Although US president Donald Trump has taken a big step back from the brink of an all-out ban on Huawei procuring US components, trade tensions with China continue to rumble amid the prospects of a global slowdown, and the position of Huawei remains uncertain. That has negative implications for the whole mobile network industry, even Huawei’s direct competitors – Nokia and Ericsson have both been clear that restrictions on their arch-rival could deprive them of access to China-influenced markets, and even delay many operators’ 5G decisions and roll-outs round the world.
Clarity is much needed, especially as there is now another major trade war erupting, between two of the most important countries in the mobile landscape, Japan and South Korea. Combined with a slowing Chinese economy, and warnings of possible recession in some western markets, the macro-economic picture is all wrong for the massive 5G roll-out on which vendors, and many governments, are banking.
This broader environment makes it important that the right conditions are created to encourage as much investment in mobile build-out and services as possible – not just to support the cellular industry itself, but to enable platforms on which digital services can be built, which in turn can support new revenues and new socio-economic impacts, to offset the effects of any economic lethargy.
One element in that is the position of Huawei and ZTE, and more widely, the position of China in the 5G picture. There are two main specific issues. One is the placing of Huawei on the USA’s entity list, which would bar US firms from selling to the Chinese firm without a special licence, with negative consequences for its US suppliers, and by extension, those in US-allied countries, which would be forced to choose between trading with Huawei and with the USA.
Trump appeared, a few weeks ago, to have backed away from this action, but there is still nervousness that he could flip-flop again, and the status of Huawei, and whether it really has gained a permanent reprieve, is far from clear.
The second issue is whether Huawei (and ZTE) will be allowed to supply equipment for 5G roll-outs in US allied countries. They have been barred from tier one infrastructure deals in the USA for years, but over the past year, the US administration has been pressurizing other governments to follow suit, citing national security concerns (which have never been substantiated). Only Australia has completely gone along with the USA’s wishes, but may European and other countries are still reviewing their policy, creating uncertainty and risk for operators.
With the Japan-Korea tensions threatening to add another dose of cost and risk to the 5G project, it is critical that the position of Huawei is clarified at once. That will help to reassure operators and enable them to understand their 5G choices. It will not, however, change the long term damage that has been done to the 5G supply chain. China has been clearly shown the wisdom of breaking its dependence on US technology and patents, and will redouble its efforts, creating a far more challenging environment for the older chip and equipment vendors. More broadly, that could create technology islands (with Japan and Korea, even aside from their current trade wars, having some interesting decisions to make about where they sit). And in turn, that would shatter the hard-won dream of a truly global mobile ecosystem, with all the growth and scale that could introduce, to the benefit of all stakeholders.