On Monday, the Chinese telecommunications company Huawei announced that it would be selling its submarine cable subsidiary, Huawei Marine. International news outlets attributed the decision to President Trump’s decision to blacklist Huawei last month. The submarine cables Huawei Marine builds and maintains are part of the global network that carry the high-speed data between countries that allows for the modern Internet.
These cables are a security risk because they carry significant amounts of unencrypted information, potentially allowing government surveillance. The United States used them that way after the 9/11 attacks and continued until Edward Snowden revealed the program in 2013. In 2017, the Australian government stopped Huawei Marine from building a cable from the Australian continent to the Solomon Islands because of concerns that China might access the information traveling over the cables. Similar concerns help to explain America’s decision to blacklist the company.
The sale benefits U.S. companies but does little for national security
The sale will likely benefit large U.S. tech companies that view Huawei as a significant threat to their market share. However, if the United States is worried about a Chinese company running submarine cables, it still has reason for fear. Hengtong Optic-Electric, which is buying the subsidiary, is run and partially owned by Cui Genliang, who has been a deputy in the National People’s Congress since 2013.
It is of course possible that the Department of Commerce will target Hengtong in turn. However, Huawei Marine has not been as exposed to the United States and its allies as other parts of Huawei. Except for a project in the Mediterranean, most of its business beyond Chinese waters has involved laying cables between Latin American and African nations.
The problem for the United States is that it, too, is viewed as a security threat by many of these other countries, especially Brazil, which turned to Huawei after Snowden’s revelations about U.S. government programs to intercept international traffic. They might be willing to ignore the ban in order to get cables that are not at risk of U.S. surveillance.
Selling off the submarine cable company may help Huawei’s political and legal strategy
By selling off one of its more controversial subsidiaries, Huawei may be able to force the Trump administration to be more specific about the security threats it is seeking to counter. It may also be hoping that Trump will make concessions to Huawei as part of a broader trade deal.
Already other governments and companies have given Huawei hope that the ban will be short-lived. The British government is still considering a 5G domestic cellphone network built in part by Huawei. Google was one of the first companies to act on the ban by announcing it would stop supporting Android on Huawei devices, but on Tuesday a Huawei device reappeared as a supported device on its testing platform for new versions of Android. Huawei was banned from key technical standard-setting bodies such as the WiFi Alliance, the Bluetooth SIG and the SD Association after the U.S. announcement — but has since been quietly reinstated. Two weeks after the ban was put in place, key American firms, like Microsoft, still have not explicitly stated how they are responding.
Key U.S. policymakers are clearly considering how or whether to “decouple” the U.S. economy from China to minimize security risks. However, there is little publicly visible guidance as to how this decoupling should work, which firms it should target and which standards it should use to make decisions. That may make it easier for the United States to flexibly target firms, like Huawei, that it sees as security risks. However, it also creates greater uncertainty on markets and for U.S. allies about what the United States will do next and whether decisions such as the sale of Huawei Marine will make Huawei seem less threatening in the eyes of U.S. security officials.