potential abuses of power.
Now, as criticism mounts, Huawei is meeting with customers and government officials to assuage concerns. This includes allowing German officials to inspect its engineering and code.
Next month at the mobile tech conference MWC Barcelona, formerly the Mobile World Congress, Huawei plans to announce new handsets and provide an update of its 5G plans. A new advertising campaign is also in the works, the company said.
Orignially published in NYT.