Asharq Al-awsat English Middle-east and International News and Opinion from Asharq Al-awsat Newspaper

Huawei and the US Escalation

Huawei and the US Escalation

Saturday, 30 May, 2020 - 06:00

Fresh US sanctions against Huawei Technologies Co. threaten to tear apart the compromise British officials struck in January to keep the Shenzhen-based telecom giant’s equipment in UK networks, reviving a dilemma for Prime Minister Boris Johnson and leaving a hole in carriers’ supply chains.

A spokesperson for Britain’s National Cyber Security Centre has said it’s “looking carefully at any impact” of American sanctions introduced May 15, which prevent Huawei from sourcing microchips made using US technology.

The new rules may make it impossible for carriers to include Huawei in their 5G buildout plans, even though UK lawmakers incurred the wrath of US allies by stopping short of a full ban in January. The prevalence of US technology means Huawei could be cut off from buying or even making the chips it needs, putting it beyond diplomatic help.

“As things stand, Huawei has 12 months left to live,” said analysts led by Pierre Ferragu at New Street Research. “Without leading-edge chips, Huawei cannot sell competitive networking equipment, and there is no alternative to fabricators powered by US technology to manufacture such chips.”

In the UK, Huawei is crucial to the country’s telecom networks -- making up about a third of wireless antennas and 40% of equipment for high-speed fiber optic networks. And there’s no obvious alternative to replace it.

The blow could pave the way for British government officials and carriers to drop Huawei after more than a year of stern words and less punitive restrictions failed to advance US objectives. American officials say Huawei is a proxy for Beijing’s authoritarian government and that allies who use it will open the door to espionage -- claims Huawei has repeatedly denied. The US has threatened to curb intelligence-sharing with allies who don’t ban it.

“Our priority remains to continue the rollout of reliable and secure 5G networks across Britain,” Huawei Vice President Victor Zhang said in response to the National Cyber Security Centre statement. “We are happy to discuss with NCSC any concerns they may have and hope to continue the close working relationship we have enjoyed for the last ten years.”

In January, the UK banned the Chinese company from supplying components for the sensitive network cores, which hold and control customer information, and for locations such as nuclear sites and military bases. But it allowed Huawei to provide as much as 35% of non-sensitive 5G equipment, such as the antennas. The compromise angered US President Donald Trump at a time when the UK needs to strike crucial new trade deals as it exits the European Union.

But swapping out Huawei isn’t so simple. There are only two major alternatives: Finland’s Nokia Oyj and Sweden’s Ericsson AB. Phone companies warn that handing them a duopoly over British networks could inflate prices and crimp competitive innovation, and it’s not clear that they have the manufacturing capability to churn out enough equipment in the short term anyway. To cultivate a more diverse supply chain, big carriers like Vodafone Group Plc have backed an initiative to make more of their networks’ hardware and software vendor-neutral. But that will take years to develop and isn’t a short-term fix. US attorney general Bill Barr also suggested the US and its allies should consider investments in Nokia or Ericsson.

Complying with Britain’s 35% cap already looks costly. Britain’s biggest phone carrier, BT Group Plc, said in January that overhauling its networks to rip out the Huawei 4G kit, which will underpin its initial 5G service, would cost 500 million pounds ($616 million). Replacing all of it would cost billions for BT and its rivals, delaying upgrades, and could threaten the quality of broadband services just as the coronavirus pandemic forces millions to rely more than ever on their home internet connections.

“We know what happens when we strip out infrastructure: A) it normally takes years, and B) right now, if you have a reliable line, don’t touch it, because you’re going to have to need it for the next few months,” said Dario Talmesio, a telecom industry analyst for Omdia.

The new rules require any foreign chipmaker that uses American gear to get a license before they can sell to companies on a US blacklist, a roster that includes Huawei. But the impact will depend on how exactly they’re applied. Previous blacklist restrictions included exemptions and deferrals.

The biggest US carriers never used Huawei, meaning American policy makers have avoided this dilemma at home. But their biggest European peers have grown reliant on it over the past decade, and leaders like Johnson have been forced to weigh the costs of a ban against the fall-out of a green light. Johnson’s plan already faced rebellion from his own party’s ranks.

By cutting off Huawei’s supply, it’s possible the US could force his hand.


Other opinion articles

Editor Picks