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  • Bloomberg

    U.S. Gains Ground in Effort to Freeze Huawei Out of 5G

    (Bloomberg) -- The U.S. campaign to hamstring China’s Huawei Technologies Co. is gaining fresh impetus as the Trump administration chokes off supplies of vital microchips and Beijing causes dismay on both sides of the Atlantic with its stance on Hong Kong and the coronavirus.The U.K. is reconsidering its embrace of Huawei while carriers in Denmark and Singapore have chosen other providers for their telecommunications networks. Meanwhile, Germany and France are reassessing the role of the company that the U.S. accuses of theft, sanctions busting and providing an avenue for espionage.Only months ago, the U.S. was struggling to persuade its allies not to use Huawei’s equipment. But in May, Washington moved to handcuff Huawei to outdated technology by denying it chips made with U.S. techniques. The change could turn Huawei into a permanent laggard, unable to update and maintain cutting-edge 5G networks that will be communications backbones for decades to come.At the same time, politics have been unkind to Huawei’s ambitions. Officials in Europe and the U.S. have criticized China over its handling of the Covid-19 pandemic. And Beijing drew condemnation for preparing national security laws for Hong Kong, a step seen as a threat to the city’s autonomy.“Two years ago no one worried about buying Huawei - that’s not true any more,” said James Lewis, director of the technology policy program at the Center for Strategic & International Studies in Washington. He sees “some progress,” in swaying other countries to ban Huawei “although well short of a total ban.”President Donald Trump is boasting of success, saying in a recent interview with the Wall Street Journal, “Look how tough I’ve been on Huawei. Nobody has been tougher than me.”The U.S. says Huawei is a threat to security for the fifth-generation, or 5G, wireless systems that are beginning to be deployed around the world. The networks promise speed and ubiquity: a thick forest of always-on links to billions of devices in homes, factories, surgical suites and autonomous vehicles. As more and more devices and networks are connected, vulnerability to hacking or espionage grows apace.Because Huawei is subject to control by China’s ruling Communist Party, it can be compelled by law to cooperate with the country’s security apparatus, and has been implicated in espionage, according to the State Department. The Pentagon chimed in Wednesday, sticking Huawei on a list of 20 companies it says are owned or controlled by China’s military, opening them up to potential new US. sanctions.Rob Manfredo, a U.S.-based spokesman for Huawei, didn’t respond to a request for comment.Huawei has denied allegations of spying, saying it would lose customers if it weren’t trustworthy. The Shenzhen-based company says it’s a private business that can’t be directed by Beijing, and that no Chinese law requires private national companies to engage in cyber-espionage.Chip BanThe Commerce Department’s ban in May of the sale of any silicon made with U.S. know-how was a potentially crippling blow to China’s tech champion. Huawei’s stockpiles of certain self-designed chips essential to telecom equipment will run out by early 2021, people familiar with the matter have said. While Huawei can buy off-the-shelf or commodity mobile chips from a third party like Samsung Electronics Co., it couldn’t possibly get enough and may have to make costly compromises on performance in basic products, they added.The chip restrictions add “uncertainty and potential costs” that could leave Huawei unable to meet commitments to build and maintain networks, said Robert Williams, executive director of the Paul Tsai China Center at Yale Law School. “The trade-offs between cost and security risks may look different now than they once did to the U.K.”Huawei’s position is sharply contested in Britain.The U.K. in January barred Huawei from sensitive core network components and high-risk areas like nuclear-power sites, but said the Chinese company could still constitute as much as 35% of networks’ 5G and fiber equipment elsewhere.That prompted an angry phone call from Trump to U.K. Prime Minister Boris Johnson. The Trump administration has said any country that uses an “untrustworthy” 5G vendor jeopardizes intelligence sharing with the U.S. That would strike at the heart of the traditional “Five Eyes” security alliance linking the U.S. and U.K., along with Australia, Canada, and New Zealand to cooperate on espionage.The U.K.’s January decision also triggered a rebellion of junior lawmakers in Johnson’s Conservative Party. Since then, Hong Kong and Covid-19 have helped to harden their stance.U.K. government officials now are seeking ways to phase the company out in as little as three years.“There’s been a pretty effective relentless American campaign,” said Sam Armstrong, spokesman for the Henry Jackson Society, a London-based policy group that has argued for blocking Huawei from the U.K.’s 5G networks. “The evidence in Parliament and the threats to Five Eyes intelligence-sharing arrangements have all contributed to a sense that this has had a seriously undermining effect on our trans-Atlantic relationship.”Despite the storm clouds obscuring its future in the U.K., Huawei committed Thursday to invest $1.2 billion in a research and development center near the English city of Cambridge, drawing criticism from a former leader of the ruling Conservative party. It said the timing was coincidental and the plans had been in the works for years. Growing TensionThe issue is fraught in other European countries, too. The company is losing luster in Europe after winning contracts across the continent, said John Strand, a consultant based in Copenhagen.“Around Europe, there is a growing focus on the use of Chinese equipment including Huawei,” Strand said in an interview. “When it comes to Hong Kong, it obviously has an impact.”Strand predicted other countries would follow paths such as those taken by Denmark, where the biggest phone company TDC A/S in March chose Stockholm-based Ericsson AB to build its 5G network, rather that its existing supplier Huawei. Earlier, Energy Minister Lars Christian Lilleholt highlighted security considerations for 5G, without mentioning Huawei.Such moves would represent a change of momentum for a beleaguered U.S. campaign, said Justin Sherman, a fellow at the Atlantic Council’s cyber-statecraft initiative.“There are many countries that have not done what the U.S. wanted,” including Germany, France and Italy, Sherman said. “There’s legitimate reason to be concerned about Huawei’s position on the 5G networks,” he said.U.S. diplomats say Ericsson and Finland’s Nokia Oyj build 5G gear and can be alternatives to Huawei. The European providers have struggled to compete with Huawei and ZTE Corp. equipment that’s often cheaper and at least as capable.“5G systems carry the most private information and intellectual property. It comes down to one question: Who do you trust?” Keith Krach, the U.S. undersecretary of state for economic affairs, said in an interview. “People are realizing that Huawei’s 5G is the backbone of that surveillance state.”U.S. officials point to progress in persuading allies, citing the European Union’s January adoption of a policy that said companies based in non-democratic countries could be excluded from parts of the network. The EU stopped short of an outright ban on Huawei.The German government is struggling to settle on rules that would require security certification for vendors in the 5G network. Earlier senior Chinese officials highlighted German car companies – the crown jewel of Europe’s biggest economy – as a potential target for retaliation if Huawei is banned from their markets. China is the biggest single market for Volkswagen AG, BMW AG and Mercedes-Benz maker Daimler AG. German Chancellor Angela Merkel has resisted a blanket ban on Huawei from 5G networks.France won’t ban any equipment maker from its 5G network, but will seek to protect critical infrastructure, finance minister Bruno Le Maire said earlier this year. With a spectrum auction set for September, carriers including Bouygues SA await a decision from the French cyber security agency Anssi on whether Huawei can be part of their plans. In a tweet earlier this week, U.S. Secretary of State Mike Pompeo praised France’s leading phone company Orange SA, calling it a “clean” telecom carrier after it picked “trusted” 5G equipment suppliers Nokia and Ericsson in January.Italy hasn’t moved against Huawei, though it has adopted rules to closely monitor telecommunications equipment suppliers, and scrutinize gear that comes from outside Europe. Italy has pursued a friendly approach with Chinese investors and especially with Huawei, which has poured money into the country, financing research centers, universities and schools.In Canada, Prime Minister Justin Trudeau has been stalling a decision on whether to ban Huawei from 5G wireless networks. Tensions between the two countries have been rising since Canadian authorities arrested Huawei Chief Financial Officer Meng Wanzhou on a U.S. extradition request in late 2018. After her arrest, China put two Canadian citizens in jail, halted billions of dollars in Canadian imports and put two other Canadians on death row. On June 2, two major Canadian wireless companies -- BCE Inc. and Telus Corp. -- said they’d build out their 5G wireless networks with equipment from Ericsson and Nokia.India has allowed Huawei to participate in trials, but the company’s entry into the country’s 5G commercial network could be blocked as tensions persist following border clashes with China. India is the largest wireless market outside China by number of subscribers, and has been a focus for investment by Huawei.“The tide is turning against Huawei as citizens around the world are waking up to the danger of the Chinese Communist Party’s surveillance state,” Pompeo said in a statement Wednesday.(Updates to add reference to U.K. development site in 19th paragraph. An earlier version of this story was corrected to fix the spelling of Huawei in fourth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Huawei Loses Main Singapore 5G Networks to Ericsson, Nokia

    Huawei Loses Main Singapore 5G Networks to Ericsson, Nokia

    (Bloomberg) -- Singapore’s biggest telecom operators chose Ericsson AB and Nokia Oyj as their main 5G network providers, leaving China’s Huawei Technologies Co. with less significant contracts in the city state.Singapore Telecommunications Ltd. chose Ericsson while a group that includes StarHub Ltd. opted for Nokia after the city-state gave final approval for the rollout of nationwide 5G coverage in the country Wednesday. Huawei, which has been a point of contention in the tensions between the U.S. and China, still has a foothold in the market as a provider for TPG Telecom Pte’s smaller, local network system.The final awards were issued to Singtel and a group formed by StarHub and M1 Ltd. after they completed regulatory processes, including selection of preferred frequency spectrum lots and vendor partners, the Infocomm Media Development Authority said Wednesday. Provisional awards were made in April.TPG Telecom Pte Ltd. is being allocated the remaining frequency spectrum in the millimeter wave band to roll out localized 5G networks, the authority said.“We never explicitly excluded any vendor,” Minister for Communications and Information S. Iswaran said in an interview with Bloomberg Television’s Haslinda Amin on Thursday. “You have a diversity of vendors involved in different aspects of the 5G system and that is in fact a positive outcome from our perspective,” he said.Ericsson, NokiaIswaran said Thursday the city-state has very clear security and resilience requirements, and the choices made by the telcos took this into account “very clearly”.Singtel, the country’s largest telco operator, said Wednesday it selected Ericsson “to commence a period of negotiation to provide the 5G SA Core, RAN and mmWave network, with a view to finalising the contractual terms as soon as practicable.”StarHub, which received spectrum rights jointly with M1, said the preferred 5G technology partner, subject to final contract, is Nokia for the 5G radio access network. Nokia is also the preferred technology supplier for StarHub’s 5G core and mmWave networks. The Singapore company is exploring other network elements with Nokia, Huawei Technologies Co., and ZTE Corp., it said.TPG Telecom said it’s an active member of the Telecom Infra Project and “will leverage the extensive OpenRAN vendor community along with Huawei’s advanced network equipment” for the implementation of 5G services.Singapore’s 5G NetworkSingtel and the StarHub-M1 group plan to introduce a standalone 5G network starting from January 2021. The country aims to have 5G coverage for at least half of the nation by the end of 2022 and the entire island by 2025. The plan sets up Singapore to join countries in the region such as China and South Korea, which have begun to offer commercial 5G services.The rollout is coming at a time when measures to curb the coronavirus have forced people around the world to stay and work from home, testing digital services and connectivity like never before. The technology is crucial for applications from autonomous driving to remote surgery. The announcement is also just a day after general elections were declared for July 10.U.S., ChinaThe Singapore telcos’ decision on providers comes amid worsening tensions between the U.S. and China. The U.S. administration has banned Huawei from its market for telecom equipment, as part of an effort to curb its presence in 5G networks globally.The Pentagon, in letters to lawmakers dated June 24, said it put Huawei on a list of 20 companies it says are owned or controlled by China’s military. While the move’s implications were not immediately clear, it opens the company to potential additional U.S. sanctions.Singapore has close economic and political ties with the U.S. and China, and last year indicated it would let its telco companies decide for themselves on suppliers. Prime Minister Lee Hsien Loong said earlier this year it hadn’t banned Huawei, but would evaluate it based on operational requirements.(Updates to add Singapore Minister S. Iswaran’s quote in fifth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Huawei’s 5G Patents Means U.S. Will Pay Despite Trump Ban

    Huawei’s 5G Patents Means U.S. Will Pay Despite Trump Ban

    (Bloomberg) -- Huawei Technologies Co. owns the most patents on next-generation 5G technology, ensuring the Chinese company will get paid despite Trump administration efforts to erase it from the supply chain, according to a new study.The study by two research firms identified the inventions most closely connected to the 5G standards and found that six companies owned more than 80% -- Huawei, Samsung Electronics Co., LG Electronics Inc., Nokia Oyj, Ericsson AB and Qualcomm Inc., the only U.S.-based company in the group.That may be awkward for President Donald Trump, whose administration has launched a global effort to shut out Huawei, accusing the Chinese company of being a security threat. The administration has launched a number of salvos, including a ban on the sale of any silicon made with U.S. know-how, which is hurting the Chinese company’s aspirations to grow in cutting-edge fields.“Even if they hire some other company to build the 5G infrastructure, they still have to pay the Chinese company because of the intellectual contribution to develop the technology,” said Deepak Syal, director of GreyB Services Pte., a technology research firm that conducted the study with software firm Amplified AI Inc.Identifying how many patents a company holds -- and how key they are to the industry standards -- will help determine who profits most from the next generation of technology that promises to revolutionize developments such as autonomous cars, robotic surgery, and connected homes.The administration’s efforts against Huawei have borne fruit. Taiwan Semiconductor Manufacturing Co., the main chipmaker to Apple Inc. and Huawei, is planning a plant in Arizona to allay national security concerns and shift high-tech manufacturing to America. In the U.K., Prime Minister Boris Johnson is taking steps to exclude Huawei from its fifth-generation mobile networks by lining up potential replacements.Industry standards are critical to ensure devices work together and communicate with each other, even across national boundaries. Tech companies get together to establish those standards and pledge that any relevant patents will be licensed on “fair, reasonable and non-discriminatory” terms.There have been global patent wars for years over how to define those fair terms and who’s entitled to how much money in royalties. They were at the heart of since-settled fights, including Apple’s scorched-earth battle with Qualcomm, and Huawei’s dispute with Samsung. Huawei has also stopped paying Qualcomm what may amount to billions in royalties amid a dispute.The GreyB and Amplified study looked at about 6,400 inventions declared “essential” to 5G by their owners that had active patents somewhere in the world as of Dec. 31, 2019. By comparing the wording of the patent to the standard, the team of 25 researchers deemed 1,658 to be patents “core” to 5G.Courts and negotiators will ultimately have to decide, though, if the patents really are essential to the standard, whether they’re valid or not, and how much they are worth.Based on the study, all of the companies were found to be padding their patent submissions to ensure they would be able to enforce their rights later, and in an effort to increase the amount they’d be able to collect in royalties.“Companies over-declare pretty equally, so reducing everyone’s share by 75% or so yields the same pecking order,” said Jorge Contreras, a law professor at the University of Utah who’s written about determining what is “essential” to a standard.Huawei has collected more than $1.4 billion in licensing revenue and has paid some $6 billion to other companies, it said in a court filing in its patent dispute with Verizon Communications Inc.“Huawei creates plenty of its own intellectual property; we don’t need to steal anyone else’s,” Ben Howes, a Huawei spokesman, said in an opinion video. The company said it put together the video “in response to the U.S. government’s attempts to prevent Huawei from collaborating with academic institutions and innovating with our R&D and patents.”First-Phase StudyThe GreyB and Amplified study, considered the first phase as more patents are analyzed and the standards continue to evolve, showed the interconnectedness between companies around the world, Syal said. He said the purpose of the study was “to bring more clarity” to where the discussions or decisions are being made.“Rather than saying who has less contributions or who has less number of patents, let’s work toward increasing the intellectual contribution of our country or our company and then build the 5G infrastructure,” he said. “Otherwise, even by blocking, they are not helping in the end because they’re paying money in terms of royalties.”As part of the Trump administration’s efforts against Huawei, Secretary of State Michael Pompeo last week said European countries “need to get it out of their system. They need to use Western technologies.”While the administration has helped curtail Huawei’s growth outside China, it remains a player because of its global footprint and advanced technology.“From a pure technology standpoint, nationalism just doesn’t work anymore,” said Contreras.(Updates with U.K. plans and Taiwan Semiconductor plant proposal in sixth paragraph. An earlier version of this story corrected the amount Huawei pays in patent royalties.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • The Numbers That Show It’s Hard for Britain to Ditch Huawei

    The Numbers That Show It’s Hard for Britain to Ditch Huawei

    (Bloomberg) -- Britain is rethinking its cautious welcome of Huawei Technologies Co. into the country’s fifth-generation mobile networks. Walking away from the Chinese technology giant won’t be easy, or cheap.Growing tensions with Beijing have led Prime Minister Boris Johnson’s government to seek out credible alternatives to Huawei’s antennas, routers and switching gear, Bloomberg reported on Wednesday. That could win him favors from Washington, which has urged its allies to ban the company.U.K. Opens Talks With Huawei Rival as Johnson Confronts ChinaYet British carriers are already building 5G networks using Huawei. Any other supplier -- even Huawei’s big European rivals Nokia Oyj and Ericsson AB -- would struggle to fill the void.35%Intelligence officials want the government to make Britain’s networks less vulnerable to spying and sabotage of services and infrastructure. So the government has set out measures to tighten security and oversight of the four mobile networks -- BT Group Plc’s EE, Vodafone Group Plc, CK Hutchison Holdings Ltd.’s Three UK and Telefonica SA’s O2.The rules are due to reach Parliament later this year for approval. However, several lawmakers from Johnson’s own party have pushed back, saying Huawei must have no role in 5G.That would send a shock wave through Britain’s telecommunications supply chain. The Chinese vendor already accounts for about 35% of the antennas that transmit signals using current 4G technology. With BT, Britain’s dominant phone company, it’s more than half.Those aging systems are now under strain from bandwidth-hogging applications such as mobile video, so carriers are desperate to upgrade to 5G. As that equipment must be compatible with 4G, it’s far simpler if it all comes from the same supplier.2023Since 5G services were launched in Britain, Huawei has further tightened its grip. Most 5G antennas used by BT and Three are from Huawei and the Chinese company makes up a large proportion of Vodafone’s new network too. 5G networks are far from complete, and the industry is set to install more gear from Nokia and Ericsson later. But Huawei’s early advantage makes it harder and costlier to backtrack now.It hasn’t all gone Huawei’s way. U.K. security officials wary of the risk that Huawei’s systems could be commandeered by hackers or hostile states are making sure its gear cannot be used in the most sensitive “core” of mobile networks -- the part where data are gathered to be processed and redistributed. BT is due to switch the core of the EE network from Huawei to Ericsson before 2023. Other carriers say they don’t use Huawei in the core.Still, U.S. officials have said the idea of core and non-core is a gray area with 5G, in which much of the data are processed on the periphery. What’s more, Huawei has been involved in other sensitive projects, for example working on a security gateway for O2’s network. Personal profiles of some telecom engineers on LinkedIn say they are integrating a real-time payment system from Huawei with O2’s core.500 MillionBT said in January that the 35% cap on Huawei 5G and fiber broadband equipment imposed in January will cost it 500 million pounds ($624 million). That’s partly the price of ripping out and replacing much of the underlying Huawei 4G gear inherited when it bought EE. Banning Huawei from 5G entirely would see those costs multiply across the sector, and inflate procurement spending by dampening competition, effectively leaving Huawei’s slice of the market to just Ericsson and Nokia, according to a study commissioned by industry group Mobile UK.Huawei is considered the market leader and its equipment could be nine or more months ahead of the pack, technology research firm Assembly said in the report. It put the cost to the U.K. economy at between 4.5 billion and 6.8 billion pounds if Huawei is barred, and said 5G rollouts could fall behind by up to two years.That would look bad for Prime Minister Johnson, who has pledged to upgrade the entire country to gigabit data speeds by 2025. Coronavirus has underlined the importance of Britain’s communications infrastructure for millions of voters forced to work from home, and the country now faces a dramatic recession. With the economy is on its knees, it’s not a good time to be ripping up and redesigning the nation’s networks. For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Huawei Snubbed by Canadian Firms Ahead of Trudeau’s Crucial 5G Call

    Huawei Snubbed by Canadian Firms Ahead of Trudeau’s Crucial 5G Call

    (Bloomberg) -- Two major Canadian wireless companies said they will build out their next-generation 5G wireless networks with equipment from European providers, sidelining China’s Huawei Technologies Co.Montreal-based BCE Inc. said that Ericsson AB will provide the radio access network equipment -- the critical antennas and base stations -- for its 5G network. Telus Corp. said in a separate statement that it has selected Ericsson and Nokia Oyj “to support building” its network, without elaborating.Those announcements come ahead of a closely watched -- and long overdue -- decision by Prime Minister Justin Trudeau on whether to ban Huawei from participating in the nation’s 5G infrastructure amid deeply troubled relations with Beijing. Huawei previously played a large role in Canadian wireless networks but has faced growing national security concerns from Western governments.BCE would still consider working with Huawei if the government allows their participation in 5G, the Canadian company said in an e-mailed response to questions.The Trump administration has lobbied allies to ban Huawei 5G, saying its equipment would make networks vulnerable to exploitation by the Chinese government. Despite that, the U.K. said in January it would allow Huawei a limited role. In recent days, Prime Minister Boris Johnson’s government has backtracked, saying it seeks to reduce reliance on the company’s technology and on China.Telus and BCE awarded Huawei its first major project in North America in 2008 -- a pivotal contract that helped cement the Chinese provider’s reputation as a global player that could compete on quality. The deal paved the way for it to become a major supplier to all three of Canada’s biggest telecom companies over the next decade.Stalling in OttawaThe Telus announcement comes as a particular surprise after Chief Financial Officer Doug French told the National Post in February that “we’re going to launch 5G with Huawei out of the gate” by the end of the year.Telus spokeswoman Donna Ramirez didn’t immediately respond to a question on whether the company’s announcement still leaves room for Huawei to participate in its 5G rollout. Huawei said in an emailed statement it looks forward to the federal government completing its 5G review and making an evidence-based decision about its role in helping build Canada’s next-generation wireless networks.Trudeau has stalled on whether to ban Huawei. Tensions between the two countries have been rising since Canadian authorities arrested Huawei CFO Meng Wanzhou on a U.S. handover request in late 2018. After her arrest, China put two Canadian citizens in jail, halted billions of dollars in Canadian imports and put two other Canadians on death row.The extradition proceedings against Meng, the eldest daughter of the company’s billionaire founder, have pushed Canada’s relationship with its second-biggest trading partner into its worst state in decades. Beijing has accused Canada of abetting a U.S.-led “political persecution” against a national champion.(Updates eighth paragraph with statement from Huawei)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    There’s Far Less Bang in a Huawei Ban Now

    (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.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Dumb Conspiracy Theories Aren’t the Only 5G Headwinds

    Dumb Conspiracy Theories Aren’t the Only 5G Headwinds

    (Bloomberg Opinion) -- Do you remember 5G? Before the coronavirus consumed all of our attention, the fifth-generation mobile networks were supposed to be the panacea for lagging economies, telecoms firms, keeping pace with China, autonomous cars, smart factories and plenty more besides.Overhyped? Maybe. But 5G will still be an economic boon. And perhaps inevitably, Covid-19 has collided with the rollout of the new technology, which ultimately depends on four ingredients: popular acceptance and adoption; the ability to install the equipment; access to capital; and the availability of spectrum — the radio frequencies used to transmit the signal that will allow vast gobs of data to be transmitted at lightning speeds.For now, telecoms companies insist the pandemic will only delay the rollout by several months. That may be optimistic. Problems with any one of the four factors above could throw things off course, and the current environment has elevated that likelihood. Given their role in dividing up the spectrum and auctioning it, governments have a particular responsibility to ensure they don’t hold up the process any more than is necessary.Much has been made of the conspiracy theories falsely suggesting 5G contributed to, or even caused, the virus’s spread. They prompted the gloriously terse response from the U.K.’s telecommunications regulator Ofcom: “This is wrong. There is no scientific basis or credible evidence for these claims.”The falsehoods may still permeate public opinion. Research suggests that even if people don’t believe conspiracy theories per se, they can nonetheless influence their views. So an underlying fear, however unwarranted, could persist that 5G is somehow detrimental to one’s health. That could perpetuate popular opposition to the necessary proliferation of new antennas.The virus has already disrupted the global supply chain, making it harder to source gear from China in particular. Telecoms equipment maker Nokia Oyj said that such interruptions shaved 200 million euros ($218 million) from revenue in the first quarter, and they continue to be a risk. Lockdowns are also making it harder to install that equipment. Orange SA Chief Financial Officer Ramon Fernandez said last week that fiber deployment — whose wires connect not just homes but the antennas — will be delayed by the virus.Telecoms operators are changing how they spend their money, too. The surge in people working from home has put huge pressure on their existing setup. That means operators are having to reallocate capital in the short term toward making sure their fixed networks are reliable, rather than working to upgrade and install everything that’s needed for the next generation of mobile services.Even with all that, Nokia CEO Rajeev Suri told me that he expects the delay will probably only be a “couple of months,” echoing comments from his peer at rival Ericsson AB, Borje Ekholm. Perhaps the biggest risk to a fast rollout is the availability of spectrum, which is where governments come in. They dedicate a particular tranche of frequencies to 5G and then auction it off. A slew of those sales have been put on the back burner by the pandemic. While Germany and Italy have all but finished theirs, other countries, including France, the U.K. and Spain, are unlikely to auction frequencies until later this year.With national budgets stretched by efforts to counter the impact of the virus, there will be a temptation to milk those auctions for all they’re worth. That could create a pinch on companies’ finances that makes rolling out the new networks even harder. Italy managed to squeeze 6.2 billion euros out of its telecoms firms back in 2018; Germany wrung 6.6 billion euros from Deutsche Telekom AG, Vodafone Group Plc, Telefonica Deutschland AG and 1&1 Drillisch AG. Economists generally classify networks as “productive” government investments, because they contribute positively to long-term economic output. It would be better for states to foster their new 5G networks by not overcharging for them. Otherwise they risk ceding more ground to China in the race for adoption. In return for more generous auction terms, it would be fair for governments to request an accelerated rollout.The virus is already reaping havoc on vast tracts of the economy. Best not to let it damage any more growth.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.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Zoom Backlash Widens With Daimler, Ericsson and BofA Curbs

    Zoom Backlash Widens With Daimler, Ericsson and BofA Curbs

    (Bloomberg) -- Some of the world’s largest companies have advised against the use of Zoom Video Communications Inc.’s conferencing app, fueling a growing backlash against a service that shot to prominence during the Covid-19 pandemic.Daimler AG, Ericsson AB and NXP Semiconductors NV are among a wave of companies forbidding or warning employees against using Zoom because of concerns about its security, according to people familiar with their operations. At Bank of America Corp., staff need to get permission to use the service. They join corporations like Tesla Inc. and government agencies from Taiwan to Singapore that have banned the app’s use, though the city-state has since backtracked. India has deemed Zoom an unsafe platform and initiated a public contest to develop a secure homegrown video-chat alternative.Zoom emerged during the global coronavirus lockdown as a home for everything from virtual cocktail hours to cabinet meetings and classroom learning. It passed the milestone of 300 million daily meeting participants this week, having never crossed 10 million before the start of this year. Its share price rose to another record Thursday. However, cybersecurity researchers warn hackers can exploit flaws in the software to eavesdrop on meetings. Weak protection has given rise to the phenomenon of “Zoombombing,” where uninvited trolls gain access to a video conference to harass participants.Daimler wrote “the software has various security gaps and data protection problems” in a memo to employees reviewed by Bloomberg News. The automaker, employer to close to 300,000 people globally, wasn’t a Zoom corporate customer before but is now explicitly prohibiting the video-calling app, pointing workers to Microsoft Teams as a more trustworthy alternative.“Daimler prohibits the use of Zoom for corporate content until further notice,” company spokesman Christoph Sedlmayr said in an emailed statement.Zoom CEO Eric Yuan has focused on bolstering the security of his videoconferencing application with the goal of winning back customers who abandoned the company. Zoom is working on improving its encryption and argues that many of its problems stem from the fact the app was initially geared toward enterprise clients with their own IT security teams instead of the broad consumer app it’s become. Singapore’s government banned Zoom’s usage by schools but later lifted that moratorium after putting in place security safeguards.NXP, a provider of wireless communications technology, uses Microsoft Corp.’s Teams internally and recently banned the use of Zoom with external parties, one person said, asking not to be identified discussing internal matters. Networking giant Ericsson also relies on Teams, previously Skype for Business, for remote meetings and now asks staff not to use Zoom. If clients or partners want to use the app, Ericsson staff will need to make sure the outside parties understand and are willing to accept the risks of using Zoom before proceeding with a meeting, said another person familiar with the measures.An NXP spokesman declined to comment, while Ericsson said in an emailed statement it has internally approved apps and guidelines for meetings, without elaborating.“A large number of global institutions ranging from the world’s largest financial services companies, to leading telecommunications providers, government agencies, universities and others have done exhaustive security reviews of our user, network and data center layers and confidently selected Zoom for complete deployment,” said a Zoom spokeswoman via email. “We are proud to be helping these customers maintain business continuity in this challenging and unprecedented time.”Bank of America doesn’t typically use Zoom internally because it has other video conferencing tools, and in cases where clients seek to communicate via Zoom, bankers need to go through an approval process to use it, a person familiar with the situation said. Of the bank’s 208,000 employees, more than 175,000 are working from home, Chief Executive Officer Brian Moynihan said at the company’s annual shareholder meeting Wednesday.A Bank of America spokesperson declined to comment.(Updates Zoom share price in third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Shunned by U.S., Huawei Winning China’s $170 Billion 5G Race

    Shunned by U.S., Huawei Winning China’s $170 Billion 5G Race

    (Bloomberg) -- Huawei Technologies Co. is emerging as the runaway winner in China’s $170 billion effort to build out its fifth-generation wireless networks, part of a concerted effort by Beijing to seize the lead in a key technology from the U.S. while rebooting a virus-stricken economy.Since the beginning of the year, Huawei has secured 28.4 billion yuan ($4 billion) worth of 5G equipment orders from the country’s largest carrier, China Mobile Ltd., beating out competitors like Ericsson AB and ZTE Corp. to win more than half of the 5G contracts awarded by the operator during the period, according to an analysis of procurement data by Bloomberg News.Huawei is relying on its home market more than ever, at a time its growth has all but evaporated. The 5G contract haul shows Huawei is benefiting from the domestic market and building its telecommunications expertise despite the Trump administration’s blacklisting last year. Beijing has forcefully defended Huawei, and the country’s three wireless operators -- all state-backed -- have added support through network contracts.While China has spent years striving for leadership in 5G, the effort took on greater urgency after the coronavirus led to the nation’s first economic contraction in decades. In a meeting with senior officials in March, Chinese President Xi Jinping singled out the technology’s importance for rebooting the economy. Weeks later, the country’s telecom regulator said China will “make every effort” to hasten the expansion of 5G coverage.“The focus on buildouts, handsets, and other metrics misses the fact that 5G will be a platform where innovative Chinese companies such as Alibaba, Tencent, Baidu, and a host of new tech unicorns will be able to build new applications and use cases,” said Paul Triolo, head of global technology policy at Eurasia Group. “Beijing wants Chinese companies to lead in this race to innovate on top of 5G.”China is entrusting Huawei to galvanize 5G tech, a cornerstone of a national “new infrastructure” blueprint that covers nascent technologies from the Internet of Things and autonomous driving to surveillance and factory automation. An early and successful rollout could help solidify Huawei’s position as a world leader in 5G.More deals are on the horizon. China has earmarked 1.2 trillion yuan to build 5G networks in the next five years, directly creating more than 3 million jobs in related sectors, according to the China Academy of Information and Communications Technology, a government think tank. IDC telecom analyst Cui Kai said 5G investment will continue to climb and peak in 2022 or 2023.This year, China’s three state-owned telecom carriers will spend a total of 180 billion yuan on 5G-related projects, including base stations and smartphones. China Telecom and China Unicom still have to announce bidding results.The 5G contracts give Huawei a much-needed boost as some projects in Europe grind to a halt because of Covid-19. Huawei this week reported revenue growth slowed to 1.4% in the first three months -- down from 19% over all of 2019 -- following pressure from the U.S. and dampening demand brought about by the outbreak.The Shenzhen-based company clinched deals to build more than 132,000 base stations for China Mobile across the country worth 21.4 billion yuan. The telecom carrier awarded rival ZTE Corp. 5G base station contracts worth 10 billion yuan, while Ericsson’s haul was around half of that. Nokia Oyj, which runs its China business via a joint venture with a local partner, didn’t get any of the business.Huawei won 56% of total orders by China Mobile for slicing packet network construction, or SPN, responsible for 5G data transmission between base stations and the core network. This brought in another 5.6 billion yuan in revenue.Huawei and ZTE also split 5G data management orders worth 1 billion yuan, leaving a fraction of the order to Ericsson, according to two separate procurement documents from China Mobile.In addition to 5G infrastructure, China Mobile placed orders with Huawei’s consumer electronics unit from the beginning of the year, including for about 70,000 units of the latest 5G smartphones and 140,000 5G portable Wi-Fi devices, without providing the procurement price. Most 5G phones in China cost around 4,000 yuan retail but carriers usually buy popular smartphone models from vendors at a discount.China Mobile had 31.7 million 5G package subscriptions nationwide as of March, more than doubling the subscription number in February, according to its website. 5G smartphone sales are expected to increase as more telecom carrier branches around the country place orders. Not all will be Huawei sales. So far this year, the carriers purchased more than 130,000 units of 5G smartphones from rivals Oppo and Vivo, the data show.Huawei’s 5G boost has benefited its suppliers. Shares of printed circuits board maker Shennan Circuits Co. Ltd. jumped more than 60% since the beginning of the year. Wuhan Fingu Electronic, a maker of radio frequency components used in base stations, increased by about 25%.Still, some doubt that 5G will be the savior that China is seeking. Gavekal Dragonomics analyst Dan Wang said that 5G doesn’t look like a big factor in moving the economy. “It’s a build-first-and-ask-questions later approach led by the state,” he said. “There’s not yet a killer app.”Huawei has put up a fierce fight since Washington banned the Chinese company from getting key American technologies last year. In the latest development, the Trump administration was said to consider imposing restrictions on the sale of semiconductors to Huawei by chipmakers such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., a move that would effectively deprive the Chinese giant of using the most advanced chips.“There’s no question that China’s state-owned telecom operators can direct a lot of business to Huawei,” said Wang. “The company’s problem, however, is on the supply side. Escalating U.S. sanctions might be highly disruptive.”(Updates with Huawei’s latest quarterly results in the third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Ericsson Says Pandemic May Set Back European 5G Rollouts

    Ericsson Says Pandemic May Set Back European 5G Rollouts

    (Bloomberg) -- Ericsson AB said Europe risks falling further behind on fifth-generation networks as phone carriers postpone upgrades to the latest cellular technology due to coronavirus lockdowns.The pandemic is already making it harder for the communications equipment supplier to deliver its services, though this had only a limited effect on operating income and cashflow during the first quarter, the company said in a statement.Key InsightsEricsson and peers such as Nokia Oyj are seen as relatively insulated from the virus pandemic as demand for communication services is holding up with the shift to home working and schooling.However, the pandemic has led to the postponement of European 5G spectrum auctions in countries including Spain, Austria and Poland, and a U.K. auction scheduled for the second quarter could also be delayed.A general pushback in 5G investments would be a setback for Ericsson, which has gone through a turnaround under Chief Executive Officer Borje Ekholm by focusing on the development of a competitive 5G product portfolio.Ekholm said there is near-term uncertainty around sales volumes due to Covid-19 and the macroeconomic situation, but with current visibility “we have no reason to change our financial targets for 2020 and 2022.”Market ContextA rebound in Ericsson stock that began in mid-March, driven by optimism that it can weather the pandemic relatively unscathed, has erased most of its decline since the start of the year.Get MoreEkholm said Ericsson still sees the market for radio access networks growing 4% this year, though sequential sales growth in the second quarter will be “somewhat lower than normal”.The risk of 5G investment delays “means that Europe may fall behind on a critical digital infrastructure for the future,” he said. “We believe governments should encourage 5G investments as a way to restart economies.”See the numbers here(Adds comment from CEO at end)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Huawei Bets Big on European 5G Patents Despite Trump’s Pressure

    Huawei Bets Big on European 5G Patents Despite Trump’s Pressure

    (Bloomberg) -- Even as the Trump administration pressures European countries to stop using Huawei Technologies Co. gear, the Chinese telecommunications giant is increasing its footprint there, filing more patent applications in Europe than any other company last year.Huawei filed 3,524 patent applications, far more than the 2,858 applications filed by No. 2 Samsung Electronics Co., according to a report by the European Patent Office. Two thirds of Huawei’s applications were in the field of digital communications, which includes the next generation of wireless communications known as 5G.European officials have thus far largely defied U.S. insistence they exclude China’s biggest maker of telecommunications gear from new 5G networks, but not without continuing controversy. On Tuesday, U.K. Conservative Party rebels fired a warning shot by giving Prime Minister Boris Johnson only a slight win over his plan to allow Huawei to supply equipment for the country’s 5G networks.Officials from President Donald Trump’s administration have urged Johnson and other European allies to stop doing business with Huawei over claims the company is an arm of the Chinese Communist Party and its involvement in 5G could enable spying.Huawei has always denied these allegations.U.S. efforts at blacklisting Huawei haven’t stopped the company from growing its business. While there’s no guarantee all of Huawei’s applications in Europe will become patents, the company’s actions make clear that it will be paid, at least through patent royalties, no matter what the politicians decide.“It shows that Huawei is investing a lot in terms of innovation,” said Luis Berenguer, a spokesman for the European Patent Office.Huawei is by far the largest filer of digital communications patents, requesting almost the same amount as Ericsson AB’s 1,227 applications and Qualcomm Inc.’s 1,061 applications combined.The European Patent Office saw a 4% jump in applications last year, driven in large part by double-digit jumps in the fields of digital communications and computer technologies, which includes artificial intelligence.U.S., Chinese and European companies each contributed about a quarter of all applications in digital communications.American companies, led by Alphabet Inc., and Microsoft Corp., accounted for 38% of applications in the computer technology field. Samsung, Huawei and Intel Corp. rounded out the top five applicants in that field.While American companies have filed a quarter of all applications, applications by Chinese firms have risen nearly six-fold since 2010. In addition to computer technology, American companies were strongest in the fields of medical technology and pharmaceuticals. The numbers reinforce other studies that indicate Chinese inventors are eroding American dominance in high tech fields.Companies file patent applications in the regions they expect to sell products and gain profit, and do a bit of forum shopping based on the rules of different patent offices.That’s why International Business Machines Corp., traditionally the biggest patent recipient in the U.S., isn’t even in the top 50 applicants in Europe.Manufacturing conglomerate United Technologies Corp. is the top American filer in Europe, followed by Qualcomm and General Electric Co.\--With assistance from Todd Shields.To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.netTo contact the editors responsible for this story: Jon Morgan at, Elizabeth WassermanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Is Nokia About to Be Smashed Into Little Pieces?

    Is Nokia About to Be Smashed Into Little Pieces?

    (Bloomberg Opinion) -- In Finland’s epic national poem, the Kalevala, a hero is tasked with retrieving the mythical sampo, a mill capable of producing salt, meal and gold that is a talisman of happiness and prosperity.It’s a task that now befalls Pekka Lundmark, the executive appointed chief of Nokia Oyj on Monday with a mandate to return the troubled Finnish network-equipment maker to more prosperous times.The time is right for his predecessor Rajeev Suri to hand over the reins. Appointed head of Nokia’s networks division in 2009, Suri became CEO in 2014 as that business became the firm’s main operation after the sale of the handset arm to Microsoft Corp. He has overseen the reshaping of a company that at the dawn of the millennium was one of the world’s biggest, with a market capitalization peaking at $290 billion in 2000, and the pride of Finnish industry.By acquiring French rival Alcatel-Lucent in 2016, he ensured that Nokia remained one of the top three suppliers of telecoms equipment, even as China’s Huawei Technologies Co. spent aggressively to leapfrog it and Sweden’s Ericsson AB to become the biggest player.But that takeover also caused problems for which Suri now seems to be paying the price. Nokia’s revenue grew more slowly than either of its two biggest competitors last year. Difficulties integrating the French company proved a distraction as the telecommunications industry started developing fifth-generation network technology. Carriers complain that Nokia now lags Ericsson and Huawei technologically, and the Finnish firm has struggled to compete on cost. Suri will hand over the reins in September. Chairman Risto Siilasmaa said Nokia aims to resolve shortcomings in the semiconductors used in its base stations this year, which ought remedy some of the tech concerns. Siilasmaa already planned to step down, to be replaced in April by Sari Baldauf.All of those missteps had helped drive shares of Nokia in its current form close to their all-time lows as a multiple of expected earnings. The stock was trading at less than 14 times forward earnings before the management change was announced. It traded as high as 29 times earnings on that basis in Suri’s first year at the helm.That downward trajectory makes Nokia vulnerable to an approach from an activist investor who could seek a breakup of the company. Replacing the CEO might help the company get ahead of the problem. And it surely can’t be a coincidence that Lundmark’s appointment follows that of Baldauf as chair of Nokia’s board: While in the same role at Fortum Oyj, she appointed Lundmark to his current job as CEO of the Finnish utility. Under his leadership, the firm has outperformed its European peers, generating an 80% return for shareholders.One recent event will give Lundmark some breathing space: U.S. regulators’ decision to approve the acquisition of Sprint Corp. by rival carrier T-Mobile US Inc. The delayed deal, which was first agreed two years ago, has meant that some spending decisions have also been pushed back. Both companies are big Nokia customers, which might help earnings this year.But Lundmark might also learn from the Kalevala. In the poem, the quest results in a fight that sees the sampo smashed into little pieces. Lundmark has been made responsible for determining Nokia’s strategy, which will include deciding whether Suri’s approach to offering an “end-to-end” network solution still makes sense, or whether some businesses are worth divesting. If he dithers, then activists might take the decision out of his hands and lead Nokia to a sampo-like fate.To contact the author of this story: Alex Webb at awebb25@bloomberg.netTo contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.netThis column does not necessarily reflect the opinion of 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.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Huawei Makes End-Run Around U.S. Ban by Using Its Own Chips

    Huawei Makes End-Run Around U.S. Ban by Using Its Own Chips

    (Bloomberg) -- Huawei Technologies Co., the Chinese technology giant barred from doing business with U.S. suppliers, is finding a way around the strict limits imposed by the Trump administration.The Commerce Department, citing national security concerns, has largely forbidden American companies from selling Huawei the computer chips it needs to make a piece of equipment integral to newly introduced high-speed wireless networks. In response, China’s largest technology company ramped up its own capabilities to manufacture the gear, which is known as a base station.In a sign that the self-reliance is working, Huawei in the fourth quarter sold more than 50,000 of these next-generation base stations that were free of U.S. technology, according to Tim Danks, the U.S.-based Huawei executive responsible for partner relations. That’s only about 8% of the total base stations that Huawei’s sold as of February, but the company is quickly ramping up at its secretive HiSilicon division to make more of these American component-free devices, Danks said.“It’s still our intention to return to using U.S. technology,” he said. The longer Huawei goes without access to U.S. suppliers, the more unlikely it is to be able to return to using them, Danks added.A base station is a typically suitcase-sized piece of machinery that’s used to help connect wireless phones to fixed-line networks carrying internet traffic, and it’s an essential ingredient in the next, or fifth, generation of mobile networks. Popular among telecommunications providers, Huawei’s base stations are widely considered among the most reliable for the price.Read about how Trump’s blacklisting of Huawei is failing to halt its growth.U.S. officials accuse Huawei of stealing valuable intellectual property and violating a trade embargo with Iran. The Trump administration blacklisted the company last year, saying there’s a risk Huawei could give Beijing access to sensitive data coursing through telecommunications networks that employ its gear. Huawei has denied the allegations. Critics also said the U.S. government imposed the sanctions to hobble China’s leadership in key aspects of 5G technology.As of early February, Huawei had shipped about 600,000 5G base stations to mobile phone companies racing to upgrade networks to the new standard, which is designed to deliver data at faster speeds to a broad range of wirelessly connected devices -- not just mobile handsets. Most of these base stations were made using stockpiled chips bought before the ban.While Huawei doesn’t disclose its suppliers, base stations typically rely on a kind of processor called a field programmable gate array that’s made by Intel Corp., a chipmaking colossus based in Santa Clara, California, and Xilinx Inc., in neighboring San Jose. Those chips provide flexibility that makes it easier to update machines as new standards and features are added. Huawei’s chips are application-specific, meaning they’re tailored to particular functions and it takes more time and money to replace them. That’s a disadvantage at a time when new technology, such as 5G, is in its infancy and still subject to big changes.Read more: Huawei Engineers Go to 24-Hour Days to Beat Trump BlacklistThe U.S. initially clamped down on all shipments of U.S. supplies to Huawei, which had spent more than $10 billion a year on U.S. products, but later began making some exceptions. Xilinx and fellow chipmakers Micron Technology Inc. and Broadcom Inc. have all reported falling earnings on reduced or eliminated sales to Huawei.Attempts by the U.S. to persuade European and other allied countries to ban Huawei equipment have fallen short, and chipmakers in Asia and Europe continue to supply it.For their part, American chipmakers have argued that banning the supply of parts that Huawei can get elsewhere is counterproductive, saying that the lost revenue crimps research and development budgets and the ability to produce the best chips in the future. Huawei’s HiSilicon chip unit designs semiconductors and has them manufactured by industry-leading plants owned by Taiwan Semiconductor Manufacturing Co. But Washington is even now said to be looking into ways to curb the world’s largest contract chipmaker on grounds of national security, and deprive Huawei of its largest semiconductor manufacturing partner.The Chinese company led the market for base stations with a 28% share last year, according to New Street Research. The investment company predicts demand for that equipment will rise this year with the 5G network buildout. Nokia Oyj and Ericsson AB are its two largest competitors in this market.How Huawei Landed at the Center of Global Tech Tussle: QuickTake(Updates with details of TSMC’s role in the 11th paragraph)\--With assistance from Gao Yuan.To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.netTo contact the editors responsible for this story: Jillian Ward at, Tom Giles, Edwin ChanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • A Slimmer Nokia Might Better Compete With Huawei

    A Slimmer Nokia Might Better Compete With Huawei

    (Bloomberg Opinion) -- The prospect is tantalizing: the Boeing Co. versus Airbus SE battle, but for the 5G era.Nokia Oyj, the Finnish telecommunications equipment firm, is contemplating asset sales and merger options, Bloomberg News reported on Wednesday. That raises the prospect of joining forces with Swedish rival Ericsson AB, thereby creating a European behemoth to compete more effectively with China’s Huawei Technologies Co.A tie-up would echo Europe’s cobbling together of Airbus in the 1960s and 1970s as a rival to U.S. aircraft-making giants like Boeing, setting up a fiercely contested duopoly that has dominated global aviation ever since. Unfortunately, it would also be a strategic misstep. Asset sales are the far more sensible option.Merging the two Nordic companies would most likely create as many problems as it would solve. Nokia has endured a tumultuous 12 months — the shares fell 25% in October after cutting its outlook — in part because of the failure to effectively integrate its last major acquisition, the $18 billion takeover of Alcatel-Lucent SA.Combining with Ericsson would make it easier to compete on price with Huawei, which benefits from the economies of scale afforded by the massive Chinese market, but it could also require several years just to secure regulatory approval, let alone integrate the operations. That would be a boon to Huawei, which could capitalize on the period of uncertainty to secure new customers.Crucially, Finland, which is one of Nokia’s five-biggest shareholders through its Solidium Oy investment vehicle, would surely stand in the way of any merger that would eliminate a lot of jobs.An acquisition by Cisco Systems Inc. would satisfy President Donald Trump’s exhortations for the U.S. to build a giant in fifth-generation wireless technology, pairing the San Jose, California-based company’s core network savvy with Nokia’s expertise in wireless communications. But it would be foolish of Cisco to tap its sizable cash pile for a deal that would dilute its margins; it enjoyed net profit representing 24% of sales last year, compared with Nokia’s 2.1%.QuicktakeHow Huawei Landed at the Center of Global Tech TussleNokia’s substandard 5G offering means Chief Executive Officer Rajeev Suri has been unable to profit on the tribulations of Huawei, and its shares have lost a third of their value over the past year. That downturn in fortunes makes it vulnerable to an approach from an activist investor scrutinizing businesses that are undervalued as part of the whole.Nokia can get ahead of that threat by putting some assets on the chopping block. Its intellectual property arm would seem the prime candidate: the division still generates healthy profits — it has a 98% gross profit margin on sales of 1.5 billion euros ($1.6 billion) — but the value of the portfolio is deteriorating steadily. Nokia could sell much of it for a lucrative sum — those parts pertaining to its old handset business, for example — while retaining the most recent patents developed for 5G. The fixed-access business, which has endured the steepest sales drop-off, might also be a candidate, according to Bloomberg Intelligence analyst John Butler.The review of options may yet come to nothing, as my Bloomberg News colleagues reported. But the last thing Suri needs is the unhelpful distraction of an activist calling for changes as he plays catch-up in 5G. It would be far better to be proactive himself.To contact the author of this story: Alex Webb at awebb25@bloomberg.netTo contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.netThis column does not necessarily reflect the opinion of 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.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • White House to Host Huawei Rivals at 5G Meeting, Kudlow Says

    White House to Host Huawei Rivals at 5G Meeting, Kudlow Says

    (Bloomberg) -- The White House plans to hold a conference with Huawei Technologies Co. rivals to try to accelerate development of affordable competing 5G wireless technology, President Donald Trump’s top economic adviser said Friday.“We’re working carefully, closely with Nokia and Ericsson,” National Economic Council Director Larry Kudlow told reporters. “We’re going to be holding some kind of a conference in about a month. I’m sure the president would join us in part, that would include Samsung, that will include all of our guys.”He later told Fox Business that the meeting “might take place” in early April, and that companies including AT&T Inc., Verizon Communications Inc. and Qualcomm Inc. would be represented.The U.S. has engaged in a campaign to persuade other countries not to use Huawei equipment in emerging 5G networks, but the effort has faltered due to a lack of competing technology. Attorney General William Barr suggested recently the U.S. government or American companies should consider investing in Huawei competitors Nokia Oyj of Finland and Ericsson AB of Sweden to try to prevent the Chinese company’s technology from being widely adopted.Kudlow called the U.K. government’s attitude toward Huawei in particular “sub-optimal.” Trump has spoken repeatedly this month with British Prime Minister Boris Johnson, berating him in at least one phone call for refusing to ban Huawei gear.“They have made some concessions about putting the lid on Huawei, but I’m an optimist, I believe we can work through it, they are our great allies,” Kudlow said.The U.S. alleges that the Chinese government will use equipment from the Shenzhen-based company to spy on nations that install it in their networks. Huawei has denied that the Chinese government controls the company or has access to its products.(Updates with details of conference in third paragraph. An earlier version corrected a misspelling of Huawei in the first paragraph.)\--With assistance from Jennifer Jacobs.To contact the reporter on this story: Josh Wingrove in Washington at jwingrove4@bloomberg.netTo contact the editors responsible for this story: Alex Wayne at, John Harney, Virginia Van NattaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Huawei Scare Pushes Carriers to Tackle Dominance of 5G Suppliers

    Huawei Scare Pushes Carriers to Tackle Dominance of 5G Suppliers

    (Bloomberg) -- With the U.S. campaign against Huawei Technologies Co. threatening to disrupt the rollout of 5G wireless networks, phone carriers are joining forces to develop technology that can reduce their reliance on a handful of powerful equipment suppliers.The Chinese company dominates the European market for telecommunications gear, ahead of Ericsson AB of Sweden and Finland’s Nokia Oyj. Governments are weighing whether to follow the U.K. and limit Huawei’s share of 5G networks over concerns -- denied by the company -- that it represents a security risk.If they do, it could knock the progress of 5G off course: The big three have designed a lot of their wireless gear so it can’t easily be integrated in the same network, much like an electric toothbrush only works with its own brush heads. So building 5G with Nokia or Ericsson kit on top of Huawei 4G infrastructure is fraught with complexity and costs.Companies including Deutsche Telekom AG and Vodafone Group Plc have decided to combine separate projects to develop a more standardized, flexible network architecture that would make it easier for carriers to use products from multiple vendors, according to people familiar with the matter.Under the plans, the O-RAN industry alliance, backed by Deutsche Telekom and AT&T Inc. among others, will align its work with the Telecom Infra Project, which was started by Facebook Inc. and is supported by several phone companies, said the people, who asked not to be named as the plans aren’t yet public.The industry is pursuing the efforts with greater urgency partly because they’re alarmed by the prospect of restrictions on Huawei in more markets such as Germany, one of the people said. The U.K.’s decision to limit Huawei’s share of broadband infrastructure already led BT Group Plc to predict a 500 million-pound ($650 million) hit to its finances.The carriers were planning to announce the O-RAN/TIP initiative at the wireless industry’s biggest annual showcase in Barcelona next week, before it was canceled due to the coronavirus outbreak, the people said. An announcement could instead come as early as this week.O-RAN’s goal from the start has been to “invite in more players with new ideas to help make the network stronger and more secure,” said Deutsche Telekom spokeswoman Pia Habel. She declined further comment.A spokeswoman for TIP declined to comment. A representative for O-RAN could not immediately be reached for comment.Negotiating PowerEnsuring that antennas, switches and other gear from competing suppliers can communicate seamlessly may also make it harder for any vendor -- Ericsson and Nokia included -- to clinch contracts just because the customer already uses its equipment. That could strengthen the negotiating position of carriers in contracts for 5G networks that are set to cost the industry hundreds of billions of dollars.AT&T has said it wants to replace the proprietary software that Nokia, Ericsson and Huawei use to run their wireless network gear with an open software.Vodafone has begun issuing small contracts for OpenRAN, an initiative backed by TIP to standardize radio access network hardware and software. CEO Nick Read said in October that Vodafone was “ready to fast track it into Europe as we seek to actively expand our vendor ecosystem.”O-RAN began in 2018 as a lobbying and research effort to make the radio access network -- the largest part of a wireless system -- more transparent and inter-operable. TIP is a broader project involving hundreds of companies working across all elements of networks.O-RAN and TIP may already be changing the economics of the industry and giving newer players more room. It’s now possible to design a “virtual” wireless network, which uses standardized, open-source software in conjunction with hardware from different vendors.Rakuten Inc. is using such technology to roll out a virtual network in Japan. U.S. satellite broadcaster Dish Network Corp., a member of the O-RAN alliance, aims to build a 5G network along similar lines.Ericsson and Nokia, reluctant to pick a fight with their biggest customers, have publicly welcomed O-RAN and TIP. Ericsson has joined O-RAN, while Nokia supports TIP and has been helping Rakuten build the Japanese network.Nokia Chief Executive Officer Rajeev Suri said in April last year it’s “better to be involved than not,” although he didn’t expect the model to be replicated in other parts of the world.\--With assistance from Thomas Seal, Angelina Rascouet, Niclas Rolander and Scott Moritz.To contact the reporters on this story: Stefan Nicola in Berlin at;Rodrigo Orihuela in Madrid at;Natalia Drozdiak in Brussels at ndrozdiak1@bloomberg.netTo contact the editors responsible for this story: Thomas Pfeiffer at, Jennifer RyanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Mobile World Congress Canceled Due to Coronavirus Concerns

    Mobile World Congress Canceled Due to Coronavirus Concerns

    (Bloomberg) -- The wireless industry scrapped its biggest annual showcase after the coronavirus outbreak sparked an exodus of participants, roiling telecom companies just as they’re preparing to roll out new 5G services.It’s the first time in MWC Barcelona’s 33-year history that organizers have called off the event, which draws more than 100,000 participants from across the world to check out the latest innovations, pitch to investors and do deals.“The global concern regarding the coronavirus outbreak, travel concern and other circumstances, make it impossible” to hold the event, John Hoffman, chief executive officer of conference organizer GSMA, said in a statement to Bloomberg News.The list of big-name attendees started to crumble on Feb. 7, when Swedish wireless equipment maker Ericsson AB pulled out, saying it couldn’t ensure the safety of staff and customers. As others pulled the plug -- from Sony Corp. to Nokia Oyj, Vodafone Group Plc and Deutsche Telekom AG -- it became harder for those remaining to justify their presence.Bloomberg News reported earlier that GSMA could announce the cancellation as soon as Wednesday, after a meeting of members. As of Tuesday, the death toll in China from the virus rose to 1,113, and confirmed cases on the mainland have reached 44,653.MWC was due to run from Feb. 24 to Feb. 27. GSMA had stepped up sanitary precautions to reassure visitors -- advising against handshakes, introducing body temperature scanners and a protocol for changing microphones, and restricting entry to recent arrivals from China.​ Some delegations had replaced Chinese staff with colleagues from other countries or sent their China representatives ahead of time to avoid being barred.Who’ll Pay?Every year, telecom heavyweights use MWC and the oceans of publicity that come with it to generate marketing buzz around their latest wares. A big focus this year was going to be fifth-generation mobile services, and now several companies will need to reschedule launch events. Chipmaking giant Intel had planned to announce products for 5G networks and will hold an unveiling another time, according to a person familiar with its plans. Motorola was gearing up to showcase new 5G phones.The smartphone industry is trying to fire up stalled growth with the promise of higher data speeds and faster responsiveness. Smartphone shipments have been declining since 2016.The decision to scrap MWC entirely was a difficult one, and it’s not clear who will shoulder the costs -- the participants or GSMA. The industry’s biggest players often spend tens of millions of dollars to exhibit at the show. Ericsson’s absence alone left a gap bigger than a standard American football field in the conference halls.GSMA funds much of its budget from the event, charging 799 euros ($872) for a basic admissions pass.BarcelonaMWC is also important to the city of Barcelona, Spain’s second-largest city, as well as to many of the smaller companies that wouldn’t otherwise have access to such a large audience of mobile carriers and consumers. Large national contingents from Turkey to South Korea take to the show to encourage deal-making and inward investment.The regional government of Catalonia had been in touch with the conference organizers and said it saw no need to cancel events like MWC, Alba Verges, head of the Catalan government health department, said at a press conference in Barcelona.South Korea’s LG Electronics Inc. was among the first to rethink its participation, pointing out last week that most health experts had advised against “needlessly” exposing hundreds of employees to international travel.The global spread of the coronavirus has decimated other conferences, like Singapore’s annual airshow, which lost scores of corporate attendees but went ahead as planned on a smaller scale. Formula One confirmed it is postponing this year’s Chinese Grand Prix racing event due to the coronavirus outbreak, the Liberty Media Corp.-owned firm said in a Twitter post on Wednesday.(Updates with information on abandoned product launches by Intel and Motorola in seventh paragraph.)\--With assistance from Thomas Seal, Niveditha Ravi, Saritha Rai, Debby Wu, Ian King, Gao Yuan, Mark Gurman, Scott Moritz, Rodrigo Orihuela, Angelina Rascouet and Loni Prinsloo.To contact the reporter on this story: Nate Lanxon in London at nlanxon@bloomberg.netTo contact the editors responsible for this story: Tom Giles at, Rob GolumFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    Virus Fallout Leaves Fate of Top Mobile Industry Event on Edge

    (Bloomberg) -- After some of the biggest telecom companies withdrew from the wireless industry’s top annual event because of concerns about the spread of the coronavirus, MWC Barcelona 2020 is all but dead.Members of the organizer, the GSMA, headed into a meeting on Wednesday expecting to announce a decision to cancel the conference in the afternoon, according to people familiar with the matter. However, the group based in London has been unable to arrive quickly at a conclusion on what to do.While many members of the lobby group publicly said they would withdraw, the organization’s base is broad and global. It’s not clear who would carry the costs of choosing not to go ahead. The Catalonian health authority said Wednesday it saw no need for such an event to be canceled.Spanish radio station Cadena Ser reported that GSMA has decided to continue preparations for MWC at least until Friday while it monitors the evolution of the virus.Two of the world’s biggest phone carriers -- Deutsche Telekom AG and Vodafone Group Plc -- earlier on Wednesday joined major exhibitors such as Nokia Oyj, Ericsson AB and Sony Corp. in pulling out of MWC. Ericsson’s absence alone left a gap bigger than a standard American football field in the conference halls.A decision to abandon the gathering for the first time in its 33-year history would underscore how the continued spread of the virus from its origin in China is denting business activity around the world. The death toll in China rose to 1,113 as of Feb. 11, and confirmed cases on the mainland have reached 44,653.Liberty Media Corp.’s Formula One on Wednesday postponed the Chinese Grand Prix, due to be held in April. Scores of companies and VIPs have pulled out of the Singapore Airshow, the industry’s biggest in Asia, scheduled for this week.MWC is due to run from Feb. 24 to Feb. 27, drawing around 100,000 people to the Spanish city. It’s the industry’s most important opportunity for networking and a chance to show off the latest gadgets and software to buyers from across the world. Wireless equipment vendors use MWC to hammer out deals with their biggest customers. Were the event to go ahead, it would be a shadow of its former self.5G ShowcaseThe GSMA stepped up sanitary precautions in recent days to reassure visitors -- advising against handshakes, introducing body temperature scanners and a protocol for changing microphones, and restricting entry to recent arrivals from China.​That’s not been enough to reassure many participants given the potential for virus transmission at an event where thousands of visitors jostle through packed exhibition halls and huddle in meeting rooms.In a statement to Bloomberg, the GSMA said Wednesday it was meeting regularly with health experts and partners “to ensure the wellbeing of attendees,” and will continue to seek medical advice on a frequent basis. A representative for the industry body declined to comment further.The biggest MWC participants often spend tens of millions of dollars to exhibit at the show. The GSMA funds much of its budget from the event, charging 799 euros ($872) for a basic admissions pass.This year is supposed to see the big launch for fifth-generation mobile services that debuted in 2019. The smartphone industry is trying to fire up stalled growth with the promise of higher data speeds and faster responsiveness. Smartphone shipments have been declining since 2016.MWC is also important to the city of Barcelona, as well as to many of the smaller companies that wouldn’t otherwise have access to such a large audience of mobile carriers and consumers. Large national contingents from Turkey to South Korea take to the show to encourage deal-making and inward investment.\--With assistance from Stefan Nicola, Angelina Rascouet, Daniele Lepido, Thomas Gualtieri, Nate Lanxon and Charles Penty.To contact the reporters on this story: Loni Prinsloo in Johannesburg at;Thomas Seal in London at;Rodrigo Orihuela in Madrid at rorihuela@bloomberg.netTo contact the editors responsible for this story: Rebecca Penty at, Jennifer RyanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    Virus Hits Startups Trying to Pitch at Giant Mobile Conference

    (Bloomberg) -- While tech giants are canceling plans to attend Barcelona’s Mobile World Congress this month, smaller firms don’t see it as an option.The show, which draws more than 100,000 attendees from around the world, is a critical meeting place for founders looking to attract new investors or cement manufacturing deals. Big name dropouts from the conference this year are stacking up: Facebook Inc. and Cisco Systems Inc. on Tuesday joined Intel Corp., MediaTek Inc., Ericsson AB, Sony Corp. and others in saying they’d canceled plans to attend the show.U.K.-based FX Technology, which sells a smartphone with a slide-out physical keyboard, was relying on MWC to help it win publicity after recent news that BlackBerry-branded devices may no longer be manufactured.“We’re also fundraising so it’s important to meet potential investors and distributors,” said Adrian Li Mow Ching, co-founder of FX Technology. “We’re making every effort to go still.”Read More: Top Mobile Conference Nears Cancellation Due to CoronavirusUnlike their smaller rivals, larger exhibitors are aided by their ability to generate their own news away from MWC. Samsung Electronics Co. unveiled its new flagship phones at simultaneous events in San Francisco and London this week, well ahead of the Barcelona gathering.Some, including Sony, said instead they’ll launch their latest products via internet livestreams. Video-calling potential investors or distributors remains “our contingency plan,” Ching said.Robert Vis, chief executive officer of enterprise communications startup MessageBird, said MWC is “super important” as networking at the show “fundamentally drives our business.”The Amsterdam-based company competes with the likes of Twilio Inc., helping firms chat with customers via messaging apps, SMS and calls. To make this happen, Vis said MessageBird needs to forge and maintain thousands of relationships with businesses, software companies and mobile carriers.“I founded the company in 2011 and we used to go with three people and run 20 meetings a day,” he said. This year he’d expected to take 40 people and hold about 500 meetings, before deciding Wednesday to pull out.“We’re a 200 million-euro ($218 million) business and this is the event of the year from a carrier perspective,” he said. “But we just don’t want to take any risk in terms of our employee safety.”The GSMA, which organizes MWC, confirmed as recently as Wednesday that the event is still going ahead.If it doesn’t, there are travel, accommodation, exhibition booths and entertainment costs deep-pocketed tech companies can afford to absorb in ways startups can’t always.MessageBird’s booth costs about 750,000 euros, in addition to travel and accommodation. But, Vis said, employee safety was more important than the numbers.Less CompetitionEven before the virus scare, big companies globally have begun looking for ways to generate buzz for their products without hitting the conference circuit.Sony, the world’s biggest console maker, skipped last year’s E3 video-game conference for the first time in almost a quarter-century. It said at the time it would focus on “exploring new and familiar ways to engage our community” instead.IDC analyst Raquel de Condado Marques said that large companies, such as Samsung Electronics Co., could ultimately benefit if MWC was halted.“Smaller vendors that were planning to launch their phones at MWC were counting on the visibility they could earn,” she said. “Therefore, Samsung will benefit from the fact that some of its competitors will lose the spotlight that MWC could potentially cast on them.”ShowStoppers, a popular companion event to MWC and other tech conferences, such as the annual Consumer Electronics Show in Las Vegas, gives smaller companies an opportunity to meet industry insiders and journalists at evening networking events.Many smaller companies take booths at these evening gatherings, which draw hundreds of industry insiders and journalists with promises of early access to cool tech from the main show, peppered with food, drinks and networking.On Tuesday, its organizer, Steve Leon, said the event was still planned to go ahead.“ShowStoppers continues to monitor news and will follow health and safety advisories from the World Health Organization, Spanish authorities, GSMA, airlines and other organizations, and the Chinese and other governments,” he wrote in an email to attendees.\--With assistance from Vlad Savov.To contact the reporter on this story: Nate Lanxon in London at nlanxon@bloomberg.netTo contact the editor responsible for this story: Giles Turner at gturner35@bloomberg.netFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • The U.S. Already Has a $60 Billion Huawei Solution

    The U.S. Already Has a $60 Billion Huawei Solution

    (Bloomberg Opinion) -- It might be the first workplace tip I was ever given: Always propose a solution when pointing out a problem.The U.S. seems finally to have taken the adage to heart for its approach to China’s Huawei Technologies Co. Attorney General William Barr suggested on Friday that the U.S., either directly or in a consortium with private American or “allied” companies, consider taking a controlling stake in Huawei’s biggest telecommunications-equipment rivals: the European companies Ericsson AB and Nokia Oyj.Sure, the proposed solution might be ill-considered — in this context there is such a thing as a bad idea — but let’s keep things upbeat and try to find a way to make it workable. Where there’s a will, there’s a way, and all that.Having a positive cross-Atlantic proposal on the table is a refreshing change from the U.S.’s general tone over the past 14 months, characterized as it has been by sniping and threats toward nations considering Huawei kit for the fifth-generation mobile networks that are crucial to making the Internet of Things a reality. (As early as 2009, the U.S. found so-called “back doors” in Huawei’s mobile-phone networks and has been telling allies such as the U.K. and Germany about them since late last year, the Wall Street Journal reported on Tuesday.)The U.K., which has been actively managing the role of Huawei’s gear in its network for a decade, has plowed ahead irrespective, albeit with some important checks and balances which seem a sensible way of limiting malicious actors’ access. As Barr himself said on Friday, “It's all very well to tell our friends and allies that they shouldn't install Huawei, but whose infrastructure are they going to install?”QuicktakeHow Huawei Landed at the Center of Global Tech TussleThe proposal was welcomed by some, not least by Cevian Capital AB, the activist fund that’s Stockholm-based Ericsson’s biggest shareholder. No surprise there. Takeover talk helps a share price, and both Ericsson and Helsinki-based Nokia have been among the five worst-performing stocks in the MSCI World Information Technology Index in the past decade.To find a workable solution, a good place to start is to identify the problem. Barr stated it thus: The question is whether, within this window, the United States and our allies can mount sufficient competition to Huawei to retain and capture enough market share to sustain the kind of long-term and robust competitive position necessary to avoid surrendering dominance to the Chinese.That makes it seem like a question of capital. But if cash is what Nokia and Ericsson need, the solution is not simply to acquire them. Were Ericsson to become the target, the buyers would likely need to spend $40 billion on the deal — money that would go straight into the pockets of existing investors before a cent was injected into the firm’s operations. That seems a shoddy allocation of taxpayers’ money. If equity was indeed the means by which to invest, then perhaps a capital increase would be the best option? But for shareholders to stomach the sort of dilution involved, there would have to be a clear way for the firm to benefit from the proceeds and translate them into more value.QuicktakeThe 70-Year-Old Spy Alliance the U.S. Says It May Cut OffWhy would either firm need the capital? Their disadvantage to Huawei in recent years has been their inability, first, to invest in research and development at the same pace, and second, to see their customers’ network costs subsidized with generous financing offers. Huawei has benefited from as much as $75 billion in state-backed financial assistance over the years, the Wall Street Journal reported in December. That helped it charge about 30% less than rivals for its gear. It’s all very well seeking a market-based solution, but China has been leaning on the scales.Being undercut by Huawei has made it harder for Nokia and Ericsson to foot the massive R&D expense that’s needed while they’re having to compete more viciously on price. That’s left them lagging in key technologies related to 5G such as network slicing, a much sought-after technique that will let carriers allocate their capacity more efficiently. Catching up could cost each firm $5 billion, a significant sum similar to what they’re each already spending annually, which already represents an eye-watering 20% of sales. The companies probably have three years before carriers start seeking such capabilities with gusto.The best approach from the U.S. would therefore be to help with both those costs and customer financing. Investing in R&D would have the corollary benefit of creating well-paying American jobs, adding to the combined 24,000 people that the two Nordic companies already employ in North America.Interestingly, on the financing side, the U.S. already has just the mechanism in place — with the U.S. International Development Finance Corporation, which will have a budget of $60 billion to help developing countries and businesses purchase equipment. The agency’s chief has intimated it plans to help counteract Huawei. It started operations in December. Ensuring it has the necessary budget scope also to help firms in developed economies will be essential.Barr’s suggestion may not be a practical one — Larry Kudlow, an adviser to President Donald Trump, acknowledged as much by saying that the U.S. would not be buying either firm — but hopefully it signals a change in American thinking that could lead to workable solutions.To contact the author of this story: Alex Webb at awebb25@bloomberg.netTo contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.netThis column does not necessarily reflect the opinion of 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.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • U.S. Charges Four Chinese Military Members Over Equifax Hack

    U.S. Charges Four Chinese Military Members Over Equifax Hack

    (Bloomberg) -- Sign up for Next China, a weekly email on where the nation stands now and where it's going next.The Department of Justice announced charges Monday against four members of China’s People’s Liberation Army for the 2017 hack of Equifax Inc., a breach that exposed the personal information of about 145 million Americans.The announcement by Attorney General William Barr follows an indictment in Atlanta accusing the Chinese military personnel of conspiring with each other to hack into Equifax’s network and stealing sensitive data on nearly half of all U.S. citizens.“This was a deliberate and sweeping intrusion into the private information of the American people,” Barr said in a statement. “Today, we hold PLA hackers accountable for their criminal actions, and we remind the Chinese government that we have the capability to remove the internet’s cloak of anonymity and find the hackers that nation repeatedly deploys against us.”Wu Zhiyong, Wang Qian, Xu Ke and Liu Lei, who were members of the PLA’s 54th Research Institute, were charged with three counts of conspiracy to commit computer fraud, conspiracy to commit economic espionage and conspiracy to commit wire fraud, authorities said.They were also charged with two counts of unauthorized access and intentional damage to a protected computer, one count of economic espionage and three counts of wire fraud, according to the Justice Department. Chinese officials disputed the accusations. “The Chinese government, military and relevant personnel never engage in cyber theft of trade secrets,” China’s foreign ministry spokesman Geng Shuang said on Tuesday.In an interview with Bloomberg News, Equifax Chief Executive Officer Mark Begor said that “having China indicted for this really changes the stakes for all of us.”“It definitely raises the bar for all of us on what we need to do to defend the sensitive data that we have,” he said. “We’re in the middle of a very significant technology and security investment because we’re convinced that these attacks are going to continue. And they’re going to be more difficult to defend, and we want to make sure we’re positioned so that this doesn’t happen again to Equifax.”The defendants allegedly exploited a vulnerability in the Apache Struts Web Framework software used by Equifax’s online dispute portal. They used the access to obtain login credentials that could be used to further navigate Equifax’s network and spent weeks running queries to identify the company’s database structure and searching for personal information, according to the Justice Department.The hackers ultimately stored the information in temporary output files, compressed and divided the files and downloaded and exfiltrated the data to computers outside the U.S., according to the Justice Department.“In total, the attackers ran approximately 9,000 queries on Equifax’s system, obtaining names, birth dates and social security numbers for nearly half of all American citizens,” according to a statement from the Justice Department.‘Over the Top’The hackers took steps to evade detection, too, routing traffic through about 34 servers in nearly 20 countries to mask their origin and using encrypted communication channels within Equifax’s network to blend in with normal network activity, authorities aid.“Chinese spying is over the top increasingly dangerous,” said Jim Lewis, a senior vice president and director of the Technology Policy Program at the Center for Strategic and International Studies in Washington. “The PLA has more personal data on Americans than anyone else.”It’s the second time in a week that Barr has raised criticism of China’s behavior on technology issues. Last week he gave a speech warning of the threats he said are posed by Chinese technology, focusing on Huawei Technologies Co.’s 5G networks, and saying the U.S. should consider investing in competitors Nokia Oyj and Ericsson AB.“Unfortunately, the Equifax hack fits a disturbing and unacceptable pattern of state-sponsored computer intrusions and thefts by China and its citizens that have targeted personally identifiable information, trade secrets, and other confidential information,” he said.Equifax announced in September 2017 that hackers accessed data including Social Security numbers, driver’s license numbers and addresses.Hackers gained access to the Equifax network in May 2017 and attacked the company for 76 days, according to a House Oversight Committee report. Equifax noticed “red flags” in late July, and then in early August contacted the Federal Bureau of Investigation, outside counsel and cybersecurity firm Mandiant. The company waited until that September to inform the public of the breach.The breach attracted scrutiny from lawmakers in Washington and criticism from consumers and banks, igniting a debate about the role credit bureaus play in lending.(Adds comment from Chinese officials in sixth paragraph.)\--With assistance from Jenny Surane.To contact the reporters on this story: Alyza Sebenius in Washington at;Chris Strohm in Washington at cstrohm1@bloomberg.netTo contact the editors responsible for this story: Andrew Martin at, Bill FariesFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • China Warns France Against Excluding Huawei From 5G Networks

    China Warns France Against Excluding Huawei From 5G Networks

    (Bloomberg) -- China warned France against treating Huawei Technologies Co. differently from European competitors when it comes to future 5G network equipment contracts, as the U.S. mounts a campaign to keep the Chinese tech giant at bay.In a lengthy statement issued on Sunday on its website, the Chinese embassy in Paris urged France to establish “transparent criteria and treat all companies in a similar way,” referring to telecom equipment makers.It also warned that a difference in treatment based on the country of origin would be considered “blatant discrimination” and “disguised protectionism.”The statement also carried a veiled warning.“We do not wish to see the development” in China of Finland’s Nokia Oyj and Sweden’s Ericsson AB being “impacted because of discrimination and protectionism” against Huawei by France and other European countries, the embassy said.Why 5G Mobile Is Arriving With a Subplot of Espionage: QuickTakeThe statement comes as France prepares to auction off 5G spectrum in April. France’s main carrier, Orange SA, has already announced it would leave Huawei out of its 5G network and work instead with Nokia and Ericsson.But two other French carriers who’ve been reliant on Huawei for their 4G networks, Altice Europe NV’s SFR and Bouygues SA’s telecom unit, have yet to name their 5G partners.The U.S. has been pressuring European allies to ban Huawei over fears that China’s government may be able to access its systems for spying. Huawei and Beijing officials deny there’s any such risk.“Huawei’s 5G equipment are totally safe” and have never presented any “backdoor” lapses, the statement from the embassy added.The U.K. government has faced a backlash from some senior lawmakers in its own party following a decision last month to let Huawei play a limited role in its 5G networks. That prompted one of China’s top diplomats in Britain to call their opposition “a witch hunt” in an interview with the BBC on Sunday.President Donald Trump has privately castigated Prime Minister Boris Johnson, and U.S. Secretary of State Mike Pompeo didn’t rule out the possibility that the episode could hurt post-Brexit trade talks between the countries.(Adds Chinese ambassador comment in penultimate paragraph.)\--With assistance from Thomas Seal.To contact the reporter on this story: Angelina Rascouet in Paris at arascouet1@bloomberg.netTo contact the editors responsible for this story: Thomas Pfeiffer at, Jennifer Ryan, Anne PollakFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Nokia Results Beat Provides Some Relief to Tested Investors

    Nokia Results Beat Provides Some Relief to Tested Investors

    (Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Nokia Oyj shares gained after the company reported fourth-quarter profit that exceeded expectations, bringing relief to investors concerned about the Finnish company’s checkered performance in the early stages of 5G rollouts.The Finnish network-equipment vendor posted adjusted earnings per share of 0.15 euros in the fourth quarter, higher than the 0.13 euros analysts surveyed by Bloomberg had expected on average.Key InsightsThe improvement in earnings reflects progress on the company’s cost savings program, though lower gross profit, particularly within the mobile access part of the company’s network division, was a drag on the results.Though operating profit of 1.13 billion euros ($1.2 billion) exceeds the Bloomberg consensus estimate of 1.09 billion euros, the company remains under pressure after it slashed its outlook in October and faces the challenge of reducing costs for making equipment to upgrade networks to 5G from 4G.Nokia warned that, excluding China, its addressable market is likely to be stagnant this year compared with 2019, and that pursuing market share in China would challenge profitability -- meanwhile, rival Ericsson AB has been aggressive in trying to expand there.“We have faced challenges in Mobile Access and in cash generation,” Chief Executive Officer Rajeev Suri said in a statement. “While I believe that 2020 will present its share of challenges, I am confident that we are taking the right steps to deliver progressive improvement over the course of this year and to position us for a stronger 2021.”Market ReactionNokia shares gained 4.1% as of 10:19 a.m. in Helsinki. Though the shares are up about 14% so far this year, they still haven’t made up for their 23% drop after the company’s third-quarter report in October.Get MoreNokia employees say management has been distracted by internal politics as it struggles to integrate Alcatel-Lucent following its takeover in 2016.The departure of Chairman Risto Siilasmaa and Chief Operating Officer Joerg Erlemeier were both announced in the wake of the October profit warning, stirring speculation about deeper changes at the company.See the numbers hereGet the statement(Updates with context in first bullet under Market Reaction)To contact the reporter on this story: Niclas Rolander in Stockholm at nrolander@bloomberg.netTo contact the editors responsible for this story: Thomas Pfeiffer at, Jennifer RyanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    The Huawei Checklist Is Both Obvious and Unclear

    (Bloomberg Opinion) -- How would you feel if your doctor, on hearing you’ve got diet-related health concerns, just told you to watch your diet? “I know,” you respond. “But which parts of my diet? What should I cut out and how much?” The reply: You should closely study the list of ingredients in anything you eat and decide for yourself.This is pretty similar to the European Union’s recommendations for dealing with Huawei Technologies Co., the world’s largest maker of telecommunications equipment. The Chinese firm has become a source of concern, not least in the U.S., over risks that it could create backdoors in the networks it helps build for exploitation by Chinese state actors.The EU’s executive body on Wednesday unveiled its much-anticipated guidelines for how the bloc’s national governments should handle cybersecurity in the era of fifth-generation mobile networks. The suggestions are sensible. They include assessing the risk profile of suppliers, putting restrictions on those that don’t pass the smell test, auditing operators and ensuring a diversity of suppliers. Crucially, it fails explicitly to name Huawei or China, instead referring to “high-risk suppliers.” Member states have the leeway to determine what constitutes such a supplier and then implement any solutions themselves.The problem is that some countries are far better equipped to tackle the challenge than others, as exhibited by the U.K.’s measured and well-considered solution to tackling Huawei unveiled on Tuesday. The soon-to-be-former EU member’s plan will clearly require constant ongoing work and revisions, but Britain has been proactively tackling the issue for more than a decade. Back in 2010, it set up a center in Oxfordshire that evaluates all of Huawei’s products before they enter the British network.Along the way, the U.K. has been proactive about limiting Huawei’s role in its domestic telecoms industry. So when Prime Minister Boris Johnson said the Chinese firm would be kept out of the core network and restricted to 35% of the radio-access network, he was to an extent simply reaffirming the existing reality.The situation is significantly different in Germany. The country’s incumbent operator, Deutsche Telekom AG, is dependent upon Huawei products for half of its network equipment, perhaps more. A similar lab to the one in Oxfordshire was only set up in 2018 in Bonn, and is considered less advanced.“We’re very late to wake up,” Thorsten Benner, co-founder of the Global Public Policy Institute in Berlin, told me. “The U.K. intelligence services saw it as a problem all along. Germany just went for the cheapest supplier.”So as much as the measures outlined by the European Commission make sense, following them effectively is a tougher proposition. And if it’s hard for Germany, Europe’s largest and most prosperous nation, the prospects are dimmer for smaller states. Take Hungary, for instance, where Huawei employs 2,000 people and has a major logistics center.Some of the responsibility for the quandary must be borne by the Commission itself. Competition policy has repeatedly blocked mergers in the region that might have helped carriers’ profitability: Average revenue per user has fallen from 21.60 euros ($23.75) a month in 2008 to 12.80 euros in 2018. That has forced carriers to find cost-savings elsewhere, providing an opening for Huawei to make inroads with its low-cost gear (thanks to subsidies from the Chinese state), and displace the pricier European rivals, Ericsson AB and Nokia Oyj.The situation is exacerbated in markets such as Poland or Romania, where revenue per user averages less than 10 euros. The contrast with the U.S., where AT&T Inc. and Verizon Communications Inc. enjoy income of close to $50 per user, is stark. They enjoy far healthier returns on investment.The EU is finally proposing checks and balances that should have been in place a long time ago. But they are little more than a starting point. Don’t be surprised if the likes of Germany, France, Spain and Italy lean more heavily on the U.K.’s lead. For the rest, there’s still plenty of scope for member states to continue voraciously gobbling down the Chinese candy.To contact the author of this story: Alex Webb at awebb25@bloomberg.netTo contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.netThis column does not necessarily reflect the opinion of 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.For more articles like this, please visit us at now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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