Research Notes

Are your suppliers still doing business in Russia? – Huawei and Lenovo remain but their US and EU competitors have pulled out.

It has been 40 days since Russia invaded Ukraine. Following global outrage against Russian aggression and the humanitarian catastrophe, many nations adopted sanctions and restrictions against Russia which obligated certain firms to suspend transactions with Russian entities. However, many US and EU companies have, on their own accord, suspended operations, if not exited all together. Despite the potential loss of millions, if not billions, of dollars in losses, the list of companies leaving Russia continues to grow.

According to the Yale School of Management, more than 500 companies have announced their withdrawal from Russia’s economy since Putin launched the war on Feb. 24. Most are based in the U.S., European Union, Japan and South Korea.

There is a consensus among people and organizations in the free world that the invasion is despicable, and hence there is a desire to end relations with Russia. Companies interpret that if they continue to do business in the country, that they will suffer backlash from the public and reputational repercussions in future. Moreover, consumers and shareholders are sophisticated to understand the power of their money to influence political decisions and behavior.

Chinese companies have remained in Russia. The Chinese government supports the invasion. Indeed there were attempts by a handful of Chinese firms to leave, fearing reprisal from their US customers, but they stay on in Russia because of pressure from China. This itself demonstrates how China exerts pressure on its companies, even when many firms have told Western media the opposite.

Two companies in particular are of interest because their competitors have left, but they remain: Huawei and Lenovo. Indeed there are reports that Huawei helps the Russia government by training its soldiers in cyberwar.

A company is more than the measure of its profits. Customers and investors select firms for more reasons than their ability to make money. They also select firms based on a set of risk factors. Some telecommunications companies have ended their relationships with Huawei for security reasons. For those operators which continue to do business with Huawei despite the security vulnerability, it is worth asking whether these operators are ok with firms that continue to do business with Russia.

Strand Consult’s report Understanding the Market for 4G RAN in Europe: Share of Chinese and Non-Chinese Vendors in 102 Mobile Networks details Huawei’s market position in Europe. Note that Huawei competitors Nokia and Ericsson were among the first companies to leave Russia.

Unlike its competitors HP, Dell, Apple, and even the Chinese ASUS, Lenovo continues to operate in Russia. It appears Lenovo, the world’s leading maker of laptops, will accept the risk. It has one quarter of the global market and just reported its first $20 billion quarter. Lenovo was founded by the Chinese government, was groomed as a techno-nationalist state champion, and remains a partially state-owned entity. It has similar features to other SOEs with Chinese Communist Party members sitting on the board and situated with a set of government preferences and conditions.

Despite these red flags, many European governments purchase Lenovo products and unwittingly put European data at risk. Given EU and European nation state governments condemning Russian action, it’s time that these governments reconsider their Lenovo products, particularly as many competitive alternatives exists. 

It appears that there is growing pressure on European and American companies that have not withdrawn from Russia while continuing to do business with companies like Huawei and Lenovo, which have not distanced themselves from Putin’s actions in Ukraine.

Journalists and media should consider contacting the employees of Huawei and Lenovo in the US and Europe and ask how they feel about working for a company that, unlike their competitors, does not distance themselves from what Russia does in Ukraine. The press should contact the telecommunications companies and authorities that buy equipment from Huawei and Lenovo and ask if they have a clear conscience when sending money to companies that, unlike their competitors, do not distance themselves from what Russia does in Ukraine.

When it emerged that Huawei, unlike its competitors, chose to stay in Russia and not condemn what is happening in Ukraine, the two remaining Britons on Huawei UK’s board of directors Sir Andrew Cahn and Sir Ken Olisa stepped down. It comes after Sir Mike Rake, the former chairman of BT Group, stepped down as chairman of Huawei’s UK operation in 2021 before the UK government banned the company from the country’s 5G networks and after Lord John Browne of Madingley, the former BP chief, stepped down as UK chairman of Huawei Technologies in 2020. It also comes after Tommy Zwicky, Vice President of Communications at Huawei Denmark, left the company in December 2019, saying he could not defend Huawei’s role in Uighur “Muslim” Alarm project.

Increasingly, working for Huawei is not a resume-builder; it’s a liability. But many still can work with blinders on. They can set aside their democratic values and go to work for or buy the products of Huawei, a Chinese government company which enables repression and autocracy with its technology. Consider the President of Cyprus, a European country, in which almost all its mobile infrastructure is from Huawei.

It’s not enough to focus on the European and American companies that won’t distance themselves from what Russia is doing in Ukraine; they should also be scrutinized for continuing to do business with the firms that refuse to leave Russia.

Strand Consult’s goal is to create transparency. Huawei and Lenovo have consistently told the press that they are not influenced by the Chinese government, yet their continued presence in Russia suggests otherwise. 

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