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Western countries’ growing veto of Chinese company Huawei, which the United States accuses of spying on Beijing’s behalf, is paving the way for Nordic manufacturers Nokia and Ericsson to global hegemony in the fifth generation (5G) mobile phone market. ).
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Given the endless applications and business opportunities it offers, 5G technology has become a strategic issue globally and its security and reliability a top priority of governments. Plus, it’s a succulent market.
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According to a recent Nokia study, 5G technology has the potential to contribute eight trillion dollars to the global economy by 2030, in areas such as industrial automation, Internet of Things (IoT) or driverless vehicles.
(Read: ‘wearables’ sales will grow 14.5% in 2020)
Huawei currently occupies the world leadership in the 5G networks sector, with a share of between 35 and 40%, well above Ericsson (20-25%) and almost double that of Nokia (15-20%). , according to data from the consulting firm Dell’Oro.
Therefore, the big beneficiaries of the Western veto to Huawei are the other two manufacturers capable of providing full 5G equipment and services – Nordic Ericsson and Nokia – who are taking the bulk of the new 5G network bids globally. outside of China.
EXPANSION OF THE VETO IN HUAWEI
The latest country to adhere to this veto was Sweden, the headquarters of Ericsson, whose authorities decided last Tuesday to ban Chinese companies Huawei and ZTE from accessing contracts for the implementation of 5G technology, claiming that they could damage the national security.
Sweden is therefore following the path taken by the United States, whose president, Donald Trump, last year decreed a ban on US companies from using 5G technology from Chinese suppliers for security reasons, and asked the European Union (EU ) and other countries that do the same.
Both Chinese authorities and Huawei have repeatedly denied the US allegations and asked companies and governments not to exclude Chinese manufacturers from deploying 5G networks for what they consider political reasons.
However, to date, countries such as Australia, Canada, Britain, Slovenia and Japan have already joined the US bloc – in addition to Sweden, for strategic reasons or pressure – and even threats – of the Trump government.
Other countries do not dare to veto Huawei directly for diplomatic reasons and for fear of possible reprisals from the Chinese government, although they advise their telecom operators not to purchase 5G equipment from Chinese manufacturers.
This is the case of France, where the director general of the National Agency for the security of information systems (Anssi), Guillaume Poupard, assured last July that his country will severely restrict – albeit without completely banning – the use of Huawei 5G networks for reasons of “sovereignty and independence”.
“We are seeing a snowball effect and there are many reasons why this is happening now. One of them is the geopolitical tension between the US and China, another that Huawei has become too important a player in the global network.” Mikael Rautanen, analyst of the consulting firm Inderes, explains to EFE.
“Another important reason is that it is about implementing 5G, a much more critical infrastructure for countries than 4G, as vital as water and electricity,” adds Rautanen.
OPERATORS ARE AFRAID OF DOING BUSINESS WITH HUAWEI
Operators’ fear of losing their licenses in the future if their governments decide that Huawei’s 5G networks may pose a national security risk is leading many of them to “voluntarily” exclude the Chinese manufacturer from their plans. 5G implementation.
A good example of this is Spanish telecommunications Telefónica, which last month excluded Huawei from its expansion plans for 5G networks in Spain, betting exclusively on Nokia and Ericsson, despite the fact that the Spanish executive has not officially spoken. about the possible risk of using Chinese equipment.
Months earlier, Telefónica had already announced its intention to “progressively” reduce Huawei’s presence at the heart of its 5G network, until it was completely eliminated by 2024, a measure similar to that announced by Vodafone for the whole 5G network in Europe. .
“Operators also see that there is a political risk when buying equipment from Huawei. This simple risk is enough for customers buying from Ericsson or Nokia even in countries where there are currently no restrictions on Huawei,” says Rautanen.
At the same time, teleoperators must ensure the competitiveness and functionality of their 5G networks, ideally diversifying their investments in order not to depend on a single supplier and become vulnerable.
“In the short and medium term, Huawei’s veto is good for Nordic suppliers, but in the long term it is difficult to say what will happen. Operators do not want to see a duopoly between Nokia and Ericsson, so there will be a demand for alternatives and that will bring new. competition, “predicts Rautanen.
The South Korean giant Samsung is establishing itself as the main rival of Nordic manufacturers in the global 5G market, as it has managed to place its share between 10 and 15%, according to Dell’Oro, although at the moment it does not have the same capabilities as Nokia and Ericsson to offer 5G equipment compatible with 3G and 4G technologies.
It remains to be seen what the Chinese government’s response will be if Huawei’s veto spreads to Europe and America, but for now it cannot be ruled out that it will end up causing a large-scale trade war.
EFE
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