US Governments Worries about Chinese Hardware in Sprint/Softbank Merger Deal

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WSJ is reporting that the US government wants more oversight over the Sprint/Softbank merger because they are going to use hardware equipment from the Chinese supplier Huawei. However, they may go even as far as outright ban any purchasing of equipment from Huawei, allegedly because of worries about the possibility of spying and hacking through that equipment. It’s not going to be easy to ban this kind of purchase, as due to free trade agreements US can’t ban a specific supplier:

“You have to find a way to say, ‘Don’t buy from the Chinese,’ without saying, ‘Don’t buy from the Chinese,’ “ said a person who has spoken with Sprint.

Huawei has repeatedly denied such accusations from the US government, and we’re also yet to see any hard proof that Huawei has been doing this. So far it’s still just a hypothetical issue that may or may not arise in the future. US government is right to be worried about this, though, and not just about Chinese manufacturers, but about those from other countries, too.

However, all of this seems a lot more like it’s just the US government using protectionist tactics to increasingly stop US companies from buying stuff from the Chinese, and instead buy from local suppliers, and not so much about hacking and spying concerns.

“The adoption of such a policy would seem little more than a market-distorting political or protectionist exercise,” Huawei’s spokesman, Mr. Plummer, said, referring to a review of equipment purchases that could exclude Huawei.

Huawei, and also ZTE, are now the two biggest leaders in network equipment, thanks to their low prices for components, and Huawei specifically has started outspending all of its competitors in research and development, too, while companies like Alcatel-Lucent and Nokia-Siemens have had trouble staying afloat lately.

Sprint and Softbank are saying that they would be fine with using other suppliers, though, but this does makes US carriers worried that they won’t be able to buy components at competitive prices in the future because certain competitors, usually the less expensive ones, are cut out from the market . A good outcome for everyone involved, including the US government, would be to verify Huawei’s equipment before being put in use, and when it’s updated through software. Unless the US government’s agenda is something completely different, then they should be fine with such a solution.