Huawei ban won’t make the US fall behind in 5G technology, experts say
The United States won’t fall behind in the introduction of next-generation 5G mobile networks if Huawei stays banned there, experts told CNBC, though smaller countries and potentially even Europe could suffer from reduced competition.
Chinese telecommunications equipment giant Huawei — along with China’s state media — have argued that banning Huawei will reduce competition, increase the cost of 5G networking hardware, and slow the introduction of the critical, high-speed technology.
Eric Xu, one of Huawei’s rotating chairmen, told CNBC in November that a continuing ban of Huawei gear from the U.S. market will lead to the world’s biggest economy to fall behind in the 5G race. Meanwhile, Chinese state-backed publication Global Times said in an op-ed last month that Europe also would lag in 5G if Huawei were blocked there.
There are three significant alternatives: Nokia, Ericsson and Samsung Networks.
But those claims aren’t necessarily true, according to experts, who said major rivals including Nokia, Ericsson and Samsung could pick up the slack.
“Even if Huawei was permanently excluded from the U.S., its competitors like Nokia, Ericsson, Verizon and AT&T, to name a handful, have the scale to ensure that the U.S. is fully catered for. Qualities like speed are unlikely to suffer in the U.S. in this scenario, ” Vinod Nair, a Singapore-based senior partner at advisory and investment firm Delta Partners, told CNBC by email.
What are the alternatives?
Huawei has had huge success in China, Europe and many emerging markets. But political pressure has risen on Huawei in recent months, with countries including Australia and Japan following the U.S. lead in blocking the firm from participating in its future 5G networks.
Huawei’s rivals have already begun to pick up business where the Chinese 5G pioneer is absent.
In January, South Korea’s Samsung announced it would supply U.S. carrier Verizon with some equipment for 5G. Last year, AT&T announced that Samsung, Ericsson and Nokia will supply hardware for its 5G network.
“There are three significant alternatives: Nokia, Ericsson and Samsung Networks,” Shaun Collins, CEO of technology research firm CCS Insight, told CNBC by email. “The first two are obvious. Samsung Networks has increased market share in wake of the challenges to Huawei. It has a deep and valuable set of customers in Korea for its 5G Infrastructure and is a significant beneficiary in the USA.”
Europe is slower to block Huawei
But Huawei, the world’s largest network equipment maker by revenue, rose to that level in part by offering favorable financing deals via banks, selling cheaper equipment, and rolling out networks relatively quickly.
Those factors made it attractive to many telecom firms, particularly in Europe, that were struggling with profitability but turned to Huawei for 4G, the current mobile internet standard.
If Nokia, Ericsson and Samsung focus their efforts on the markets where Huawei is blocked, Nair said other countries could suffer when it comes to the rollout of 5G.
“Smaller Asian markets may suffer if Huawei’s competitors turn their attention toward the U.S. and major European economies to fill the void,” Nair told CNBC.
While the U.S. has banned Huawei, countries in Europe have tread more carefully — despite U.S. pressure. Germany, for example, said it was not ready to ban Huawei or any particular vendor of network equipment.
The CEO of European carrier Vodafone, Nick Read, warned last month that excluding Huawei from Europe’s 5G networks could be “hugely disruptive” to national infrastructure. Vodafone is a long-time Huawei customer and continues to work with the company.
Even Ericsson CEO Borje Ekholm said in February that the debate over Huawei is causing “uncertainty” that could delay the introduction of 5G in Europe.
Collins of CCS Insight agreed that some markets without Huawei could see a slower rollout.
“Many of the operators we speak with have said that without Huawei in the network, 5G rollout will slow. It is the market leader in size and 5G development,” Collins said. “Even Ericsson and Nokia acknowledge that, when one of the CEOs said that hampering Huawei will slow the whole 5G industry rollout, as it holds so much of the technology right now.”