What Business History Has to Say about Huawei, Geopolitical Jockeying, and the Battle to Sell Americans 5G Equipment

16 05 2019

In this blog post, I’m going to show how the research of two business historians is relevant to understanding the ongoing controversy about Huawei. The Chinese company Huawei is in the news again, thanks to Donald Trump signing a presidential order that declared that Chinese exports of telecoms equipment to the United States constitute both a national security threat and a national “emergency.” Given that Trump previously labelled Canadian and European steel exports to the U.S. a threat to national security, it is not surprising that the justification for the U.S. government’s attack on Huawei is not being taken seriously. As the BBC reported this morning, Trump’s executive order is “widely seen” as an attack on Huawei, a firm whose 5G products are competing with those of two European manufacturers, Ericsson and Nokia, and Samsung, a South Korean firm. For this interpretation of Trump’s executive order, see here, here, and here.

The French president, Macron, has rightly called Trump’s attitude to the Chinese firm “overprotectionism”. Many experts who have compared the Huawei’s products with those of its non-Chinese rivals have concluded that  Huawei’s equipment is smaller, more cost effective, and more energy efficient than equivalent products from its competitors, which implies that the U.S. consumers will lose out from the ban on Huawei products.

The immediate winners of Trump’s move would appear to be the U.S. subsidiaries of Ericsson, Samsung, and Nokia. As of yet, there is no direct evidence that any of these companies were involved in making Americans concerned about  Huawei. There’s no proof that these companies paid U.S. journalists or Congressmen to adopt anti-China, anti- Huawei stances, but that’s not unthinkable. I would note that when Borje Ekholm, the CEO of Ericsson, was asked about Trump’s executive order, he was remarkably restrained and did not join in the Huawei-bashing.  However, there is rising Sinophobia in the U.S. and that’s good news, at least in the short term, for the shareholders of Ericsson, Samsung, and Nokia, Huawei’s rivals, as well as for domestic U.S. firms competing with Chinese imports.(The US doesn’t have any companies that make 5G equipment).

 

This episode is certainly not the first historical instance of third-country firms benefitting from rising tensions between two countries. In the early twentieth century, the emergence of the movement for independent in India prompted many Indian firms and consumers to shun British-made goods. As the business historians Christina Lubinski and  Dan Wadhwani  discuss this dynamic in their new SMJ paper “Geopolitical jockeying: Economic nationalism and multinational strategy in historical perspective”. Their paper introduces the concept of “geopolitical jockeying” which is when a multinational firm attempts to delegitimize rival multinationals and position themselves as complementary to the economic and political goals of the host nation. I know that many business historians will tend to view the Huawei with relation to the wider trade war between the United States and China and the literature on the history of trade wars However, in thinking about the Huawei saga, I find it more useful to use the concept of  geopolitical jockeying.