Huawei and Start-ups

Huawei and Start-ups
Chinese telecoms giant, Huawei, has faced much international scrutiny in the past months due to allegations of skirting US sanctions. Its CFO, Meng, remains under house arrest in Canada awaiting extradition to the US and this has strained an already worsening relationship between Canada and China.
 
One allegation against Huawei in particular might be of concern to entrepreneurs; that Huawei exploits its partnerships with start-ups to steal proprietary technology. Enter Akhan Semiconductor Inc. – a US start-up developing diamond-infused smartphone glass to make screens more durable than the leading and well-known competitor, Gorilla Glass. Akhan founder, Adam Khan, hoped to license the glass to phone manufacturers.
 
Initially, Akhan felt very fortunate to have a behemoth like Huawei agree to partner with them. According to analysts, this partnership fit well with Huawei’s evolving business model that hopes to emerge from the traditional stigma of poor quality “Made in China” products, and to enter the premium smartphone market to become a global market leader – and using superior glass technology to those used in Apple’s iPhones or Samsung’s Galaxy line is a good way to begin cementing that image.
 
But any hope Akhan had for a mutually prosperous partnership with Huawei was quickly dashed when they received back a sample of their diamond glass that was initially sent to Huawei for some basic testing. According to their agreement — and per the industry standard practice – the glass sample was essentially loaned to Huawei and was to be returned in the same pristine state it was given to prevent any possible reverse engineering of intellectual property. However, the glass was returned shattered and it was suspect that impermissible tests were conducted upon it. When Akhan attempted to reach Huawei to discuss this matter, perhaps a bit unsurprisingly, Huawei officials assumed no responsibility and shifted blame. Akhan has since agreed to help the US FBI in their case against Huawei.
 
It is unfortunate that tech start-ups have to be so vigilant in their approach to partnering with global players like Huawei, even as they take all reasonable measures to safeguard their interests as Akhan seemed to have done. A lesson here might to not underestimate the unscrupulousness of one’s business partners.
 
David Kim is a member of the BLG Business Venture Clinic, and is a 2nd year student at the Faculty of Law, University of Calgary.