A heated battle between the US and China played out at the world's biggest mobile event

Key Points
  • A drama played out between American officials and Chinese tech giant Huawei at Mobile World Congress in Barcelona this year.
  • The U.S. sent a delegation to MWC to protest Huawei's involvement in providing infrastructure for 5G.
  • Huawei's response this week was an aggressive campaign to prove its prowess in technology like 5G, and that it can't be stopped by the world's largest economy.
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Huawei security concerns dominating Mobile World Congress 2019

The Mobile World Congress trade show in Barcelona is an annual opportunity for tech companies to showcase their latest devices and compete for the attention of more than 100,000 gadget-lovers.

But this year a drama played out on stage and behind the scenes that had little to do with gadgets: a battle between American officials and Chinese tech giant Huawei.

The U.S. sent a delegation to MWC to protest the telecommunication firm's involvement in providing infrastructure for 5G, a fifth-generation wireless network that heralds faster speeds and response times for consumers and businesses. U.S. intelligence agencies fear Huawei's networking equipment could enable Chinese spying, claims Huawei has repeatedly denied. The U.S. has also accused Huawei of violating American sanctions on Iran and stealing trade secrets, which it also denies.

"The United States is asking other governments and the private sector to consider the threat posed by Huawei and other Chinese information technology companies," Robert Strayer, ambassador for cyber and international communications at the U.S. State Department, told reporters Tuesday in Barcelona.

Intelligence experts have been skeptical about Huawei's guarantees it isn't a security risk, pointing to Chinese laws that allegedly mean every domestic company is legally mandated to assist the country in intelligence gathering if Beijing requests it. China's companies are also thought to be forbidden from talking about any intelligence work.

Chinese government and media outlets have repeatedly claimed, however, that the American warnings about managing cybersecurity risk are really a pretext for a pre-meditated attack on Huawei because the world's largest economy feels its business interests are threatened by the telecom.

The U.S. has not warned of any security risks associated with Finland's Nokia and Sweden's Ericsson — Huawei's two main competitors in the telecom equipment industry.

Huawei strikes back

Huawei's response this week was an aggressive campaign to prove its prowess in technology like 5G, and that it can't be stopped by the world's largest economy.

"Prism, prism on the wall. Who's the most trustworthy of them all?" Guo Ping, Huawei's rotating chairman quipped in a keynote speech on Tuesday. "We can't use prisms, crystal balls, or politics to manage cybersecurity. It's a challenge we all share."

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Trump is right to say US needs powerful 5G, Huawei chairman says

In the speech, Guo claimed the company has never, and will never, use its equipment for spying. In a roundtable with media on Sunday ahead of MWC, the chairman took aim at the U.S., saying the country should implement 5G technology "as fast as possible" or it risks being left behind. Huawei is the biggest provider of telecommunications equipment globally and also one of the world's biggest smartphone vendors.

Huawei's presence hard to miss

Beyond public remarks, Huawei's physical presence at MWC was hard to miss. The Chinese tech giant is a major sponsor of the event and typically operates several massive booths in the conference halls.

This year was no exception. Huawei's logo was brandished on the lanyards of thousands of attendees' badges and on posters and escalators around the conference. The company also hosted additional events in Barcelona throughout the week, like a cocktail reception Monday night at the swanky W hotel.

Huawei's logo was on the lanyards of badges at MWC Barcelona 2019.
Elizabeth Schulze | CNBC

"What's playing out around the race to 5G is an exceptional marketing exercise from massive, multi-billion dollar companies, and two countries," Doug Murray, CEO of U.S.-based cloud software company Big Switch Networks, told CNBC in an email Wednesday. "Huawei has been on the defensive this week while the U.S. continues to push its agenda."

Murray pointed to more than 20 deals that Huawei announced this week at MWC to provide 5G equipment to telecom operators. In perhaps the biggest setback to the U.S., the United Arab Emirates said on Tuesday it had chosen Huawei to build out its 5G network through its state-controlled telecom firm Etisalat.

Meanwhile, Huawei's new $2,600 foldable phone, announced at a flashy launch event on Sunday, captured a lot of attention from the tech-savvy consumers at MWC.

"Everyone was kind of coming to the show thinking they were going to have a really, really tough time, and they smashed it with this new device," Ben Wood, a tech analyst at CCS Insight, told CNBC on Wednesday in Barcelona.

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Foldable phones have arrived

Uncertainty is the word

Still, uncertainty over Huawei's future in the U.S. and other key markets like Germany and the U.K. has shrouded the outlook of many telecommunications and tech firms.

Chang-Gyu Hwang, the CEO of South Korean mobile operator KT, told CNBC Tuesday the company was not using Huawei equipment in its 5G networks, citing security concerns. The CEO of Rakuten, a Japanese e-commerce firm that also operates mobile networks, said there is a "political risk" with using Huawei equipment.

"The risk I talked about is not about the fact that there will be a security breach," he told CNBC's Karen Tso. "The risk is that the government will try to legally or implicitly, kind of, force us not to use some hardware, especially from China."

Meanwhile, Nokia and Ericsson warned about an uncertain political environment as 5G starts to go mainstream.

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Nokia CEO warns 5G implementation 'will be delayed in Europe'

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