DOJ charges Huawei with racketeering, theft of trade secrets

The US Department of Justice is charging Huawei and two of its US subsidiaries with racketeering and conspiracy to steal trade secrets. The new federal indictment, unsealed Thursday, accuses the Chinese telecommunications giant of using "fraud and deception" to steal technology from US companies.

The indictment builds on charges the US filed against Huawei, the world's No. 1 telecom supplier and No. 2 phone manufacturer, in January 2019.

The new charges relate to alleged efforts by Huawei and its subsidiaries to steal intellectual property, including material from six US companies. The Justice Department said Huawei, through deceptive practices like violating terms of agreements and rewarding employees for turning over confidential information on competitors, managed to obtain nonpublic information related to internet router source code, cellular antenna technology and robotics.

The indictment also includes new allegations related to Huawei's business with countries subject to sanctions, including Iran and North Korea. Huawei is accused of assisting the Iranian government, through unofficial subsidiary Skycom, with domestic surveillance.

Huawei didn't immediately respond to a request for comment but reportedly told Cheddar: "This new indictment is part of the Justice Department's attempt to irrevocably damage Huawei's reputation and its business for reasons related to competition rather than law enforcement. The 'racketeering enterprise' that that government charged today is nothing more than a contrived repackaging of a handful of civil allegations that are almost 20 years old and that have never been the basis of any significant monetary judgment against Huawei. The government will not prevail on these charges which we will prove to be both unfounded and unfair."

The updated charges escalate an already turbulent relationship between Huawei and the US government. The core issue is concerns about Huawei's coziness with the Chinese government and fears that its equipment could be used to spy on other countries and companies. Last year, the Commerce Department blacklisted Huawei following a May executive order from President Donald Trump that effectively banned the company from US communications networks.

Specifically, the new charges include allegations that Huawei entered into confidentiality agreements with companies and owners of intellectual property and then violated the terms of those agreements by misappropriating the information for use in their own commercial products. Huawei also allegedly recruited former employees of companies and asked them to disclose trade secrets and intellectual property. The Justice Department also accuses the company of using professors at research institutions to steal intellectual property and provide it to Huawei.

The Justice Department says Huawei was successful in amassing stolen intellectual property that allowed the company to reduce research and development costs and gain an advantage over competitors.

Huawei is considered one of the leading suppliers of 5G gear. The company also supplies other 4G LTE equipment and has gained a foothold in many markets by being a price leader in telecommunications equipment.

Earlier this week, Huawei was accused of using backdoors intended for law enforcement to access networks it helped build that are being used by phones around the world. The details were disclosed to the UK and Germany at the end of 2019 after the US had noticed access since 2009 across 4G equipment, according to a report from The Wall Street Journal, citing US officials.

Huawei has long denied any wrongdoing and continues to maintain its innocence.

The Trump administration has pressured other countries in Europe and around the world to keep Huawei equipment out of their 5G networks. The Federal Communications Commission has also banned Huawei products from government-subsidized network installations.

"The indictment paints a damning portrait of an illegitimate organization that lacks any regard for the law," Senate Select Committee on Intelligence Chairman Richard Burr, a Republican from North Carolina, and Vice Chairman Mark Warner, a Democrat from Virginia, said in a joint statement. "Intellectual property theft, corporate sabotage, and market manipulation are part of Huawei's core ethos and reflected in every aspect of how it conducts business."

Last month, six senators, including Burr and Warner, introduced legislation that would help subsidize companies developing more-secure 5G gear. The bill would allocate at least $750 million to companies developing 5G wireless technology. It would also create a $500 million fund to be doled out to companies deploying "trusted and secure" equipment around the world.

Originally published Feb. 13, 10:44 a.m. PT.
Update, 1:30 p.m.: Adds more background and information and a statement from leaders of the Senate intelligence committee; 3:25 p.m.: Adds reported Huawei comment.

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Qualcomm settles Huawei patent spat, warns of 5G flagship phone delay -- likely the iPhone

Qualcomm settles Huawei patent spat, warns of 5G flagship phone delay -- likely the iPhone

The expected iPhone 5G delay may be a reality. Qualcomm, which likely will supply the modems that power the newest crop of iPhones, on Wednesday warned of "the delay of a global 5G flagship phone launch."

The company said handset sales are expected to drop about 15% in the current period, its fiscal fourth quarter, because of the delay. While Qualcomm didn't specify what phone it was discussing, it's widely believed to be the upcoming iPhone. Apple is expected to introduce its first 5G iPhones this fall, but worries about coronavirus-related delays have plagued the company for months.

Apple didn't immediately respond to a request for comment.

At the same time, Qualcomm said it and Huawei have settled their long-running patent spat, with the two companies signing a long-term, global patent license agreement.

As part of the agreement, Qualcomm will record about $1.8 billion from Huawei in its September quarter, helping its stock soar 13% to $105 in after-hours trading. The US government has banned Huawei from buying Qualcomm chips and other American components, but Huawei now is paying licensing fees for Qualcomm's patents.

Qualcomm is the world's biggest provider of mobile chips, and it created technology that's essential for connecting phones to cellular networks. The company derives a significant portion of its revenue from licensing those inventions to hundreds of device makers, with the fee based on the value of the phone, not the components. Because Qualcomm owns patents related to 3G, 4G and 5G networking technology, as well as other features like software, all handset makers building a device that connects to cellular networks have to pay it a licensing fee, even if they don't use Qualcomm's chips.

Qualcomm and Apple had battled in courts around the globe over patents and Qualcomm's licensing terms. The two giants reached a licensing and chip supply agreement a year ago, just after opening arguments began in a trial in San Diego. The pact cleared the way for Qualcomm to resume supplying modems for iPhones. Apple's devices expected this fall will likely include 5G chips from Qualcomm. Its other modem supplier, Intel, exited the market.

Huawei licensing battle

Huawei, one of the world's biggest handset makers, was the last major company fighting with Qualcomm over its licensing terms. The two reached an interim licensing agreement 18 months ago, with Huawei at that time agreeing to pay Qualcomm $150 million each quarter.

The new deal reached this month is long term and gives the two companies access to each other's patents.

Qualcomm said the new global patent license agreement covers sales beginning Jan. 1, 2020. It said it's still assessing the accounting impacts of its new pact with Huawei but noted its current quarter revenue will include royalties for sales made by Huawei in the September 2020 quarter, as well as the $1.8 billion payment and estimated amounts due for the March 2020 and June 2020 quarters under the new pact.

Qualcomm's results

Qualcomm is a key partner for companies like Apple and Samsung. Its modems connect the majority of the world's phones to wireless networks, and it had been expecting a big boost this year from the move to 5G. Because of its position as a key supplier, it has insight into the health of the mobile industry and can provide information into how COVID-19 is impacting tech.

Qualcomm typically forecasts how many 3G, 4G and 5G phones will be shipped each calendar year.

In April, it warned that handset makers likely would ship about 30% fewer phones in the June quarter than it previous expected. And that followed a 21% drop in phone demand in the first three months of the year because of weakness in China. The bright spot was 5G, which Qualcomm at the time said was as strong as it previously expected.

On Wednesday, Qualcomm reported better-than-expected fiscal third-quarter results, boosted by the rollout of 5G. It said shipped 130 million chips for handsets, in line with its prediction for 125 million to 145 million.

Qualcomm reported fiscal third-quarter revenue of $4.89 billion, down from $9.6 billion a year ago. Its per-share earnings tumbled to 74 cents from $1.75 in the same period last year. But its results were better than Wall Street expected. Analysts polled by Yahoo Finance expected revenue of $4.8 billion and earnings of 71 cents a share.

Looking forward, Qualcomm expects to report fiscal fourth-quarter revenue of $7.3 billion to $8.1 billion, thanks to the Huawei payment. Excluding Huawei, Qualcomm's revenue will total about $5.5 billion to $6.3 billion, in line with the $5.8 billion projected by analysts. It also expects per-share earnings of $1.05 to $1.25 a share, excluding items. Analysts expected $1.10 a share.

"As 5G continues to roll out, we are realizing the benefits of the investments we have made in building the most extensive licensing program in mobile and are turning the technical challenges of 5G into leadership opportunities and commercial wins," Qualcomm CEO Steve Mollenkopf said in a press release.

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Huawei Steal Intellectual Property

DOJ Charges Huawei With Racketeering, Theft Of Trade Secrets

DOJ charges Huawei with racketeering, theft of trade secrets