Despite U.S. objections over the past two years, Huawei has sought to develop its 5G network business, gaining dozens of contracts with carriers, many of which are in Europe.
However, in the context that the US is increasingly punishing Huawei, the UK’s change of decision will be a huge loss for this Shenzhen-based company and may even cause much trouble ahead. At the same time, Huawei’s supply chain has been disrupted due to U.S. restrictions, citing concerns about security risks when using its products.
Global hegemony ambition stalled
Carisa Nietsche, a researcher at Center for a New American Security, said that the UK decision would be a reminder of reconsideration for other European countries, about how they can minimize risks when allowing Huawei to develop 5G networks there. “The UK has long been a leader in the risk assessment trend in Europe. When it comes to Huawei, it is likely that other European countries will make similar moves,” she said. . ”
According to Paul Triolo, chief technology geography of Eurasia Group, in Germany, Deutsche Telekom, which relies heavily on Huawei equipment with 90% of its network, debates about China’s role in the country. hotter in recent months.
Meanwhile, Washington will likely attempt to capitalize on that momentum. U.S. national security adviser Robert O’Brien arrived in Paris on Monday for a three-day visit, joining talks with his counterparts from France, Germany, Britain and Italy. Accordingly, Huawei’s 5G network issue will be on the agenda.
After the British statement, Huawei called the country’s ban disappointing and was based on U.S. trade policy, not security concerns. Huawei spokesman Evita Cao said the company would continue to fulfill its obligations to customers and suppliers. She also added that Huawei will survive regardless of future challenges.
Under the Trump administration restriction, Huawei has set an ambition to “surpass” Samsung and become the largest smartphone manufacturer in the world by 2020. In addition, the goal is to become a supplier. 5G device. Last year, Huawei said it had 91 5G contracts, more than half of them in Europe (47), 27 in Asia and 17 in other regions. On July 15, the company declined to update these numbers.
However, the sanctions from the US has made the ambition of global domination “out of breath”. Last year, Washington banned U.S. companies from providing technology to Huawei. This means that Huawei’s latest smartphones will not use the Android operating system.
By May, the United States continued to ban global companies from using U.S. technology to sell semiconductors to Huawei. This move prevented the use of chipsets manufactured by major vendors, including TSMC. Without the chipset, Huawei cannot build 5G base stations either.
In recent months, the United States is also promoting “Clean Path Initiative,” which requires countries and carriers to ensure contact between the United States and overseas military and diplomatic bases without Chinese equipment. Quoc. In the UK, senior US officials “repeatedly warned that the US-UK intelligence link could be at risk if the UK does not take tighter action against Chinese 5G suppliers. ”
The “price” to pay when turning away from China
According to Edison Lee, an analyst at Jefferies, the UK ban will leave Huawei facing a smaller and less profitable global market for the 5G device business. He added: “However, not every European country has the same decision as Britain.”
Some comments may be concerned that Huawei’s difficulties will spark retaliation. China has signaled that it will respond to actions that hinder the country’s largest technology company.
On July 15, Chinese Foreign Ministry spokesman Hua Chunying said, “You made the wrong decision, which could seriously undermine the interests of Chinese companies.” “China will take this issue seriously and comprehensively,” she said, “will take all necessary measures” to protect its interests.
Triolo, meanwhile, said German officials were concerned that banning Huawei from developing 5G networks could lead to Beijing’s retaliation against its major exporters. According to government statistics, Germany exported nearly 100 billion euros ($ 114 billion) of goods to China in 2019, making it the second largest export market after the United States.
In addition, blocking Huawei’s ambition has another consequence. While Britain’s banning Huawei was a major victory for the Trump administration, the move dealt a heavy blow to Britain’s rollout of 5G technology. Officials have warned that the launch of the 5G network could be delayed by up to 3 years and cost billions to change Huawei equipment.
According to Lee, an analyst at Jefferies, the same thing happens if other countries make the same decision and make carriers reluctant to upgrade the system. He said: “Britain’s decision to ban Huawei will provide little additional incentive for telcos to rapidly develop 5G networks.”
Lee said choosing equipment from vendors such as Huawei, Nokia, Ericsson and others is one of the biggest business decisions for any mobile operator. “When they have to change their chosen supplier and also get rid of used equipment without any problems for the past five years, it will be a big disruption for the company,” he said. their business plan. ”