LDN - Business

U.S. universities unplug from China's Huawei under pressure from Trump

[January 24, 2019] By Heather Somerville and Jane Lanhee Lee

SAN FRANCISCO (Reuters) - Top U.S. universities are ditching telecom equipment made by Huawei Technologies and other Chinese companies to avoid losing federal funding under a new national security law backed by the Trump administration.

U.S. officials allege Chinese telecom manufacturers are producing equipment that allows their government to spy on users abroad, including Western researchers working on leading-edge technologies. Beijing and the Chinese companies have repeatedly denied such claims.

The University of California at Berkeley has removed a Huawei video-conferencing system, a university official said, while the UC campus in Irvine is working to replace five pieces of Chinese-made audio-video equipment. Other schools, such as the University of Wisconsin, are in the process of reviewing their suppliers.

UC San Diego, meanwhile, has gone a step further. The university in August said that, for at least six months, it would not accept funding from or enter into agreements with Huawei, ZTE Corporation <000063.SZ> and other Chinese audio-video equipment providers, according to an internal memo. The document, reviewed by Reuters, said the moratorium would last through February 12, when the university would revisit its options.

“Out of an abundance of caution UC San Diego enacted the six-month moratorium to ensure we had adequate time to begin our assessment of the equipment on campus and to prevent the campus from entering into any agreements that could later be viewed as inconsistent with the NDAA,” UC San Diego spokeswoman Michelle Franklin said in response to Reuters’ questions about the memo.

These actions, not previously reported, signal universities' efforts to distance themselves from Chinese companies that for years have supplied them with technical equipment and sponsored academic research, but which are now in the crosshairs of the Trump administration.

The moves are a response to the National Defense Authorization Act (NDAA), which President Donald Trump signed into law in August. A provision of that legislation bans recipients of federal funding from using telecommunications equipment, video recording services and networking components made by Huawei or ZTE. Also on the blacklist are Chinese audio-video equipment providers Hikvision, Hytera, Dahua Technology and their affiliates.

U.S. authorities fear the equipment makers will leave a back door open to Chinese military and government agents seeking information. U.S. universities that fail to comply with the NDAA by August 2020 risk losing federal research grants and other government funding.

That would be a blow to public institutions such as the sprawling University of California system, whose state funding has been slashed repeatedly over the last decade. In the 2016-2017 academic year, the UC system received $9.8 billion in federal money. Nearly $3 billion of that went to research, accounting for about half of all the university's research expenditures that year, according to UC budget documents.

HUAWEI UNDER SIEGE

The new law is part of a broader Trump administration strategy to counter what it sees as China's growing threat to U.S. economic competitiveness and national security.

The president has slapped tariffs on a slew of Chinese goods and made it tougher for foreign companies to purchase minority stakes in U.S. tech companies, causing Chinese investment in Silicon Valley to plunge.

In addition, Trump last year signed legislation prohibiting the U.S. government from buying certain telecom and surveillance equipment from Huawei and ZTE. And he is considering a similar ban on Chinese equipment purchases by U.S. companies.

At the center of the storm is Huawei, a global behemoth in smartphones and telecom networking equipment. The company's chief financial officer has been under house arrest in Canada since December for allegedly lying about Huawei's ties to Iran. Another Huawei employee was arrested this month in Poland on espionage allegations.

Huawei did not respond to a request for comment.

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Graduates attend commencement at University of California, Berkeley in Berkeley May 16, 2015. REUTERS/Noah Berger/File Photo

U.S. universities have already felt the sting of Trump's China policies. The State Department shortened the length of visas for certain Chinese graduate students. And the administration is considering new restrictions on Chinese students entering the United States. Chinese students are by far the largest group of international students in the United States and provide a lucrative source of revenue for universities.

Pressure to dump Huawei and other Chinese telecom suppliers is adding to the strain.

In addition to the University of Wisconsin, a half dozen institutions, including UC Los Angeles, UC Davis and the University of Texas at Austin, told Reuters they were in the process of reviewing their telecommunications equipment, or had already done so and determined they were NDAA compliant.

At Stanford University, Steve Eisner, the director of export compliance, told Reuters the school did a "scrub" of the campus, but "luckily" did not find any equipment that needed to be removed.

But for Stanford and other academic institutions, Huawei is more than an equipment vendor. Huawei participates in research programs, often as a sponsor, at dozens of schools, including UC San Diego, the University of Texas, the University of Maryland and the University of Illinois Urbana-Champaign.

In addition to an explicit equipment ban, the NDAA calls for creating regulations that would limit research partnerships and other agreements universities have with China. The law requires the Secretary of Defense to work with universities on ways to guard against intellectual property theft and create new regulations aimed at protecting academics from exploitation by foreign countries. Universities that fail to comply with those rules risk losing Defense Department funding.

UC San Diego highlighted this section of the law in a campus newsletter in September.

Fears of a more rigorous crackdown from Washington would seem to be justified. In June, 26 members of Congress sent a letter to Education Secretary Betsy DeVos, sounding an alarm over Huawei's research partnerships with more than 50 U.S. universities that "may pose a significant threat to national security."

The lawmakers called on DeVos to require universities to turn over information on those agreements.

Separately, a White House report from June points to a research partnership on artificial intelligence between UC Berkeley and Huawei as a potential opening for China to gather intelligence that could serve Beijing's military and strategic ambitions. That partnership started in 2016.

"COOLING" RELATIONS WITH HUAWEI

UC Berkeley spokesman Dan Mogulof said the university does not participate in research involving trade secrets. He said the school only enters research partnerships whose findings can be published publicly. Such open-source research is not subject to federal regulations.

Mogulof said UC Berkeley has no plans to change any of the research partnerships it has with Huawei. The company is involved in at least five UC Berkeley research initiatives, including autonomous driving, augmented reality and wireless technology, in addition to artificial intelligence.

Still, a person with knowledge of the matter said the university's relationship with Huawei had "cooled," and that some Berkeley researchers are choosing not to proceed with their research agreements with the company to avoid scrutiny from university and government officials.

The chill is spreading. The United Kingdom's Oxford University this month cut ties with Huawei, announcing it would no longer accept funding for research or philanthropic donations.

"The decision has been taken in the light of public concerns raised in recent months surrounding UK partnerships with Huawei," a university spokesman said in a statement.

(Reporting by Heather Somerville and Jane Lanhee Lee; Editing by Greg Mitchell and Marla Dickerson)

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