Germany wants a rapid roll-out of 5G technology to sort out its creaking mobile phone network. Yet a group of German lawmakers wants to ban equipment made by China’s Huawei Technologies Co. The country can’t do both.
There is an inevitable trade-off for any nation considering a block on Huawei’s telecoms gear. Sticking to the equipment produced by its big rivals Nokia Oyj, Ericsson AB and Samsung Electronics Co. Ltd. might lessen the risk of exposing your networks to malicious interference from Beijing; unfortunately it also means slowing down the upgrades of those networks because Huawei is in the lead technologically. Deutsche Telekom AG, Germany’s biggest phone carrier, estimates a Chinese ban would delay its 5G deployment by at least two years.
While governments from Britain to India are weighing a Huawei prohibition, Berlin has much more at stake than almost any other nation. That’s due in part to the Chinese company’s deep penetration of the German market. While Huawei has about one-third of Europe’s market for telecoms equipment, it supplies at least half of Deutsche Telekom’s gear.
The German magazine WirtschaftsWoche has reported that Telekom plans to strip Huawei components out of its core network over the next two years, no doubt because of the political pressure. Yet Spain’s Telefonica SA, which operates Germany’s second-biggest wireless network, last week picked both Huawei and Nokia as key suppliers for its own next-generation networks. This is why concerted European action on Huawei makes more sense than doing it piecemeal.
Germany has one of the worst mobile networks in Europe, according to research firm OpenSignal. As part of its auction of 5G spectrum rights, the German regulator stipulated aggressive coverage targets. The aim is to make sure that the country’s industrial companies can lean on 5G to keep pace with the latest innovations in artificial intelligence and cloud computing.
Just as significantly, many of Germany’s biggest businesses depend on Chinese exports. It is Germany’s third-biggest export destination, accounting for some $100 billion a year, and the single biggest market for carmakers Volkswagen AG, BMW AG and Daimler AG. So comments from China’s ambassador to Berlin on Friday, where he mooted retaliation for any Huawei ban, will have been heard with dismay in the boardrooms of the autos giants.
This leaves Berlin with a real conundrum. Banning Huawei might be the most sensible course of action from a security standpoint. There’s also the not-so-small diplomatic matter of keeping the Americans happy, with Washington eager for a hard line on the Chinese company.
But as Germany plays catch-up on mobile connectivity, there’s a tangible downside to such an embargo, even without factoring in retaliatory trade measures from Beijing. Lawmakers would surely have to abandon Germany’s ambitious 5G goals, which include covering 98 percent of homes with download speeds of 100 megabits per second by the end of 2022.
Were fellow European Union member states to agree a common policy over the Chinese tech champion, as my colleague Andreas Kluth has advocated, then the competitive disadvantage of tackling Huawei would be reduced. But lawmakers need to acknowledge the true industrial cost of cutting it out of the supply chain.
Bloomberg
