It started out as strictly business: a huge private contract for one of the world’s most advanced undersea fiber-optic cables. It became a trophy in a growing proxy war between the United States and China over technologies that could determine who achieves economic and military dominance for decades to come.
In February, American subsea cable company SubCom LLC began laying a $600-million cable to transport data from Asia to Europe, via Africa and the Middle East, at super-fast speeds over 12,000 miles of fiber running along the seafloor.
That cable is known as South East Asia–Middle East–Western Europe 6, or SeaMeWe-6 for short. It will connect a dozen countries as it snakes its way from Singapore to France, crossing three seas and the Indian Ocean on the way. It is slated to be finished in 2025.
It was a project that slipped through China’s fingers.
A Chinese company that has quickly emerged as a force in the subsea cable-building industry – HMN Technologies Co Ltd – was on the brink of snagging that contract three years ago. The client for the cable was a consortium of more than a dozen global firms. Three of China’s state-owned carriers – China Telecommunications Corporation (China Telecom), China Mobile Limited and China United Network Communications Group Co Ltd (China Unicom) – had committed funding as members of the consortium, which also included U.S.-based Microsoft Corp and French telecom firm Orange SA, according to six people involved in the deal.
HMN Tech, whose predecessor company was majority-owned by Chinese telecom giant Huawei Technologies Co Ltd, was selected in early 2020 to manufacture and lay the cable, the people said, due in part to hefty subsidies from Beijing that lowered the cost. HMN Tech’s bid of $500 million was roughly a third cheaper than the initial proposal submitted to the cable consortium by New Jersey-based SubCom, the people said.
The Singapore-to-France cable would have been HMN Tech’s biggest such project to date, cementing it as the world’s fastest-rising subsea cable builder, and extending the global reach of the three Chinese telecom firms that had intended to invest in it.
SubCom had no comment on the SeaMeWe-6 battle, and HMN Tech did not respond to requests for comment. In a statement last year about infrastructure projects, the White House briefly noted that the U.S. government helped SubCom to win the Singapore-to-France cable contract, without giving details. China’s foreign ministry did not respond to requests for comment. China Telecom, China Mobile, China Unicom and Orange did not respond to requests for comment. Microsoft declined to comment.
Undersea cables are central to U.S.-China technology competition.
Across the globe, there are more than 400 cables running along the seafloor, carrying over 95% of all international internet traffic, according to TeleGeography, a Washington-based telecommunications research firm. These data conduits, which transmit everything from emails and banking transactions to military secrets, are vulnerable to sabotage attacks and espionage, a U.S. government official and two security analysts told Reuters.
The potential for undersea cables to be drawn into a conflict between China and self-ruled Taiwan was thrown into sharp relief last month. Two communications cables were cut that connected Taiwan with its Matsu islands, which sit close to the Chinese coast. The islands’ 14,000 residents were disconnected from the internet.
Taiwanese authorities said they suspected a Chinese fishing vessel and a Chinese freighter caused the disruption. However, they stopped short of calling it a deliberate act and said there was no direct evidence showing the Chinese ships were to blame. China, which considers Taiwan a breakaway province, has ratcheted up military and political efforts to force the island to accept its dominion.
But the U.S. government, concerned about the potential for Chinese spying on these sensitive communications cables, ran a successful campaign to flip the contract to SubCom through incentives and pressure on consortium members.
Reuters has detailed that effort here for the first time. It’s one of at least six private undersea cable deals in the Asia-Pacific region over the past four years where the U.S. government either intervened to keep HMN Tech from winning that business, or forced the rerouting or abandonment of cables that would have directly linked U.S. and Chinese territories. The story of those interventions by Washington hasn’t been previously reported.
Eavesdropping is a worry too. Spy agencies can readily tap into cables landing on their territory. Justin Sherman, a fellow at the Cyber Statecraft Initiative of the Atlantic Council, a Washington-based think tank, told Reuters that undersea cables were “a surveillance gold mine” for the world’s intelligence agencies.
“When we talk about U.S.-China tech competition, when we talk about espionage and the capture of data, submarine cables are involved in every aspect of those rising geopolitical tensions,” Sherman said.
Two of the projects upended by the U.S. government involved cables that had already been manufactured and laid thousands of miles across the Pacific Ocean. U.S. tech behemoths Google LLC, Meta Platforms Inc and Amazon.com Inc were major investors in at least one, or in Meta’s case both, of those cables, according to public announcements made about the projects. The delays and rerouting of the cables cost each of those companies tens of millions of dollars in lost revenue and additional costs, four sources who worked on the projects said.
Amazon, Meta and Google declined to comment about these projects or the cable wars.
SubCom’s cable coup is part of a wider effort in Washington aimed at reining in China as Beijing strives to become the world’s dominant producer of advanced technologies, be it submarines, semiconductor chips, artificial intelligence or drones. China is bulking up its military arsenal with sophisticated armaments. And Beijing has become increasingly assertive about countering U.S. influence worldwide through trade, weapons and infrastructure deals that are drawing wide swaths of the globe into its orbit.
The U.S. cable effort has been anchored by a three-year-old interagency task force informally known as Team Telecom.
To oust the Chinese builder from the Singapore-to-France cable, the United States proffered sweeteners – and warnings – to the project’s investors.
On the sweetener side, the U.S. Trade and Development Agency (USTDA) told Reuters it offered training grants valued at a total of $3.8 million to five telecom companies in countries on the cable’s route in return for them choosing SubCom as the supplier. Telecom Egypt and Network i2i Limited, a company owned by India’s Bharti Airtel Limited, got $1 million apiece, USTDA said. Djibouti Telecom, Sri Lanka Telecom and Dhivehi Raajjeyge Gulhun of the Maldives each received $600,000. None of the five responded to questions from Reuters.
Meanwhile, American diplomats cautioned participating foreign telecom carriers that Washington planned to impose crippling sanctions on HMN Tech, a development that could put their investment in the cable project at risk. The U.S. Commerce Department made good on that threat in December 2021, citing HMN Tech’s intention to acquire American technology to help modernize China’s People’s Liberation Army.
A senior U.S. State Department official confirmed that the department had advocated through its embassies to help SubCom win the contract, including warning other countries about the security risks posed by HMN Tech. Though the cable won’t come ashore in Chinese territory, the U.S. government believed HMN Tech could insert remote surveillance equipment inside the cable, the official said without providing evidence. The Commerce Department declined to comment.
Two months later, in February 2022, SubCom announced that the cable consortium had awarded it the contract to build the SeaMeWe-6 cable. China Telecom and China Mobile, which were due to own a combined 20% of the cable, pulled out because the Chinese government wouldn’t approve their involvement in the project with SubCom as the cable contractor, three people with knowledge of the matter told Reuters. China Unicom remained.
China’s foreign ministry and its defense ministry, which handles questions for the People’s Liberation Army, did not respond to Reuters’ questions.
On June 26, 2022, the White House published a fact sheet citing various upcoming infrastructure projects, including the SubCom undersea cable deal. The document said the U.S. government had “collectively helped secure” the award of that contract for SubCom.
The White House did not respond to a request for further comment.
U.S.-China relations are at the lowest they’ve been in decades. The two countries have clashed on a host of issues, including China’s tacit support for Russia’s invasion of democratic Ukraine, its crackdown on Hong Kong, and the future of Taiwan, which Chinese President Xi Jinping has pledged to bring under Beijing’s control. In February, the United States shot down a Chinese spy balloon that floated into American airspace. China has claimed it was a weather balloon that got blown off course and accused the Americans of overreacting.
President Joe Biden’s policies are increasingly isolating China’s high-tech sector with the aim of bringing some technology manufacturing back to America while keeping cutting-edge U.S. innovation out of Chinese hands.
Over the last year, the Biden administration has pushed through a landmark bill to provide $52.7 billion in subsidies for U.S. semiconductor production and research. The Commerce Department in December added dozens of Chinese firms producing technology such as drones and artificial intelligence chips to its so-called Entity List, which severely restricts their access to U.S. technology.
Chinese Foreign Minister Qin Gang, speaking in Beijing this month, said the two superpowers are destined for “conflict and confrontation” unless Washington abandons its policy of “containment and suppression” towards China.
Three companies have dominated the construction and laying of fiber-optic subsea cables for decades: America’s SubCom, Japan’s NEC Corporation and France’s Alcatel Submarine Networks, Inc.
But a seismic shift occurred in 2008 when Huawei Marine Networks Co Ltd entered the fray. Owned by Chinese telecom Huawei Technologies, the Tianjin-based company initially built small cable systems in underserved markets such as Papua New Guinea and the Caribbean.
Fast-forward 15 years and the firm, now known as HMN Tech, has become the world’s fastest-growing manufacturer and layer of subsea cables, according to TeleGeography data.
But the company’s short history has been shaped by deteriorating U.S.-China relations.
In 2019, Huawei Technologies came under fire from the administration of then-U.S. President Donald Trump. The Commerce Department banned Huawei and 70 affiliates from buying parts and components from U.S. companies without government approval.
That move was part of a global campaign by Washington and its allies to stop Huawei Technologies from building fifth-generation, or 5G, communications networks around the world due to concerns that host nations would be vulnerable to Chinese eavesdropping or cyberattacks, the details of which were revealed in a previous Reuters investigation.
Huawei Technologies said at the time that it was a private company that is not controlled by the Chinese government. Contacted for this story, Huawei Technologies said it fully divested its stake in Huawei Marine in 2020 and is no longer connected with the cable-laying company, which rebranded as HMN Tech under new Chinese ownership.
HMN Tech expanded its ambitions with the PEACE cable, which came online last year and connects Asia, Africa and Europe. The firm was poised to make another great leap with the Singapore-to-France project before SubCom snatched it away.
The following account of how that deal fell apart for the Chinese players is based on interviews with six people directly involved in the SeaMeWe-6 contract. They all asked not to be named as they were not authorized to discuss potential trade secrets or matters of national security.
