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How much trouble is there in Huawei?

New U.S. sanctions have severely restricted the Chinese technology company’s access to vital American technology. Countries and cellular network operators around the world are now wondering whether Huawei can keep its 5G promises. And the increasing sentiment against China in India and elsewhere doesn’t help.
US Secretary of State Mike Pompeo said last month that “the tide is turning against Huawei as citizens around the world become aware of the threat to the Chinese Communist Party surveillance state.”

These statements were “a little preventive,” said Carisa Nietsche, a researcher at the Center for a New American Security, a think tank in Washington.

Pompeo praised countries like the Czech Republic, Poland and Estonia for “only allowing trusted providers in their 5G networks”
;. However, Nietsche noted that many of these countries had decided last year when they signaled that they would not be working with Huawei. And European countries with much larger economies like the UK, France and Germany have not yet announced a complete ban on Huawei.

But there is “the beginning of a fundamental change in Europe,” said Nietsche.

European countries and mobile operators are now concerned that Huawei will not be able to deliver the promised 5G infrastructure as the new U.S. export controls have put a massive strain on its business, she said.

Huawei’s 5G business in great danger

Huawei has been here before. Last year, the U.S. government banned American companies from selling technology and accessories to the Shenzhen-based company without first obtaining a license. Huawei stocked and found alternative suppliers. As a result, the company continued to do good business despite the U.S. ban. However, the company’s overseas smartphone sales were severely impacted as new models had to be released that could not access popular Google apps.
However, despite reporting a strong end to 2019, Huawei warned that 2020 would be “difficult”.

That would turn out to be too true.

Huawei headquarters in Shenzhen.  The 5G business is at risk as the company wages a long American campaign against its business.
The latest US sanction announced in May goes much deeper ban last year. This applies to all global companies that use American devices for the production of semiconductors. The new rule prevents companies like TSMC, a Taiwan-based company, from exporting computer chipsets and other key components to Huawei.

Without these chipsets, according to analysts from the brokerage firm Jefferies, Huawei cannot build 5G base stations and other devices.

“Because of the current direct export rule that the United States introduced, I really think Huawei’s 5G device business is in grave danger,” Jefferies analyst Edison Lee said recently when speaking to investors.

“If the law doesn’t change and tensions between the US and China don’t subside, I think there’s a big risk that Huawei won’t be able to offer 5G devices from early next year,” he added.

Huawei spokeswoman Evita Cao was asked to comment on the story and said, “We continue to receive support from our customers,” without going into detail.

The enterprise said in May that it “categorically rejects” the recent US sanction and describes the new rule as “discriminatory.”

“It will have a serious impact on a variety of global industries,” and will affect collaboration within the global semiconductor industry, “said Huawei in a statement.” We expect our business to be inevitably affected, “he added.

This can already happen in the UK.

The U.S. is pushing for new action against Huawei and is concerned about retaliation against American companies
On Saturday, the UK-based newspaper Telegraph reported that Prime Minister Boris Johnson is ready to phase out Huawei 5G technology in the UK “this year” to reverse a decision that gave Huawei a limited role in building this network.
Earlier last week, Oliver Dowden, the country’s digital and media secretary, said that US sanctions “are likely to affect Huawei’s viability as a provider of the 5G network.”

“I am not a Sinophob, I am not drawn into Sinophobia,” said Johnson on Tuesday. But “I want our critical national infrastructure to be adequately protected from hostile state providers, so we have to strike that balance.”

Huawei announced earlier this year that it had signed 91 commercial 5G contracts, more than half (47) are in Europe, 27 in Asia and 17 in other parts of the world.

China tensions

The United States has been cautious of Huawei for a long time and is suspicious of how closely the company is associated with the Chinese Communist Party. The company claims it is a private company owned by thousands of its employees.

Critics also say Beijing could force Huawei to spy on other nations. According to Huawei, this has never happened before, and if it did, the company would reject such orders.

Despite Beijing’s independence, Huawei is involved in disputes between China and the United States, and increasingly between the European Union and countries like India that are becoming increasingly cautious about China.

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The coronavirus pandemic has only exacerbated the relationship. Some countries, such as the United States, have blamed China for the outbreak, while others have been put off by Beijing’s aggressive response to criticism.
There was a moment during the pandemic “when China was able to assert itself as a leader on the global stage, and I think they fiddled with it,” especially in Europe after China sent masks and breathing apparatus of dubious quality to countries in to which there were outbreaks Nietsche.
EU countries are concerned about their unilateral trade and investment relations with China and have taken steps in recent months to prevent subsidized Chinese companies from taking over the bloc’s industrial champions or winning public contracts. Beijing’s oppression of the Uyghur ethnic minority in northwestern Xinjiang Province is another major concern.

There are now “excellent signals” from Germany and the United Kingdom “that they will try to exclude Huawei, or at least remove it from the core.” [5G] Network, “said Nietsche. Germany is examining Huawei’s data flows, for example, to determine whether the company is violating European laws.

In the meantime, India has considered whether Huawei devices should be included in the country’s 5G network, said Chaitanya Giri, analyst at the Indian foreign policy think tank Gateway House. Huawei received the go-ahead for participating in 5G testing late last year.

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Tensions between New Delhi and Beijing have increased dramatically in the past few weeks after at least 20 Indian soldiers have been killed in border fighting with Chinese troops stationed in the Himalayas. According to Giri, China has also been selected to blame for the coronavirus pandemic in India.

Some Indians have called for a boycott of Chinese goods. In a move commonly seen as retaliation against China, the Indian government banned TikTok and several other Chinese apps last week, saying it was a “threat to sovereignty and integrity”.

According to Giri, Huawei could now get into escalating tensions. Public opinion has now “consolidated that we will not be using Chinese equipment,” he said.

What Giri Europe and India have in common, according to Giri, is growing discomfort after years of significant investment from China.

“Great democracies are singing in a choir,” he said. “You understand what it’s about.”

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