Blacklisting: No Huawei 5G Self-Reliance a Surprise!

personal jottings

Privacy, data protection, national security and intellectual property rights (IPR) violations do not stir emotions in Asia as much as they do in the developed West.

Huawei has effectively been able to get a good hold on the market in the region, partly because it offered comparable technology at costs that are lower than its major global competitors and partly because it did not have to battle such concerns here.

  • The blacklisting of Huawei by the U.S. over the weekend may challenge status quo in the region even as initiatives are afoot in Singapore for the rollout of 5G networks. Huawei’s networking gear is at the centre of Singapore’s 4G / Next-Generation Nationwide Broadband Network (NGNBN).

5G Rollout and Call for Proposal

With Singapore announcing a Call for Proposal for the rollout of 5G networks earlier this month and with Huawei’s blacklisting, the competitive scenario appears to have reached a state of flux. While it was earlier projected that Huawei, Ericsson and Nokia would be in the reckoning for it, the American ban on the Chinese giant has cast a shadow on its prospects.

  • The U.S. curbs apply to 68 non-U.S. entities of Huawei, including the one in Singapore. It remains to be seen how Singapore deals with this development.
  • Suffice it to say that U.S. embargoes, sanctions and trade restrictions are to be taken seriously and any breach may result in penalties and affect bilateral ties.
  • Incidentally, Huawei’s troubles with the U.S. reached a flashpoint with the arrest of its CFO Meng Wanzhou (daughter of Huawei’s founder, Ren Zhengfei) last December over alleged use of “the global banking system to evade U.S. sanctions against Iran.”

Singapore has set its 5G sights on vendor diversity even as Ericsson and Nokia are believed to be manufacturing components for next-generation mobile infrastructure in China.

Singapore is targeting a standalone network to reap the full benefits of a 5G network. As a result, suppliers do not have the leeway to piggyback on the current 4G infrastructure.

So, more complications may begin to unravel from the U.S. ban.

What surprises me is that there are still network / server components for 5G technology that are not made in China or by Huawei, frequently blamed for patent thefts.

Still, the IPR of American components does not appear to have been compromised and China is unable to boast 5G self-sufficiency, at least for those components it has to rely on American companies.

Huawei blacklisting

Business Continuity

It is believed Huawei is able to meet one-third of its requirements as it had been working on manufacturing components and technology needed for the 5G infrastructure that it is selling globally as a frontrunner.

As part of its Business Continuity Plan, Huawei is reported to have initiated plans to make its own chipsets (so it can stop buying them from the likes of Intel, Qualcomm and Broadcom). Over the course of the last year, it may also have been accumulating stockpiles from American companies of network/server components for its 5G technology.

  • Huawei has been buying goods and services from U.S. companies valued at more than $11 billion each year.

No U.S. Company in 5G Space – Not Even Cisco, HP or IBM

However, Huawei is the global leader in the supply of 5G network equipment, trailed by Nokia and Ericsson. What is also clear is that there are no American companies in this space. Not even networking leader Cisco, or IBM or HP.

  • Cisco had fought legal battles with Huawei over IPR infringements in the past. Once, a settlement between the two companies was reached after Cisco code was discovered in a Huawei product.
  • During my employment with Cisco (2005-2010), I had worked on building competitive intelligence against Huawei – along with a few SMEs
  • Huawei had faced IPR challenges with other American equipment manufacturers as well.
  • Interestingly, Lucent (another former employer for me) had the technology ahead of the rest along with Motorola. But Lucent’s arm and of Motorola are now with Nokia, stripping the U.S. of any wireless infrastructure presence.
  • Current dynamics are different with Huawei spending around US$15 billion on R&D.

In 2009, Cisco made a foray into the server sector where HP and IBM, its partners, were .holding sway. It did not go well with particularly HP and they became rivals both in the server and networking equipment (routers and switches) markets.

While Cisco’s (or that of a competitor) equipment are key to a telecommunication service provider’s network, it has no play in the wireless infrastructure market that Huawei dominates. It has clearly chosen to stick to its core business as is evidenced by its decision to sell in 2015 TV set-top box leader Scientific Atlanta, which was a costly acquisition for Cisco in 2006.

  • Although there was talk of Cisco acquiring Nokia around the same period it remained a rumour. If it had made that acquisition it will have given it entry into the radio access segment of the telecom equipment market.

Huawei Phones Lose Access to Google

The consequences of the blacklisting have started to unfold with Google suspending ties with Huawei. This will mean that new Huawei phones will have no access to Google apps and existing users may lose updates to the Android operating system.

Huawei, though, is believed to be in the process of launching its own OS and have its own apps. It may still not be the same as having access to Google apps, unless the blacklisting is overturned by the U.S. That may happen, but until then the hiccups will stay.

G Joslin Vethakumar

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