Yahoo Finance Huawei in the UK: will Boris Johnson block the Chinese company?
What does Huawei do in the UK?
The Chinese company has two major businesses in the UK. One, a consumer-focused hardware arm, makes and sells smartphones, laptops and tablets. It has been struggling since US sanctions soured its relationship with Google, preventing it from offering customers access to apps hosted on the Play Store.
The other arm provides network hardware for the telecoms industry, a role Huawei has filled for the last 15 years. It started with extremely simple equipment that was used in the wiring of Britain’s fixed lines: “The dumber bits of the network,” according to one senior telecoms industry source, “simply converting flashes of light travelling down fibre optic cables into flashes of electricity travelling down copper.”
Now, however, it provides far more equipment – though still overwhelmingly on the “radio access” side of the network, rather than the “core”, where more intelligent routing happens.
Who is in favour of removing it?
The US government has been engaged in a PR war for the past two years, trying to convince key allies not to use Huawei equipment as they upgrade their domestic mobile networks to the new 5G standard, which is faster and can handle more traffic.
Related: UK rebuffs US presentation on Huawei security risks
The Americans say their fear is that, by handing control of key parts of national communications infrastructure to a Chinese-owned company, allies might be putting their national security at risk. Huawei itself is seen as tantamount to an arm of the Chinese military by elements of the US security community, although the company has always argued that it is independent of the state and a worker-owned cooperative.
But there is also an economic argument: speaking last year, Robert Strayer, a deputy assistant secretary at the US state department, argued that Huawei had benefited from an “unfair playing field”, as the Chinese government had provided interest-free loans and guaranteed revenue from its captive internal market. And, of course, the Huawei conflict is just one arm of the wide-ranging trade war between the two superpowers.
Who is pushing back?
Huawei itself, for one. The company argues that claims of unfair competition are nonsense and says it makes as much profit from its western operations as it does from within China. As for national security, says Victor Zhang, a vice president at the company, “two UK parliamentary committees concluded there is no technical reason to ban us from supplying 5G equipment”.
The UK government is apparently less than eager to slavishly follow the advice of the US, seeing a possible future opportunity for Britain as an intermediary between the superpowers. Indeed, the first installation of Huawei in Britain’s networks, 15 years ago, came in part because “the UK government was very keen for British companies to go out and strike deals with China – building links to a growing economy,” according to the telecoms industry source.
But Britain’s carriers are also fighting for the right to use their preferred suppliers to carry out one of the biggest network upgrades the sector has ever performed. “In order [for us] to launch 5G this year, they are the most advanced company,” Three’s Phil Sheppard told the Register last year. “They have the technology available now – and most of the other vendors are behind.”
Who are the other vendors?
The two biggest are Finland’s Nokia and Sweden’s Ericsson. Both companies will be more recognisable for their defunct mobile phone businesses – Ericsson spun its off in 2001 with Sony, while Nokia sold the whole handset subsidiary to Microsoft in 2013 – but they retain a large basis in network infrastructure.
However, according to the telecoms industry source, they are undeniably behind the state of the art – which is represented by Huawei. “They’re just nine to 18 months ahead of their competition. Nokia and Ericsson are playing catch-up. Aggressively so, because I think they see the advantages of being the non-Huawei option.”
Related: Johnson: Huawei critics 'must tell us what's the alternative'
Huawei has spent the last decade ploughing investment into research and development, “and that’s the reason why they’re in a leading position,” the source said. “They’re really good at radio access network equipment, that’s where they’ve put a lot of their expertise and their R&D. Bear in mind they’ve got a lot of money, because they are the world’s largest telecoms equipment maker.”
Importantly, Huawei doesn’t only win on price, the source said. “I would say they are price competitive, but not bargain basement compared to their competitors like Nokia and Ericsson. That may have been the case back in 2005, but now their antennas are more efficient at the moment, they can handle greater volumes of traffic … It comes down to efficient use of spectrum.”
What would happen if Boris Johnson decided to block Huawei?
In the most likely scenario, a limit would be introduced on the proportion of Huawei equipment that would be used on the UK phone network. That would mean that Huawei kit would continue to be installed, until the other providers could match it in capability – if not price – at which point, they would be installed on the rest of the network.
A more aggressive ban, requiring Huawei gear to be removed where it is already installed, has probably been avoided by virtue of the UK carriers committing to keep Huawei out of the “core”, where security concerns are more significant. Some carriers, including EE, do have older Huawei equipment running their 4G cores but BT, which bought the carrier in 2016, has been removing that equipment since the two networks merged.
