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10 June 2019

Google stresses about Huawei ban, Samsung waits in the wings

Google may have raced to deprive Huawei of access to its Android technologies, as soon as the US government placed the Chinese firm on its ‘entity list’, but its parent firm, Alphabet, is also warning of dire consequences if the ban on trading with Huawei becomes permanent.

If China is forced to develop its own platforms, including a mobile operating system, not only would US companies lose access to a large customer base, but – Alphabet argued – a Huawei mobile OS could be more vulnerable to hacking and so present security risks.

Whatever the qualms of US hi-tech firms about China applying its huge scale and brainpower to becoming a technology island, many of them are complying with the US bar on trading with Huawei. Facebook is one of the latest, following Instagram in removing pre-installed versions of its apps on Huawei devices.

And non-US companies are getting drawn in too. According to the South China Morning Post, Taiwanese manufacturer Foxconn has stopped several production lines that were assembling Huawei smartphones, presumably because of reduced demand for the products in the light of the removal of access to Google and other apps.

Meanwhile, the other mobile network vendors face the difficult task of stepping into the breach left by Huawei, in a way that will not delay roll-outs. Nokia and Ericsson have both expressed concern that potential sanctions against Huawei in European and other markets would just cause MNOs to delay deployments while they revised their RFPs, or while they waited to see whether the bans on Chinese suppliers were lifted.  With many governments still assessing the US-led claims that Chinese 5G networks could be used for cyber-attacks, operators are left in limbo about the vendors they will be able to select. For those with existing Huawei investments, this is particularly problematic, as many will have bought 4G equipment that was ‘5G-ready’.

Samsung is probably the only infrastructure vendor which is unequivocally positive about bars on Chinese vendors, since it does not have a base to defend outside South Korea, and is widely seen as the only realistic supplier to act as a check on Nokia and Ericsson, at least in the macro RAN.

A new study by analysts at Dell’Oro Group found that Samsung achieved a leadership share of 37% of new 5G sales by revenue in the six-month period from October 2018 to March 2019. Admittedly this relates to a small base of early sales, and Samsung was able to play to its existing strengths in fixed wireless with its big Verizon alliance, but it could be a valuable foothold, especially if the Chinese vendors are excluded from some markets (officially, or because of operator uncertainty).

Dell’Oro said 5G NR already accounted for between 5% and 10% of the total RAN market in the first quarter of 2019, with 80% of that figure going on Massive MIMO – the large antenna arrays are a major capex burden at a time when the cost of the other RAN elements is being driven down by virtualization, network sharing and the ability to upgrade ‘5G-ready’ LTE systems in software.

Samsung cashed in on the Massive MIMO boom because it deployed its antenna arrays to support the South Korean operators’ deployments in 3.5 GHz earlier this year. It is also working with Verizon, AT&T and Sprint in the USA.

It remains to be seen whether it can continue to prosper in 5G when deployments shift from the early markets of the USA and Korea – in which Samsung has an established position – to the large number of countries where it has had no place in the RAN space. But it will clearly have a better chance if Huawei and ZTE are not in every market.

As for Nokia and Ericsson, the report suggested the latter was ahead in 5G revenue share in the six-month period. Nokia has acknowledged that it was slower to get 5G fully deployable than its rivals, but in recent weeks, CEO Rajeev Suri has insisted it has caught up, leapfrogging the two biggest network suppliers to claim 42 5G commercial contracts.

One of its key target markets is Canada, which has so far refused to go along with US calls for a ban on Huawei, but is in the process of evaluating cybersecurity claims and challenges. While that process drags on, Nokia has been working with three operators – incumbent BCE, Telus and cableco Shaw Communications – on 5G trials. The third major MNO, cable/mobile player Rogers, has already selected Ericsson as its 5G supplier.

Canada is attractive to Nokia because the big telcos have previously worked with Huawei on 3G and 4G networks. Rogers’ vice chairman, Philip Lind, said last week that Huawei should be banned from 5G networks. Richard Herald, president of Nokia’s Canada unit, told local media: “If nothing happens or if the worst happens for Huawei, we’ll be there regardless of the situation. We just have to demonstrate our readiness when they’re ready.”