Chip War: The Fight for the World's Most Critical Technology

by Chris Miller

Huawei’s critics often allege that its success rests on a foundation of stolen intellectual property, though this is only partly true. The company has admitted to some prior intellectual property violations and has been accused of far more. In 2003, for example, Huawei acknowledged that 2 percent of the code in one of its routers was copied directly from Cisco, an American competitor. Canadian newspapers, meanwhile, have reported that the country’s spy agencies believe there was a Chinese-government-backed campaign of hacking and espionage against Canadian telecom giant Nortel in the 2000s, which allegedly benefitted Huawei. Theft of intellectual property may well have benefitted the company, but it can’t explain its success. No quantity of intellectual property or trade secrets is enough to build a business as big as Huawei. The company has developed efficient manufacturing processes that have driven down costs and built products that customers see as high-quality. Huawei’s spending on R&D, meanwhile, is world leading. The company spends several times more on R&D than other Chinese tech firms. Its roughly $15 billion annual R&D budget is paralleled by only a handful of firms, including tech companies like Google and Amazon, pharmaceutical companies like Merck, and carmakers like Daimler or Volkswagen. Even when weighing Huawei’s track record of intellectual property theft, the company’s multibillion-dollar R&D spending suggests a fundamentally different ethos than the “co...