To fight Huawei, US government may invest in private telecoms

United States Attorney General William Barr said on Thursday that the US and its allies should consider the highly unusual step of taking a “controlling stake” in Finland’s Nokia and Sweden’s Ericsson to counter China-based Huawei’s dominance in next-generation 5G wireless technology.

His statement underscores how far the US may be willing to go to counter Huawei Technologies Co. Barr disclosed in a speech at a conference on Chinese economic espionage that there had been proposals to meet those concerns “by the United States aligning itself with Nokia and/or Ericsson”.

Barr said the alignment could take place “through American ownership of a controlling stake, either directly or through a consortium of private American and allied companies”.

“Putting our large market and financial muscle behind one or both of these firms would make it a far more formidable competitor and eliminate concerns over its staying power, or their staying power,” Barr said.

“We and our closest allies certainly need to be actively considering this approach,” he added at the event, which was hosted by Washington’s Center for Strategic and International Studies (CSIS).

Both Nokia and Ericsson have a combined market capitalisation of about $50bn and it is not clear what source of funds the US government could potentially tap to take stakes in the firms or if foreign regulators would approve the move.

Ericsson declined to comment, while Nokia did not immediately comment. The companies’ shares edged higher in European trading after Barr’s comments.

Last month, a group of six US senators introduced legislation to provide over $1bn to invest in Western-based alternatives to Chinese equipment providers Huawei and ZTE and accelerate the development of open-architecture systems to allow for alternative vendors to enter the market for specific network components.

Barr said China had emerged as the “top geopolitical adversary” and added: “China has stolen a march and is now leading in 5G … They have already captured 40 percent of the market and are now aggressively pursuing the balance.”

US government investments in public companies are rare except in the case of bailouts to save ailing firms and jobs, and such investments in foreign companies are even rarer.

US officials have criticised Huawei for its close ties to the Chinese government, and they added the company to an economic blacklist last year, saying it was involved in activities contrary to US national security. The administration of US President Donald Trump has pressed nations not to grant Huawei access to 5G networks and alleged Huawei’s equipment could be used by Beijing for spying, which the Chinese company has repeatedly denied.

Trump signed an executive order last year barring US companies from using telecommunications equipment made by companies posing a national security risk.

FBI Investigating 1,000 Chinese firms

At the same CSIS event, Federal Bureau of Investigation Director Christopher Wray said Beijing was seeking to steal US technology by “any means necessary”.

He said the bureau currently had about 1,000 open investigations of Chinese technology theft across its 56 regional offices, while FBI counterintelligence chief John Brown said it had arrested 24 people last year in China-related cases and another 19 already in 2020.

Wray said the investigations spanned “just about every industry sector” and the threat needed to be addressed through action across the whole US government.

China was aggressively exploiting US academic openness to steal technology, using “campus proxies” and establishing “institutes on our campuses”, Wray added.

William Evanina, director of the US National Counterintelligence and Security Center, said that among China’s priorities was stealing US aircraft and electric vehicle technology.

In advance of Thursday’s event, Evanina estimated the theft of US trade secrets by China costs the US “anywhere from $300bn to $600bn” a year.

The comments from the top law enforcement officials reflect an aggressively stepped-up campaign by the Trump administration to counter Chinese espionage operations.

This has snared a growing group of Chinese government officials, business people and academics. The campaign has included charges against a leading US academic at one of the top US universities. Last month, prosecutors charged Charles Lieber, chair of Harvard University’s Department of Chemistry and Chemical Biology, with lying about participating in China’s Thousand Talents Plan, which aims to attract research specialists working overseas.

The Chinese embassy in Washington earlier rejected the US allegations as “entirely baseless”.

“People-to-people exchange between China and the US is conducive to stronger understanding between the two peoples and serves the fundamental interests of our two countries,” it said.