Huawei Smartphone Distribution Deal with AT&T Collapses Just Prior to Launch

AT&T announced on Jan­u­ary 8 that it had backed out of a deal to sell Huawei hand­sets.  The announce­ment came two days pri­or to a planned pre­sen­ta­tion of the part­ner­ship at a major tech con­fer­ence in Las Vegas.  The retreat comes after a Decem­ber 20 let­ter from the Sen­ate and House Intel­li­gence Com­mit­tees to the Fed­er­al Com­mu­ni­ca­tions Com­mis­sion, which warned that “addi­tion­al work by the Intel­li­gence Com­mit­tees on this top­ic only rein­forces con­cerns regard­ing Huawei and Chi­nese espi­onage.”

Amid the break­down of the Huawei-AT&T deal, Ver­i­zon is report­ed to be recon­sid­er­ing its own plans to sell the Huawei Mate 10.  Orig­i­nal plans to begin sell­ing the phone in sum­mer 2018 have been pushed back to the fall, while full can­cel­la­tion remain­ing a dis­tinct pos­si­bil­i­ty.

Huawei’s fail­ure to make inroads through either ser­vice provider is a sign that infor­mal polit­i­cal process­es can be just as effec­tive as the work of the Com­mit­tee on For­eign Invest­ment in the Unit­ed States (CFIUS) in scup­per­ing Chi­nese deals. Over­all, greater gov­ern­ment scruti­ny has con­tributed to an over­all 50% drop in Chi­nese invest­ment in the U.S. in 2017.

For now, Huawei’s Mate 10 will only be sold through open chan­nels (mean­ing through third par­ty ven­dors that sell hand­sets inde­pen­dent from phone plans). Huawei North Amer­i­ca spokesman William Plum­mer said “The U.S. mar­ket presents unique chal­lenges for Huawei, and while the Huawei Mate 10 Pro will not be sold by U.S. car­ri­ers, we remain com­mit­ted to this mar­ket now and in the future.”  Huawei is the world’s third largest smart­phone ven­dor by vol­ume, after only Sam­sung and Apple, but it accounts for just 0.5% of the U.S. mar­ket. Huawei, along with fel­low Chi­nese phone-mak­er, ZTE, was sub­ject to a U.S. gov­ern­ment inves­ti­ga­tion in 2012 relat­ed to poten­tial harm to crit­i­cal infra­struc­ture.