It’s rare for the world’s most technologically-advanced nation to fear the technology of one individual company in another corner of the world, and to act on that fear. However, that is how the United States has viewed Huawei for the past couple of years, as the Chinese company emerged an unquestioned leader in emerging 5G wireless technology. Last week, US President Donald Trump blacklisted Huawei, positioning himself as the one to save western civilian telecom networks from Chinese dominance or spying.
5G is not just another incremental improvement in wireless technology. It is the most advanced yet, with enormous potential to transform society and business. If 3G was about a faster Internet, and 4G was about faster Netflix and Spotify, the latest generation of wireless communication is all about connecting the world’s infrastructure, perhaps all of it.
So, it would connect autonomous cars on the roads and billions of sensors used in nuclear and power plants, as much as those in agricultural fields, manufacturing plants and wearable fitness devices. Any company that takes a large market share of 5G technology will enjoy enormous power, perhaps for decades to come. That is precisely what Trump doesn’t want to concede to rising China.
Trump’s decision is a measured one, unlike his many other. It has come after much deliberation and much time. He sat over the executive order for nearly a year, as his aides tried to persuade America’s closest allies to shut out the Chinese company because of security concerns. The US offered no evidence even behind closed doors. The nearest anybody came to believing the security fears was when Vodafone admitted detecting some flaws in Huawei gear installed in Italy. Critics called it an exploitable “backdoor” but the Chinese company, and Vodafone itself, termed it a simple flaw commonly seen in telecom gear from many companies, including the US-based Cisco.
Consequently, Australia banned Huawei, apparently because it saw threats to critical infrastructure, such as power and nuclear plants. Even New Zealand, a member of the Five Eyes alliance, blocked only one telecom company from buying Huawei gear, retaining its right to use the Chinese company in other networks.
The United Kingdom and Germany, America’s closest allies, have simply not budged. If a leak is to be trusted, Britain might relent to the extent of barring Huawei gear from the ‘core’ but allow its gear in other parts of the 5G networks. Germany has conceded nothing despite repeated warnings about fears of Chinese spying and Canada has preferred to test Huawei equipment on its own before making a decision.
Europe’s defense of the Chinese company pretty much forced Trump’s hand. He invoked ‘national emergency’, nothing less, to bar Huawei from accessing US technology and from serving any American companies, hoping the move will choke Huawei’s global growth, most notably in Europe.
Notwithstanding some early bluster, the blacklisting is a blow to the Chinese company’s ambitions. For all its 5G leadership, Huawei has been reliant on US technology and suppliers for a lot of critical features, notably in chip design. Trump’s decision cuts off this access. So, it will no longer be able to buy the most advanced microchips from, say, Qualcomm or graphics chips from Nvidia. Both could blunt Huawei’s qualitative edge over rivals.
While China is expected to rally behind Huawei, the broken supply chain calls into question its ability to quickly deploy 5G gear in Europe. Trump hopes this uncertainty will cause European nations to tilt toward other suppliers, such as Nokia and Ericsson, especially if they want to stay competitive.
Besides 5G, the US decision hurts Huawei in a number of other ways. The Chinese company’s global handset business is threatened, as it is cut off from the Google’s Android mobile operating system. It could access only the simplest open source version, and will be barred from the Google Play Store, repository of key apps such as Google Maps and YouTube. This could potentially throttle the non-China business of the world’s second-largest maker of mobile phones.
Huawei founder Ren Zhengfei says the company has expected the US action and consequently is prepared to face it. The company claims it has stockpiles of chips and other parts. Huawei’s phones already run on its own processor and the company claims a ready alternative mobile operating system to replace Android for users outside China. It is, of course, easier said than done.
Huawei still depends on a number of companies for other critical parts. In addition, the global mobile ecosystem is an entrenched duopoly run by Google’s Android and Apple’s iOS. It would be challenging for a third player to build a competitive app base, not to mention other features.
But should the US blockade persist for a length of time, Huawei and China could turn the crisis into an opportunity by accelerating development of chip technology within its borders. That might be the last missing piece it needs to truly challenge America’s technological dominance.
Bala Murali Krishna works for a New York-based startup. Views are personal
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