The EU needs to keep China’s national tech champion on the ropes

Last week saw Huawei kit out a colossal fish farm in China with tens of thousands of its solar panels that shield out the sun while generating electricity—just the latest in a recent spate of new business ventures.

2020 saw Huawei getting pummelled by the coronavirus pandemic and Western sanctions, forcing the company to pivot towards enterprise clients while diversifying its market presence to make up for lost business. Huawei founder Ren Zhengfei has been putting out feelers in worlds as diverse as electric vehicles, agriculture, mining and, most worryingly, renewable energy in the form of solar panels.

Huawei’s foray into solar panel production is a logical move on its part: the company has quietly headed the global market as the largest manufacturer of inverters four years in a row now. But given Huawei’s dubious links to the security services of the ruling Chinese Communist Party, and the associated risk of manipulation inherent in these digitised electricity generators, Beijing’s creeping influence in solar products spells bad news – particularly for Brussels, which has so far taken an ambivalent approach to Huawei and all but turned a blind eye to their solar sales.

China is chipping away at the market

In the face of consecutive US sanctions and a global microchip shortage, Huawei was barred from numerous national 5G networks as well as Google Android services, as a result of which consumer sales of mobile phones, responsible for half of Huawei’s overall profits, dropped 40% in the last quarter. But in the interim the company upped the ante. The market looked on in wonder when Huawei still posted a 3.7% growth and revenues of $136.7 billion last month. It is the company’s hedged portfolio, with its emphasis on inverters, which has allowed it to grow in spite of heavy geopolitical headwinds.

Renewable energy is one of the fastest growing industries in the world and solar power has grown quicker than any other major energy source over the past decade. This has made photovoltaic inverters are highly demanded commodity since they’re needed for converting electricity generated from a direct to alternating current used in electric grids. Huawei is able to produce solar panel inverters in spite of Western restrictions, because the 28-nanometer technology required for doing so is readily available in China. As a crucial means for satisfying China’s enormous energy habit, solar panel inverters represent a large cash cow for the company, and neither do these interests stop at the Chinese border.

The EU’s Huawei blindspot

Along with the EU’s push decarbonise came a wave of investment in renewable energies, allowing Huawei to leverage its market position and capitalise on EU member states’ emphasis on solar capacity expansion. This has created a bizarre double-standard across the bloc: while the Chinese giant has executed a very successful leap into the European market in the solar sector without much resistance, European countries have reacted with irritation to Huawei’s security implications for 5G infrastructure by following Washington’s example and banning Huawei as a supplier of 5G components.

However, in light of the increasing digitisation of energy infrastructure where core components like inverters are frequently connected to the web, inaction on Brussels’ part is no longer a viable option. As the managing director of the European Network for Cybersecurity (ENCS), Anjos Nijk warned poignantly earlier this month, “Politicians are worried about 5G suppliers, but those same suppliers are builders of the biggest share of PV inverters… Those systems are in people’s homes and a manufacturer has direct access to them, and can switch them on and off. With so many devices, it could cause a blackout”.

The EU’s disregard of this increasingly dominant Chinese tech company in the renewable energy sector will have severe knock-on effects, threatening bilateral relations with the US in the best case and the entire European electrical grid in the worst. Indeed, if evidence is needed that such concerns are anything but well-founded a quick look at India will suffice. Earlier this year, it became apparent that the Chinese abused their technological presence in the country to create a widespread power outage in Mumbai that left 20 million people in the dark. As tensions between the West and China rise, Beijing might well be tempted to use its technological supremacy in Europe’s solar infrastructure to turn off the lights for millions when the geopolitical going gets tough.

Like moths to a solar panel

Given that in 2019 the energy sector was the world’s most widely targeted area for cyberattacks, it is high time policymakers in Brussels take a page from the American approach to the threat. US lawmakers have grown highly suspicious about Huawei’s solar offering, and got shot of the Huawei inverters when a bipartisan coalition of Senators called for the prohibition of the solar products, leading Huawei to close its U.S. inverter business in the face of an “unwelcoming climate”. The Biden administration shows no signs of changing tack after further reinforcing restrictions this week on US companies dealing with the outfit.

For the EU, this could turn into a long-term problem indeed. Brussels’ lenience towards Huawei’s inverters is by no means the only area in which the EU is failing to take a strong stance on Chinese businesses. Brussels has also been criticised for the Sino-European investment deal as well as for taking a lax attitude to China’s dangerous infiltration of European media in their EU trade deal. Contracts awarded to Chinese businesses by European governments even doubled in value to almost €2 trillion in 2020.

A united Western front is the only way to stem the increasingly hegemonic Huawei. While the EU’s zero carbon aims are highly commendable, there is still work to be done to futureproof the infrastructure to avoid the fate of Mumbai. The EU must rely on more efficient homegrown solutions to take back the advantage that China has thus far won for itself, or face the consequences.

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