Some experts say Huawei is one year ahead of its rivals Ericsson and Nokia when it comes to 5G equipment. Why then does the company want to give it biggest advantage away?
As you might have guessed, these aren’t the best of the times for the Chinese conglomerate. The U.S. has not only banned the use of its 5G equipment in the country but is also urging allies to do the same. On top of that, companies stateside can no longer do business with the vendor. Thus, its bottom line is under threat.
Buyer Will Be Able To Modify The Source Code
Zhengfei says that in return for a one-off payment, a buyer will get access to the company’s current portfolio of 5G patents, code, blueprints, licenses, and manufacturing know-how. After that, both Huawei and the buyer will be free to modify the resources as per their needs.
Given that the source code can be edited, it will give ease of mind to the acquirer as it will be able to restrict access to the telecoms infrastructure created. In simple words, there will be no risk of China or Huawei spying on the company. This buyer can then sell equipment to other countries that have banned Huawei but still want cutting-edge technology that’s cheap.
Currently, the U.S. is dissuading its Western allies from buying 5G gear by stoking fears about espionage. Huawei has always denied these claims. By selling its 5G technologies and allowing the buyer to make modifications, the company might birth to its own competitor. That being said, the transaction will kind of vindicate Huawei.
Huawei’s CEO says that creating a rival will help level the playing field. This, he believes, is conducive to the company’s survival. Moreover, it will also clear the air regarding its supposed intentions to spy on the rest of the world. However, the sale might still not ease the U.S.’ national security fears in the short run. This is because the buyer will still likely make most of its equipment in China, in the short run at lease.
Proceeds From 5G Technologies Sale Can Help Huawei Make More Strides
As Zhengfei points out, the money from the deal will allow the company to advance further. Although he didn’t disclose the value of the company’s technology portfolio, it’s believed to cost billions of dollars.
Although it seems like Huawei has got it all sorted out, there are still some hurdles to think about. First off, it’s not clear if China will allow the deal to go through. After all, advancement in 5G gives it a considerable lead over other countries.
Another issue is that of finding a buyer. Ericsson and Nokia are unlikely to make an offer because of their egos. For a smaller firm, buying the technologies will be pointless as Huawei is allegedly in bed with operators. Samsung is slowly growing its networking equipment business, so there is a slim chance it might consider Huawei’s offer.
Even after giving away its well-kept secrets, Huawei’s is unlikely to lose its dominance. Firstly, the sale proceeds will likely finance new R&D endeavors and this can again give a lead to the company. Other than that, the vendor also owes its success to low pricing and speedy manufacturing, something which the acquirer will most probably not be able to offer. Moreover, the Chinese giant also serves regions where a Western firm might not want to go. In fact, Zhengfei has squarely admitted that he doesn’t think the potential buyers will be able to compete with it, even after gaining access to its 5G resources.
What then exactly is the point behind the proposal remains unknown. Zhengfei has denied that it’s a sign of desperation as the company says that it has found alternative suppliers in the face of the American embargo. He also doesn’t think that the company will be making a loss next year.