Huawei can expect more European hardship in the Biden era

Huawei is praying a change in US leadership will ease pressure on its $123 billion business. But the early signs have not been encouraging.

Tony Blinken, the prospective new US Secretary of State, might be a less divisive personality than incumbent and AC/DC fan Mike Pompeo, whose mission of sending Huawei to hell riled some European governments. But the alternative could be a more cohesive assault on the Chinese vendor, which is fast losing friends in Europe. Blinken has reportedly spoken of working through NATO to block Huawei's 5G progress in the region.

Victor Zhang, Huawei's vice president, would have felt jilted when a mid-November plea for clemency in the UK was studiously ignored. Days later, the Conservative government tightened its restrictions by outlawing the installation of Huawei's 5G equipment beyond September 2021. The election of Joe Biden has not prompted the sort of rethink Zhang hoped it might.

US President-elect Joe Biden is unlikely to be soft on Huawei.

The pattern is the same across much of Europe, and with good reason. Sanctions imposed by Donald Trump had bipartisan support and there is scant chance they will be rolled back with the Senate under the likely control of the Republicans in future. Huawei has sounded as panicked about these, and their impact on its supply chain, as an aircraft pilot running out of fuel. Some customers are parachuting into safety, whatever their governments say.

Chinese backlash

At the political level, opinion in Europe is now swinging firmly against China, whose saber-rattling in Asia, widely documented persecution of Uighur minorities and disregard for international trade norms are prompting a reappraisal of the relationship with Chinese companies. Huawei insists it is privately owned and not subject to Chinese state control, but critics are unappeased. After all, the nature of undemocratic governments is to control everything. The recent sale of Huawei's Honor smartphone business to a government-backed consortium just seemed like evidence of the state involvement that Huawei's opponents have complained about for years.

Still, there is no smoking gun that shows Huawei's network includes software for spying on Europeans or even crippling European networks. But is the risk worth taking when China's philosophy is so clearly unaligned with Europe's? No amount of government checks can eliminate that risk entirely, or network security breaches would be a fiction. "The main concern is not about spying," said Michael Trabbia, a senior executive at France's Orange, during a previous conversation with Light Reading. "The fear is their ability to stop or block the network."

The existence of competitive alternatives to Huawei has emboldened some governments and operators now dispensing with it. Sweden's Ericsson is at the front of the queue with a resurgent networks business under the stewardship of Börje Ekholm, CEO since 2017. Nokia, a Finnish rival, is also now landing contracts at Huawei's expense. The suggestion Europe would suffer badly without Huawei's expertise is largely unsubstantiated. The US manages without it, and so do KT Corp and SK Telecom in South Korea, one of the world's most advanced 5G markets. BT thinks it can replace all Huawei products in its network by 2028 for an additional fee of just £500 million ($674 million), about 2% of last year's sales.

CountryOperatorOperator movesGovernment movesBelgiumOrangeNokia is displacing Huawei as the single vendor of RAN products in a network jointly operated with ProximusEarlier this year there were reports that Belgium would limit "high-risk vendors," meaning Chinese firms, to 35% of any radio access network and ban them entirely from the coreBelgiumProximusNokia is displacing Huawei as the single vendor of RAN products in a network jointly operated with OrangeEarlier this year there were reports that Belgium would limit "high-risk vendors," meaning Chinese firms, to 35% of any radio access network and ban them entirely from the coreLithuaniaTeliaTelia this month confirmed it would replace Huawei with Ericsson as a supplier of radio access network products, having previously been 100% reliant on the Chinese vendor, according to Strand ConsultA National Threat Assessment published last year complained about the "increasing aggressiveness" of Chinese intelligence services in Lithuania, although there have been no explicit moves against HuaweiFranceOrangeCEO Stephane Richard previously said he would not use Huawei in France before Orange confirmed Ericsson and Nokia as 5G suppliersANSSI, France's cybersecurity agency, will reportedly not renew Huawei's regional equipment licenses when they are due to expire, forcing operators to find alternatives by 2028FranceSFR-NumericableUses Huawei across 55% of RAN sites, according to Strand Consult.As aboveFranceBouyguesUses Huawei across 50% of RAN sites, according to Strand Consult. Has already indicated it will dismantle 3,000 Huawei antennas in densely populated areas by 2028As aboveGermanyDeutsche TelekomRelies on Huawei for two thirds of RAN. Resists official ban but wants O-RAN mandated in future telecom legislationAuthorities are still weighing a decision but noises at EU level have already persuaded Deutsche Telekom and Vodafone to remove Huawei from their core networksGermanyTelefónica DeutschlandTakes half its RAN products from Huawei, says Strand Consult, but has promised to be "clean," meaning Huawei-free, in near futureAs aboveItalyTelecom ItaliaBuys 55% of RAN gear from Huawei, according to Strand Consult, but has said it could manage a transition if Huawei were banned by Italian authoritiesGovernment does not appear to have taken an official decision about the role of Chinese vendors in Italy's telecom networks but reportedly vetoed a 5G deal between Huawei and Fastweb in OctoberPolandPlayStrand Consult reckons 90% of RAN is Huawei-suppliedPoland has introduced legislation that would prevent operators from buying products sold by high-risk vendors and require them to remove products they have already deployed within the next five yearsPolandOrangeStrand Consult reckons 70% of RAN is Huawei-suppliedAs abovePolandT-MobileStrand Consult reckons 70% of RAN is Huawei-suppliedAs aboveSwedenThreeBuys all its RAN gear from Huawei, according to Strand ConsultIn October, regulator barred winners of 5G licenses from using Huawei, a move the Chinese vendor is contesting legallySwedenTele2Through a network-sharing venture with Telenor is 100% reliant on Huawei, says Strand ConsultAs aboveSwedenTelenorThrough a network-sharing venture with Telenor is 100% reliant on Huawei, says Strand ConsultAs aboveUKBTRAN is two-thirds Huawei, one third Nokia. It is likely to adopt Ericsson as a Huawei replacementGovernment imposed restrictions in January limiting Huawei to 35% of any 5G RAN or fiber-based network by 2023 and banning it entirely from the core. In July, it moved to ban 5G RAN sales by Huawei after 2020 and said operators must have no Huawei products in their networks after 2027. A rule announced this week forbids operators from installing Huawei 5G products after September 2021UKVodafone UKUses Huawei across only one third of RAN, says CTO Scott Petty,and Ericsson for rest. Unhappy with Nokia, it is likely to use Samsung and/or O-RAN solutions as Huawei replacementAs above(Source: Strand Consult, Light Reading, companies, news reports)

CountryOperatorOperator movesGovernment movesBelgiumOrangeNokia is displacing Huawei as the single vendor of RAN products in a network jointly operated with ProximusEarlier this year there were reports that Belgium would limit "high-risk vendors," meaning Chinese firms, to 35% of any radio access network and ban them entirely from the coreBelgiumProximusNokia is displacing Huawei as the single vendor of RAN products in a network jointly operated with OrangeEarlier this year there were reports that Belgium would limit "high-risk vendors," meaning Chinese firms, to 35% of any radio access network and ban them entirely from the coreLithuaniaTeliaTelia this month confirmed it would replace Huawei with Ericsson as a supplier of radio access network products, having previously been 100% reliant on the Chinese vendor, according to Strand ConsultA National Threat Assessment published last year complained about the "increasing aggressiveness" of Chinese intelligence services in Lithuania, although there have been no explicit moves against HuaweiFranceOrangeCEO Stephane Richard previously said he would not use Huawei in France before Orange confirmed Ericsson and Nokia as 5G suppliersANSSI, France's cybersecurity agency, will reportedly not renew Huawei's regional equipment licenses when they are due to expire, forcing operators to find alternatives by 2028FranceSFR-NumericableUses Huawei across 55% of RAN sites, according to Strand Consult.As aboveFranceBouyguesUses Huawei across 50% of RAN sites, according to Strand Consult. Has already indicated it will dismantle 3,000 Huawei antennas in densely populated areas by 2028As aboveGermanyDeutsche TelekomRelies on Huawei for two thirds of RAN. Resists official ban but wants O-RAN mandated in future telecom legislationAuthorities are still weighing a decision but noises at EU level have already persuaded Deutsche Telekom and Vodafone to remove Huawei from their core networksGermanyTelefónica DeutschlandTakes half its RAN products from Huawei, says Strand Consult, but has promised to be "clean," meaning Huawei-free, in near futureAs aboveItalyTelecom ItaliaBuys 55% of RAN gear from Huawei, according to Strand Consult, but has said it could manage a transition if Huawei were banned by Italian authoritiesGovernment does not appear to have taken an official decision about the role of Chinese vendors in Italy's telecom networks but reportedly vetoed a 5G deal between Huawei and Fastweb in OctoberPolandPlayStrand Consult reckons 90% of RAN is Huawei-suppliedPoland has introduced legislation that would prevent operators from buying products sold by high-risk vendors and require them to remove products they have already deployed within the next five yearsPolandOrangeStrand Consult reckons 70% of RAN is Huawei-suppliedAs abovePolandT-MobileStrand Consult reckons 70% of RAN is Huawei-suppliedAs aboveSwedenThreeBuys all its RAN gear from Huawei, according to Strand ConsultIn October, regulator barred winners of 5G licenses from using Huawei, a move the Chinese vendor is contesting legallySwedenTele2Through a network-sharing venture with Telenor is 100% reliant on Huawei, says Strand ConsultAs aboveSwedenTelenorThrough a network-sharing venture with Telenor is 100% reliant on Huawei, says Strand ConsultAs aboveUKBTRAN is two-thirds Huawei, one third Nokia. It is likely to adopt Ericsson as a Huawei replacementGovernment imposed restrictions in January limiting Huawei to 35% of any 5G RAN or fiber-based network by 2023 and banning it entirely from the core. In July, it moved to ban 5G RAN sales by Huawei after 2020 and said operators must have no Huawei products in their networks after 2027. A rule announced this week forbids operators from installing Huawei 5G products after September 2021UKVodafone UKUses Huawei across only one third of RAN, says CTO Scott Petty,and Ericsson for rest. Unhappy with Nokia, it is likely to use Samsung and/or O-RAN solutions as Huawei replacementAs above(Source: Strand Consult, Light Reading, companies, news reports)

Some governments and service providers are also optimistic that open RAN, a new technology, will produce more rivals in the future. Open RAN relies heavily on software, substituting general-purpose kit for today's customized equipment. Unlike traditional networks that tie operators to one supplier's system, it would also support the use of products from different vendors at the same site. Currently, it raises more questions than it can answer. And it is forecast to account for less than 10% of all spending on 4G and 5G radio access networks in 2024, or just $3.2 billion in sales, according to Daryl Schoolar, a practice leader at Omdia. But none of that has dampened enthusiasm.

Parallel Wireless, a developer of open RAN software, says interest has grown thanks to Chinese supplier bans. "The UK government recently unveiled a series of projects designed to push the use of open RAN to increase operator supply options," it said in a paper about the market outlook. "We also predict that other countries will impose similar bans, encouraging the open RAN supply chain to avoid duopoly dictated pricing."

Huawei holdouts

Yet there are still some Huawei holdouts, including Europe's biggest economy. In Germany, operators believe they can mitigate the security risk by removing Chinese products only from the "core," the sensitive control center of the network. Elsewhere, they remain heavily reliant on Huawei. A 5G network built by Deutsche Telekom, the national incumbent, reaches nearly two thirds of the population and was provided mainly by Huawei. Replacing it quickly would not be a low-cost activity.

Unlike the UK and France, which have plans to phase out Huawei equipment by 2028, Germany's government has been reluctant to join the fight. Undoubtedly, it is worried about its cozy trade relationship with China, which bought about €100 billion ($121 billion) worth of goods from Germany last year, a figure that equals about half the European Union's China-bound trade exports. There is similar concern among the Swedes. When Swedish authorities recently said 5G license winners would not be allowed to buy network products from Huawei or ZTE, Ericsson spoke up about the unfairness. Chinese retaliation, of course, might damage its fast-growing business in North East Asia, where sales were up 23% year-on-year in the recent third quarter, to 8.8 billion Swedish kronor ($1 billion).

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But even in Germany, Huawei's situation looks precarious. José María Álvarez-Pallete López, the CEO of Spain's Telefónica, has hinted at a forthcoming replacement of Huawei kit in Germany, using the word "clean" to describe infrastructure free of Chinese influence. Networks in Spain and the UK already qualify, he recently said, while "Telefónica Deutschland [Germany] and Vivo [Brazil] will be in the near future without equipment from any untrusted vendors."

In the meantime, Timotheus Höttges, Deutsche Telekom's CEO, has urged authorities to mandate the use of open RAN in telecom legislation. "The Telecommunications Act and the IT Act need to be amended in certain regards," he told reporters in August. "I think it would be good if these amendments also cover open RAN regulations for the access network. We need some statutory rules and they should be mandatory for all equipment providers." Höttges is probably playing for time – clued-up authorities realize open RAN is still not ready for widespread commercial deployment. But future rules could augur badly for Huawei, which has been dismissive of open RAN technology.

Politically, the worst development for Huawei might be a rapprochement between Europe and the US, which have bickered in the Trump era. A US president better at diplomacy, and a Secretary of State more amenable to compromise, could tilt Europe decisively against Huawei, something the obstreperous Trump and his eager-to-please lieutenants never quite managed.

Worth remembering is that Joe Biden served under a former president who was no friend to Huawei. "The Obama administration went to all the wireless carriers and said please don't use Huawei," said Tom Wheeler, who chaired the Federal Communications Commission under Obama, during a recent interview with Light Reading. "The Obama administration urged against the use of Huawei, for some clear-cut and obvious reasons." They will be spelled out to Europe again next year.

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