Huawei’s 5G Coins It In Despite Washington’s Objections

HUAWEI’S FIRST-QUARTER results suggest that the United States’s campaign against the world’s biggest telecoms equipment maker is having limited effect, especially outside the advanced economies.

The company has long denied Washington’s allegation that Beijing ultimately controls it and that its equipment could be used for espionage in the service of Chinese state security, the basis of the Trump administration’s campaign to prevent other governments from using Huawei’s 5G equipment.

Huawei says its income was 179.7 billion yuan ($26.8 billion) in January to March, a 39% increase on the same period a year earlier. It did not disclose its net profit but said it operated at an 8% net profit margin, slightly higher than in the first quarter of 2018.

It reported sales increases in all its three customer groups — carriers, enterprise and consumer customers. On the contentious 5G technology, it said it had signed 40 contracts with leading global carriers, and shipped more than 70,000 5G base stations, a number it expects to reach 100,000 by May. It says 2019 will be ‘a year of large-scale deployment of 5G around the world’.

In practice, only a handful of countries have heeded Washington’s exhortation to follow it in banning Huawei from their 5G telecoms network: Australia, New Zealand and Japan, all close US allies in Asia.

Europe, which will likely lead 5G rollouts — eleven EU countries have 5G auctions scheduled for this year and six for 2020, with 30% of its internet users expected to be on 5G by 2025 — has been more ambiguous in its response.

Denmark, Germany, Italy, Norway, Poland and the United Kingdom all have expressed concerns about the cybersecurity risks of contracting a firm with opaque links to Beijing. However, Belgium has declined to ban Huawei, saying it has found no deliberate technological compromises in its equipment that could be misused by China’s state, but it will keep the equipment under review. Germany has taken a similar line but is drafting quality and cybersafety standards for 5G suppliers and talking about a ‘no-spying agreement with China.

France is debating 5G legislation that would impose extensive security tests. The report of a Dutch government investigation into Huawei is due in May when the United Kingdom is also expected to make a final decision. London has repeatedly raised concerns about Huawei equipment and the firm’s ability to fix cybersecurity problems but also has one eye on a post-Brexit trade deal with China.

For all of Europe, keeping China, a critical trade and investment ally, on side while securing the Internet of Things devices and automated vehicles that 5G will enable, from malicious state and non-state cyber attacks will be a delicate balancing act, made harder still by the current unease of the transAtlantic relationship. Washington may ban US firms from working with any others, including European firms, who use Huawei technologies and equipment.

Brussels and EU member governments will try to keep the decision-making process on the technical level and not get sucked into the political dimensions that saw Meng Wanzhou, Huawei’s chief financial officer and daughter of its founder, Ren Zhengfei, arrested in Canada in December at Washington’s request on charges of bank and wire fraud in violation of US sanctions against Iran. (She denies wrongdoing.)

The European Commission’s recently published recommendations on 5G network cybersecurity rejected bans on specific suppliers (unnamed, but for which read Huawei) and told member states to come up with joint EU-wide security checks for firms building 5G networks in Europe by the end of this year.

While Europe will be an important beachhead for Huawei’s 5G equipment and offers a near-term market, the company is looking beyond Europe. Many parts of Asia, Africa, Latin America and the Middle East will transition from 2G/3G/4G to 5G over the next ten years. That is where Huawei’s future sales lie.

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Filed under China-E.U., China-U.S., Technolgy

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