Facing Huawei 5G, the United States is showing its hand

Originally, in the context of the "big cake" of the 5G market, Huawei would receive more and more foreign orders with its core 5G technology, and once surpassed Ericsson and Nokia to gain an absolute leading advantage. However, with the strong intervention of the United States, many suppliers that had once selected Huawei as their 5G construction supplier have "changed their faces", and the most noteworthy one is the United Kingdom.

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Over the past two decades, Huawei has maintained a very close cooperative relationship with the UK, but with the United States interfering, the relationship between the UK and Huawei has become increasingly delicate. In July last year, the UK suddenly "changed its face", not only prohibiting local telecom operators from purchasing Huawei 5G equipment, but also requiring that all Huawei equipment be removed from the UK telecom network by 2027, including 3G and 4G equipment.

What is even more unexpected is that local operators in the UK have begun to dismantle installed Huawei 5G equipment and replace it with Nokia 5G equipment.

Even though Huawei has been deeply rooted in the UK for more than 20 years and its communications equipment market share has reached more than 40%; even though British telecom operators oppose the decision to exclude Huawei 5G equipment; even though the UK's complete removal of Huawei equipment would cost US$2 billion and delay the UK's 5G deployment by at least 3 years, the UK's decision to remove Huawei equipment does not seem to have wavered at all.

If we go back to January 2020, the UK's review of Huawei equipment concluded that the use of Huawei equipment and technology is safe and controllable and will not affect the cooperation between the UK and the US. As a result, the UK announced its decision to allow Huawei to participate in the construction of its 5G network. But why did the UK suddenly change its mind later?

I believe everyone should know the reason. On the one hand, it may be that the pressure from the United States is too great. On the other hand, as an ally of the "Five Eyes Alliance", the other four countries have banned Huawei, and only the United Kingdom stays out of it, which may not be realistic.

In addition, in May 2020, the United States revised the new chip regulations to prohibit TSMC, Samsung and others from supplying chips to Huawei. Whether Huawei, which has no 5G chips available in the future, will be able to continue to supply 5G equipment has become the UK's biggest concern, and therefore has become a reasonable reason to reject Huawei.

In fact, Huawei also feels very sorry about the UK's decision. Because as one of the important economies in Europe, the UK's decision to remove Huawei equipment is likely to become an obstacle for Huawei to continue to expand into the European market and cause a "butterfly effect."

As expected, in the face of Huawei 5G, after the UK began to dismantle Huawei equipment, the US also showed its hand.

According to recent news from foreign media, the Federal Communications Commission (FCC) officially announced that it will launch a compensation project worth US$1.9 billion (approximately RMB 12.3 billion) to provide funds to most rural telecommunications operators in the United States to help them remove installed Huawei and ZTE network equipment.

In fact, as early as last year, the United States had stipulated that American operators would no longer be allowed to purchase Huawei equipment, and had made plans to remove Huawei equipment. However, because the cost of removing Huawei equipment was too high for American rural telecom operators, and the $1.9 billion in subsidies promised by the government had not been received, local rural operators in the United States have refused to implement it.

Now, judging from the result announced by the Federal Communications Commission, the $1.9 billion subsidy seems to have been received, and rural telecom operators in the United States can officially remove Huawei and ZTE equipment. This means that the United States has come to a showdown with Huawei 5G.

Although the United States has made it clear that it will spend $1.9 billion out of its own pocket to dismantle Huawei equipment, it needs to be emphasized that this process still faces various difficulties.

First, Huawei and ZTE equipment are loyal old customers in the hearts of rural telecom operators in the United States, and they play an irreplaceable role. Data shows that Huawei's market share in network communication equipment in the United States has reached 45%, so the workload of dismantling them can be imagined.

Secondly, foreign media said that even if the US$1.9 billion subsidy has been received, there are still many practical problems. For rural telecom operators in the United States, they face many problems such as high costs and difficulty in finding workers to dismantle and replace equipment.

Finally, for reasons known to all, the US has not had ample finances in recent years, and the domestic situation has become a mess. It would be fine if they did not save money everywhere, but they took out $1.9 billion so anxiously to dismantle Huawei and ZTE equipment and suppress Chinese companies. This is really a thankless task for the US and is difficult to understand.

But then again, since the United States has already revealed its hand and is determined to do so, all the consequences can only be borne by the United States and its companies. On the other hand, Huawei's Ren Zhengfei has already transferred its R&D center and investment in the United States, so compared with the US showdown, Huawei may suffer less damage.