Huawei rotating Chairman Eric Xu cast doubt on the 5G plan currently pursued by the United States wireless industry, stating that Washington's insistence on keeping the Chinese technology giant out of the country makes it less likely the global 5G race will be won by the West. In a statement provided to CNBC earlier today, Mr. Xu reiterated a number of points previously raised by many Huawei officials, once again asserting that the Shenzhen-based firm is a world leader in telecom equipment and provides some of the best hardware and software at a highly competitive price point.
"Without the participation for 5G technology leaders, without full competition, telcos would have to spend more to buy 5G equipment for network rollout," the industry veteran exemplified, describing the situation as a straightforward economic case wherein less competition equates to higher prices. A costlier 5G buildout will certainly lead to higher prices of 5G products and services as device manufacturers and network operators will be passing those expenses to consumers, Mr. Xu said.
Background: Following a long history of issues with both the U.S. government and American companies, Huawei has been essentially blocked from offerings its network solutions to any stateside entities in 2012. The ban was reinforced earlier this year with a provision of the annual spending bill that specifically barred state and federal agencies from relying on Huawei-made telecom technologies or solutions from companies associated with Huawei. The law extended the same prohibition to ZTE, another Chinese company that's been fending off accusations of posing a security threat to the West for many years now.
Both Huawei and ZTE repeatedly dismissed spying concerns as baseless but the stateside intelligence community is always quick to point out that existing Chinese laws make it easy for law enforcement and other government agencies in the Far Eastern country to compel domestic companies into submission when it comes to obtaining information on any individual or company within their reach, whether fulfilling such a demand requires procurement of existing info or collection of future data. As a result, Washington repeatedly described Huawei and ZTE as national security threats, not necessarily because they have a proven track record of spying on their clients on behalf of Beijing but because they have the potential to easily be forced to do so in the future.
Australia followed the U.S. example and indirectly banned Huawei from participating in its 5G buildout project this summer, prompting criticism from the company and the Chinese government, both of whom called for an even playing field in the country's wireless market. Critics of the communist regime and some advocacy groups often mockingly point out that China should open up its borders to large-scale foreign investments if a fair and open economy is high on its list of ideals and perhaps start with the wireless industry by allowing the likes of Nokia and Ericsson to compete with Huawei and ZTE on the latter duo's home turf. South Korea is currently considering following suit behind the U.S. and Australia, which prompted Huawei to attempt impressing the local wireless industry with the promise of a foldable 5G Android smartphone by mid-2019.
Despite its issues in the West, Huawei already signed 22 supply contracts centered on 5G equipment around the world, the company revealed last week. The Chinese conglomerate remains the world's largest manufacturer of telecom infrastructure and has made a substantial contribution to the 3GPP's efforts to standardize the next generation of mobile communications known as 5G New Radio (NR). The technology is significant because it represents the first wireless infrastructure update that's been designed with concrete use cases in mind and is also substantially more upgradeable than previous telecom solutions. Taken together, these two factors should allow 5G rollouts to quickly have an impact on the global economy, enabling new technologies such as remote surgery, self-driving vehicles, and cutting-edge IoT platforms that will in turn create millions of new jobs and spur economic growth.
Due to those optimistic expectations, most of the world's developed nations are racing toward 5G commercialization and with Huawei being the largest network equipment maker on the planet, avoiding its offerings often means going out of one's way to do so; Ericsson, Nokia, and Samsung are the only major firms the U.S. and its allies can rely on as an alternative to Huawei's hardware and it remains to be seen how the handle an unprecedented demand for telecom gear in the coming years. Non-standard 5G rollouts are already taking place in the U.S. and 5G NR buildouts are scheduled to start early next year, with all national carriers previously promising to achieve nationwide coverage by 2020. South Korea, Japan, Australia, and China may all connect their urban centers to the next generation of wireless even sooner.
Impact: Mr. Xu's Thursday comments are yet another indication that Huawei's U.S. rhetoric isn't going to change anytime soon; despite its history of issues with Western governments and companies, including corporate espionage and trade secret theft scandals, as well as an overall lack of structural transparency, the firm hardly has an established track record of proving any one of its accusers right in regards to allegations that it poses a national security risk to any country. However, China's existing regulatory framework and the nearly limitless pull of its intelligence agencies makes the threat of Huawei being turned into a spying tool against is will highly credible, at least as far as the U.S. government is concerned.
All of that led to the current status quo that's preventing Huawei from running a large-scale wireless business in the U.S. as it cannot feasibly defend itself from allegations that it might possibly be forced to spy for Beijing and Washington cannot take the risk of giving it a chance to even attempt doing so in practice, leaving Huawei with nothing else to do but continue denying those accusations. Coupled with the ongoing trade war between the U.S. and China, today's geopolitical climate is far from good news for Huawei's global ambitions, especially as the American government is presently also pushing its allies to ditch the Chinese technology juggernaut as well.