(Bloomberg Opinion) -- It’s easy to ban a product that’s difficult to get your hands on anyway.
That’s why Britain’s possible move to impose a stricter ban on Huawei Technologies Co. seems opportunistic, even if it does now make sense. It’s taking advantage of harsher U.S. sanctions on the Chinese telecoms-equipment giant to consider extending the U.K.’s halfway measures unveiled with great fanfare in January. A final decision will come after the government’s National Cyber Security Centre reviews implications for the security of the country’s phone networks.
Earlier this month, the U.S. imposed more stringent guidelines on Huawei, restricting any firm that uses American equipment from selling to the Chinese technology company without its approval. That means Huawei won’t be able to get chips from companies such as Taiwan Semiconductor Manufacturing Co. because they’re likely made using machines from firms such as California-based Applied Materials Inc. So Huawei may effectively find itself cut off from access to the high-tech silicon it needs for its networking gear.
This provides a convenient excuse for Prime Minister Boris Johnson’s government to revisit its more nuanced approach with regards to Huawei, which provoked U.S. ire in the midst of efforts to strike a new Anglo-American trade pact and a rebellion from a group of Conservative lawmakers.
Initially, in a break with the U.S., the U.K. had decided to retain some access to Huawei’s products for its carriers’ rollout of fiber-optic and fifth-generation mobile networks. It proposed capping the Chinese company’s share to 35% of non-sensitive parts of a mobile network in order to keep operators from being reliant on a Nordic duopoly of Ericsson AB and Nokia Oyj. Now ministers are drawing up proposals to reduce that share to zero.
The irony is that, given the recent U.S. measures, Huawei may find it very difficult to keep competing for orders. The company probably won’t be able to buy many of the chip sets it needs to make things such as wireless base stations. The quality of those products will suffer as it’s forced to seek out new suppliers, likely in China itself, where semiconductor technology is still playing catch-up. That could make carriers rethink who supplies their 5G equipment even before any national ban kicks in, according to Bloomberg Intelligence analyst Anthea Lai.
Even though a ban on new Huawei gear might now be easier, the question of how to handle the existing networks is not. Huawei’s equipment currently accounts for two-thirds of BT Group Plc’s mobile network, and one-third of Vodafone Group Plc’s U.K. mobile network, according to UBS Group AG analyst Polo Tang. BT has already said that swapping the kit out would cost it 500 million pounds ($615 million) over the next five years. Reducing it to zero could double that expense, Tang said.
The U.K.’s previous 35% limit applied to an operator’s overall network, but forcing operators to replace any already installed Huawei gear would strain capital requirements and jeopardize ambitious goals for new network build-out — Prime Minister Boris Johnson has said he wants the whole country to have access to gigabit internet speeds by 2025. It seems that the government is taking that into account. The Times of London reported that the new proposals would only prohibit the purchase and installation of new equipment from 2023.
Which serves to underline how opportunistic the new review looks. The main argument for letting carriers continue to use Huawei was to ensure that network investment continued apace. Now that the U.S. crackdown looks likely to reduce the quality and availability of Huawei products, it’s a chance for the government to assuage both rebellious lawmakers and critics across the Atlantic. And with global antipathy toward China rising over its handling of the Covid-19 outbreak and crackdown in Hong Kong, there’s now little point in further testing the straining U.S. alliance.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.
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