Huawei: The Big Picture

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get 20% off the annual subscription. September 9th, 1976. The day, Mao Zedong died, three decades after
founding the People’s Republic of China. Few countries are so easily divided into two
distinct eras. With his death, the economic walls around
the Red Dragon slowly fell, allowing the largest population on earth access to the world economy. In 1978, there were, essentially zero private
companies. All were state-owned, with only a tiny 140,000
people, or 0.01% of its population, employed privately. Just three years later, thanks to Mao’s
successor, Deng Xiaoping, that number was already 16 times higher. China in the ‘80s and ‘90s was the golden
opportunity to start a company. Big, inefficient state-owned corporations
had left huge gaps in the economy, people were moving to the city, finally, with money
to spend, and the government was eager to encourage enterprise. Which is to say, Ren Zhengfei couldn’t have
picked a better time than 1987 to start his company, called Huawei! A few years later, it won a contract with
the People’s Liberation Army, which, although small in financial terms, was huge for winning
favor with the Communist Party, who then protected the company from competition. With this help, Huawei became, today, the
2nd largest phone company in the world, just ahead of Apple, and behind only Samsung. Up until just a few months ago, it was expected
to pass Samsung to become number one, lead the world in the spread of 5G and gain even
more market share than its current 29% of all telecommunications equipment on earth. Then, with one, swift signature, Huawei was
banned. Not only does this stop the company from selling
equipment in the U.S., but all Huawei products, everywhere are banned from working with American
companies, who supply Huawei with components like Intel chips, and software like the Google
Play Store. So, is Huawei, as the United States claims,
a real threat to national security? A trojan horse for the Chinese government? Or is the ban merely political? The problem with most answers to these questions
is that they focus only on the technology, the politics, or China. But to really understand Huawei, you have
to marry all three. Who really owns a company? It’s a pretty reasonable question and should
have a pretty simple answer. You don’t usually need to go around reading
Articles of Incorporation, just some common sense. A few decent clues are whoever’s office
is on the 100th floor, or, maybe, whoever’s business card is most expensive. But not always. Because, of course, the structure of a company
is not designed for our legibility, but, rather, to make more money or limit somebody’s power. So, you see lots of weird subsidiaries, holding
companies without employees based in the Virgin Islands, deliberately confusing names, and
dual-class shares. Things can get… weird. Take John, for example, of Papa fame, who,
facing public pressure, resigned as the company chairman. A few weeks later, John decided actually,
he’d like to return to his pizza Papa position. The board said, “Yeeeah… Hard pass!” and changed the company’s
bylaws to block their own largest shareholder from taking over the company he founded. He then sued his own company. One time, a pharmaceutical company called
Rockwell Medical split into two legal corporations, each claiming to be the real, legitimate Rockwell
Medical Incorporated with the same address and same shareholders, leaving everyone wondering,
who’s the real pope? The point is, it’s actually not that simple
of a question. And, that’s before you add the whole Socialism
twist. If you do ask Huawei who owns the company,
they’ll happily take you to a special room in their Shenzhen headquarters, where a giant
blue book, because little and red were taken, sits behind glass. Exactly the way you’d expect a multi-billion
dollar tech company to keep its records. In it, Huawei says, is a list of every person
who owns shares in the company. And, as they’ll enthusiastically assure
you, none of these people are the Chinese government. Case… not closed, obviously. Here’s what we know: Huawei Technology LLC is 100% owned by a holding
company called Huawei Investment & Holding, which is itself owned by two parties: Huawei’s CEO owns about 1%, and the rest,
the Union of Huawei Investment & Holding. It says this is only for legal reasons, and,
I’ll remind you, convoluted ownership structures aren’t at all unusual. For all practical purposes, Huawei claims,
the company is owned by its employees – the names in the blue book – who own stock in
the company. But, again, it’s not so simple. What Huawei calls stock is, actually, apologizes
in advance to non-business majors, Synthetic Equity, or, for maximum, put-it-in-the-parking-lot,
synergize, circle-back jargon-points, Restricted Phantom Shares. OoOooOoo… Phantom… spooky sounding! It’s a lot like regular equity – shareholders,
in this case, Huawei employees, receive a share of the company’s profits – a dividend. They stand to make money, so they’re incentivized
to add value to the company. Except it’s “synthetic” – as in not
totally… real. It can’t be sold or transferred, doesn’t
give much say in the operations of the company, and, if an employee, for any reason, leaves
the company, he or she must also sell back their shares. As two American researchers summarize “…this
virtual stock ownership has nothing to do with financing or control. It is purely a profit-sharing incentive scheme.” When we ask the question “Who owns Huawei?”,
what we’re really asking is who, if they really wanted the company to do something,
like, say, spy on foreign countries, has the power to do so. The answer, it seems, is the union, who owns
the holding company, who owns the company. So, who controls the union? This time the answer is much easier: Under
Chinese labor law, Unions are subject to their superior branch – local Unions answer to provincial
unions, all the way up through a winding python of hierarchy, ending at the chairman of the
All-China Federation of Trade Unions, who also sits on the National People’s Congress. Unions in China are, therefore, largely an
extension of the Communist Party. Now, you’d be right to point out that this
alone shouldn’t be enough to ban an entire company from doing business with an entire
country. After all, this logic applies to many Chinese
companies, not just Huawei. It would be ridiculous to ban all of them. To that, defenders of the ban would say, But
Huawei is no ordinary company; it has a long history of alleged misbehavior. It’s CFO was, quite prominently, arrested
in Canada on the grounds of violating US sanctions on Iran. Cisco accused the company of copying their
manuals after finding the same typos in Huawei’s, which its CEO said was just a coincidence. The CIA also claims it has evidence that Huawei
has taken money from Chinese intelligence services. And finally, in 2012, China gave the African
Union a new $200 million headquarters in Ethiopia. Then, last year, a French newspaper quoted
anonymous technicians in the building who claimed they caught Huawei equipment copying
and sending data to servers in Shanghai – which China and the African Union officially deny. On one hand, there’s a lot of smoke here,
on the other, there’s also a lot of people who have a strong interest in you believing
there’s a fire. All of these incidents are alleged, and, neither
the UK nor the US has ever presented clear evidence of a backdoor in Huawei equipment,
despite having many years to investigate. Before the ban, before its phones were cut-off
from Google services, before it lost its relationship with ARM, before it was, indirectly, forced
to sell off its undersea cable business, Huawei was unstoppable. Experts tend to agree that it’s years ahead
of anyone else on 5G technology and that its equipment is, in general, significantly cheaper. That’s why, despite pressure from its allies,
Britain has continued buying Huawei equipment – doing so saves, at least, millions of dollars. It mirrors the predicament many countries
around the world face with Chinese investment: Even knowing the risk of dependence on China,
can they resist the economic benefits? It’s no secret that, while this is going
on, the U.S. is in a trade war with China, and banning Huawei gives it both negotiating
leverage and protects American telecommunications companies from foreign competition, exactly
at its strongest. So, make no mistake: The ban is political. It’s been strongly hinted as being on the
table for trade negotiations. And it’s quite possible the ban will soon
be reversed if a deal is made. But, it’s just as important to note that
just because something is strategically motivated, doesn’t mean there aren’t, other, perfectly
legitimate arguments. Much of the confusion around this issue is
centered around the fact that politicians can agree on the same policy for vastly different
reasons. The truth is you don’t need to make a judgment
call on whether you trust Huawei or its CEO. You only need to recognize the most basic
feature of the Chinese system: everything is the concern of the state. From what is shown on TV, to who is allowed
to travel, even how long you can play Fornite, and certainly the movements of its largest
corporations, the Communist Party is everywhere, if not now, and quite possibly, not, in the
case of Huawei, eventually. Having an enemy is, unfortunately, useful
for American politicians, especially one as misunderstood as China, but so too is it crucial for a country to
keep its communications infrastructure, through which national secrets are shared and information
wars, increasingly fought, free from foreign influence. This is much bigger than any one company,
bigger than who controls 5G, bigger even than the trade-war. It’s really about the Chinese system being
used against it. The story of Huawei is very much the story
of China – both only realized their full potential upon opening up to the world’s markets,
where Huawei now makes the much of its revenue, and how China was turned into one of the most
powerful nations on earth. Huawei is what it is today to a significant
degree because of its close relationship with and subsequent protection by the Chinese government. Now, it’s a victim of that same closeness
– the other side of that very profitable coin, which, ironically, has long blocked many western
tech companies – Google, Facebook, Twitter, YouTube… – from operating in China on, you
guessed it… national security grounds. China would like the benefits of free, open
trade abroad, while closely protecting and controlling business domestically. But now it’s forced to chose. In a trade war like this one, each side is
trying to use game theory to interpret and outmaneuver their opponent, who may or may
not be lying. For example, say there are two types of people
– knights, who always tell the truth, and knaves, who always lie. You say “If I asked if you were a knight,
what would you say”? and they respond “No”, which are they – knight or knave? To see the answer and solve other problems
like this one, check out the interactive logic, computer science, and math courses on Brilliant. You can even do them offline with their iOS
and Android apps. If you want something more bite-sized, Brilliant
also has Daily Challenges in math, science, and engineering. You can use the link in the description to
start learning for free, and the first 200 people will get 20% off the annual premium
subscription, so you can view all Daily Challenges and unlock dozens of problem-solving courses. Thanks again to Brilliant and to you for watching
this video.

Maurice Vega

100 Responses

  1. If you’re hungry for more Huawei, Business Casual does a great job diving deeper into Huawei’s History: Also, If you noticed I uncharacteristically left out Apple, that’s no mistake: more to come!

  2. It's pretty much two of the largest economies playing diplomacy on each other for their monopoly on security/surveillance/power/everything within their country with the passive goal of removing the competition

  3. They're (and every other country) is the same, and want only them to be able to trace and access their citizen's data.

  4. lmao 6:38 with this union bullshit. Typical whitey arrogance. No wonder all these sinophobia. Y'all are the source.

  5. What people dont agree to when they buy a smartphone regardless of brand.

    What didnt we all agree to when we downloaded facebook and youtube.
    I am not surprised that few if not many governments are taking advantage of this

  6. we must protect free trade, competition and capitalism from the evil forces of socialism by… stopping a capitalist company… from trading freely… and competing with us tech companies… wait…

  7. He's a naive or however you spell it. Not a knight. I'm calling him joker because of the J
    He's answering that question and not his actual identity. If you ask J if he is a knight, he will say Yes because he always lies. But you are asking him what he would say if you asked him. He would say yes, like I just said. But he always lies. So he says he would so no. If you actually asked him "Are you a knight?" he would say yes.
    A knight would say yes to both questions

  8. union is not the same as communist party. Not all Chinese are communist party members. Actually most Chinese are not communist party members. Don’t miss lead the world.

  9. I wont agree with most of the info in this video . Chinese government does not control everything of its ppl’s life. It only control things to prevent ppl like western companies to over throw the government. They are trying to prevent Things like Arab spring that can destroy the country.

  10. They need to take that whole damnn govt down already. While we busy ourselves with pity domestic politics, there is a very real enemy and an active cold war going on which our liberal politicians couldn't care less about. If we don't deal with it under an united front, there won't be any politics for you to do in a few years.

  11. This is nothing but propaganda and false. It's like saying since the US government funds billions into Google, Microsoft, Cisco, Apple they all owned by the US government who have contolling stakes and majority of shares ,as they spy on everyone . But you don't forget all these companies are extremely close to the US government intelligence, Isreal and the Deep State , are you saying they all arms of zionist entities in the Government and owned by the US government.

  12. Apparently, national security is a legimate concern despite no evidence of backdoors on Huawei equipment has been found during years of investigation, only because the company is controlled by Chinese government.

  13. Huawei is indirectly control by the Chinese government because the Union that own Huawei stocks is control by the Chinese communist party that alsio control the Chinese government. The USA may banned Huawei to stop Chinese competition in the cell phone industry but they are right for not allowing Huawei a cell phone corporation control by the Chinese government to build USA cell phone 5G infrastructure. China have no moral authority in the trade war because they have also banned Google, Facebook and Instagram from the Chinese market.

  14. 真的像傻逼一样。爷佛了,讲的什么几把东西就在这编故事?洋人都这么傻逼的吗,说什么信什么

  15. I'm a Canadian, and I can tell you that this has been one of the most controversial subjects here. Vancouver is completely divided, and we are the most affected.

  16. It's so sad how brain washed here in the US by politicians and medias. It's just a company, and that company is winning. We're just not used to lose the dominance. That's all. Hypocrisy and superiority are the problems.

  17. Trump is just like a gambler, he ban everything which is better than the ones from usa,but as a consumer, we just hope a better product, and huawei make it.If a man always envy others for their achievements, he would lost the chance to make great progress.

  18. wester bias and idiots,U.S has banned HUAWEI cuz they have 5G advance technology no other reason,do you understand? shut up and look this video

  19. How does U.S know so much about HUAWEI without spying on them? The CIA is literally on HUAWEI's dick, but nope, only China is spying.

  20. I love your videos, how you explain and your tone is on point.
    How did you get started and what made you get into this topic

  21. just watch this idiots and wester bias, HUAWEI are NOT an hacking company,and HUAWEI HAVEN’T got any backdoors and hack codes, PolyMatter you just saying some bull shit, there are not evidence prove that HUAWEI got an back doors,those event about HUAWEI banned are just they have 5G and u.s haven’t got it so this event just prove the weakness of u.s. technology against China understand?

  22. Propagandist at its best, it is easy to know that america does not have Huawei technology and to slow Huawei down trump imposed a total ban on a company that sells nothing to the us and has no plans to do so. the owner of the company is the CEO, the rest is profit sharing, for this reason most of the profits go to R&D.

  23. "A French news company quoting anonymous technician.." Hmm, it must be good evidence because we all know that the French people are the most Godly people because they, unlike the UK and USA, never colonies and traffic human beings as slaves to plant their cotton fields, and do the dirty work in Anglosaxon homes. Besides, France has no business interests in African countries, as we all ought to know. News of French colonial past and having past colonial businesses in Africa has been proven to be "fake news" spread by the evil developing third world people who live in god forsakened countries. God bless France, U.K., Australia, for they are made exceptional countries by God because they are good. Why else some countries are developed and some good for nothing third world nations????

  24. "Its cheaper" – Its bullshit, they pay their people like a 1$ a month. So the "cheaper" part is just slave labor. The Chinese need to be stoped they have a long history of spying on their own people and now their taking aim to the rest of the world

  25. So apparently Huawei, a Chinese company, is beholden to unilateral US sanctions against Iran. Funny how that works.

  26. the implicit argument that China only underwent development because of foreign investment is a vast oversimplification. China’s development, much like the “asian tigers” had a lot more to do because of the large state intervention in developing its infant industries as well as controlling important sectors such as housing so as to make sure the prosperity reached a mass level not just a tiny few. while far from socialism, it certainly wasn’t what the video implies which is a opening of domestic markets to foreign investment. It was actually a strict control on the conditions of that investment that made the mass development possible

  27. Animations looking bomb here. Thanks for inspiring me to start using After Effects.

    I took the Polymatter skill share class and it really helped. Anyone who’s new to making video presentations and likes these videos should watch it.

  28. "the risk of dependence on China" you mean the risk of getting freedomed by America because China oppressed the world with cheap phones instead of Apple?

  29. What I don't agree with is how Google is said to be removed from every huawei phones worldwide. Why should the politics of one country have any say in the lively hood of other countries. (looking at you Britain with your hard border and the peace of northern Ireland) I hope this blows up in Google's face. Actually that would be the perfect opportunity for other search engines to take Google's place on Huewei phones. Espicailly search engines that don't have dodgy pasts with data collections.

  30. In your example at the end, wouldn't neither ever say no?
    If you asked a knight they would say yes they are because they always tell the truth
    If you asked a knave, they would say yes, because they always lie
    Either way they should never say no.

  31. so its okay for the american government to use their biggest tech companies to spy on people
    but gets mad when china does????

    hypocrisy runs deep in the the US government

  32. "big, inefficient state-owned enterprises"
    lol they were not inefficient and they're still the biggest in the world and growing, so whence cometh this mythical inefficiency?

  33. For a socialist enterprise to work, it doesn't make sense that the workers be able to take their share and sell it to someone else. The point of a worker cooperative is that the workers of that enterprise own that enterprise. Mondragon, headquartered in Spain, is one of the largest worker cooperatives in the world and they also have the policy that "when you leave, you have to sell your share back unless you're retiring."
    Profit-sharing is the name of the game. So what's the problem? Of course they own it. Their union legally owns it and the individual workers collect the corporate profit. What else is there to ownership? lol

  34. Also the CIA is a liar. The job description of a CIA agent includes being a liar for the USA lol
    Mike Pompeo, the man in that video, admitted that's what he did when he was in the CIA. Lie, cheat, and steal.
    That said, of course Huawei would take money from Chinese intelligence. Would Google not take money from American intelligence? Hint: they definitely already have lol

  35. Wow, just first time to recognize that the employee union is that powerful…Actually, in my view, the union is totally nothing but a loose organization. Huawei is controlled by its executive board.

  36. Interesting and inspiring observation. Great video. America applies democracy domestically while not doing so abroad, while China talks about freedom among nations instead of within China. Let's see if this will change.

  37. And yet despite the fact that Cisco equipment was used to spy on Angela Merkel ( and that its code has contained at least 8 backdoors by 2019 (, China continues to use Cisco products by allowing China Mobile and China Telecom to remain partners of Cisco.

  38. You have to look at what the ownership structure actually does: it incentivizes increasing market share over increasing profits by rewarding middle management to work to death, and this occurs to the point it triggers anticompetitive pricing. In other words, this is a war production model applied to consumer goods. This leads to one of two outcomes: in a closed system it turns the company into a Cartel, if it has a competitor, the Cartels then fight for turf. The issue isn't so much one of state espionage as it is with corporate espionage, as the goal is market share, not profit, and what is better to increase market share than scooping up the customers of your competitor by forcing your competitor to close. This is very similar to Japanese companies in the 1970's. In an open system, it must therefore compete abroad and effectively dump its products abroad.

  39. Here's the solution to the problem: in the WTO rules, introduce a "Critical Systems Independence" protocol modeled on the "energy independence" concepts of the 1970's. In other words, protectionist rules may be used to protect certain designated critical systems such as national telco infrastructure, national smelting capacity, "base heavy manufactures" (i.e. maintain a minimal amount of heavy industry domestically identified by high-investment capital items at least one heavy press, so many blast furnances per hundred million people etc). You probably want to enumerate these specific critical systems, and keep it as narrow as possible and not extend to stupid stuff like financial service products. Within this framework, allow "critical systems unions." In other words, allow nations below a certain GDP to unify into a single critical systems market with "critical systems independence protectionist measures" applicable to that union. It's not so much globalism or transnationalism as much as it is a recognition that economies have to scale to a certain size for certain industries. It already exists de-facto in terms of global railways. It may also be possible to use the critical systems union to divide very large economies as well so you don't have overdominance. The United States already effectively does this in its refinery region approach.

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