The UK officially bans Huawei 5G equipment! Officials respond quickly

The UK has just officially announced that Huawei will not be part of the UK's 5G construction! According to the BBC, the UK government will stop purchasing new Huawei equipment from December 31, 2020. In addition, Huawei equipment currently used in the UK's 5G network must be removed by 2027.

The UK has always been "resistance" to the use of Huawei equipment in 5G construction, and since yesterday there have been reports that the British Prime Minister will hold a meeting today to give a final answer. Now that the shoe has dropped, it seems that the UK is determined to shake hands with the United States.

Announcing the move, Culture Secretary Oliver Dowden said: “This has not been an easy decision but it is the right one for the UK telecoms network, for our national security and for our economy, both now and in the long term.”

[[333785]]

▲British Culture Secretary Oliver Dowden

Just after the British government officially announced the ban on Huawei's 5G equipment, a Huawei UK spokesperson told domestic media that this decision was disappointing and could put the UK on the slow lane of digital development, increase consumers' communications expenses and deepen the digital divide. We urge the government to reconsider this decision. We are confident that the new US regulatory measures will not affect the resilience and security of the products we provide to the UK.

On the afternoon of the 14th, Beijing time, Chinese Foreign Ministry spokesperson Zhao Lijian said on the issue of whether the UK will ban Huawei from participating in 5G construction that whether an open, fair and non-discriminatory business environment can be provided for Chinese companies in the UK is a touchstone for the direction of the British market after Brexit and a weather vane for whether Chinese investment in the UK is safe. China will pay close attention.

[[333786]]

▲Zhao Lijian, spokesperson for the Chinese Ministry of Foreign Affairs

1. From accounting for less than 35% to a "complete break" in just half a year

The UK's official ban on Huawei's participation in the construction of the UK's 5G network also marks the end of Huawei's 20-year partnership with the UK's largest telecom operator.

In fact, as early as January this year, the UK passed a bill allowing Huawei to participate in the development of the UK's 5G network under limited conditions, on the condition that it must not participate in the construction of the core network, and the proportion of Huawei equipment in non-core parts must not exceed 35%. This proportion control must be completed before 2023.

However, the United States has been urging the UK to completely block Huawei, saying that Huawei's equipment poses security risks and should not give Huawei any chance. The United States believes that Huawei is a Chinese company that cannot be trusted.

In June, British Prime Minister Boris Johnson said he would protect critical infrastructure from attacks by "hostile state vendors" when asked about Huawei. British Justice Secretary Robert Buckland said on Monday they would prioritize national security concerns.

Huawei has responded to the US accusations, saying that the accusation of "conducting espionage" is groundless and that the US hopes to use it to suppress Huawei's strong growth momentum around the world because no US company can provide the same technology at a competitive price.

Huawei has also stated that the impact of US sanctions is still unclear. Huawei is still providing technology and product solutions to the UK, and it is recommended that the UK should be patient for now.

However, this time the UK clearly "did not listen to advice".

2. Is US chip sanctions the fuse?

In May this year, the United States further escalated its sanctions on Huawei. Companies that produce chips for Huawei need to obtain approval from the U.S. Department of Commerce as long as their production process involves U.S. technology. The implementation of this policy has a 120-day buffer period.

According to Reuters, the direct reason for the UK's policy shift is that the US sanctions on Huawei over chip technology will affect Huawei's ability to provide a stable supply of equipment. British officials said that if Huawei has to purchase chips from third parties for its 5G equipment due to US sanctions, the security of the equipment will not be guaranteed.

Currently, Huawei is restricted mainly in its more advanced 7nm process chips, including smartphone SoCs and communication base station chips. If the US sanctions are truly implemented, it will indeed cause considerable trouble for the shipment of Huawei's 5G equipment.

In addition to the chip factor, Reuters also used "New Cold War" as one of its subheadings in the report. Reuters commented that the United States is worried that its dominance in 5G will be taken away by China, and 5G is an important technology that can define the geopolitics of the 21st century.

The BBC believes that political factors may also play an important role, such as the UK's eagerness to reach a trade agreement with the United States and the tensions between China and the UK over Hong Kong-related affairs.

3. British Telecom CEO: It will take at least 5 to 7 years to truly remove Huawei

The move will no doubt win the support of US President Donald Trump to some extent, but it also marks the end of what former British Prime Minister David Cameron called the "golden era" of Sino-British relations.

This move will also have a significant economic impact on the UK's domestic telecommunications industry.

Currently, Huawei's main customers in the UK are BT, Vodafone and Three. BT CEO Philip Jansen told the BBC on Monday that it would take at least five or even seven years to truly remove Huawei equipment.

He stressed that "if the government asks us to implement policy requirements very quickly, then more than 24 million mobile users of BT may face a serious problem - signal interruption."

If the ban is extended to cover all mobile and fixed networks, including traditional equipment, it will take at least a dozen years to exclude Huawei, Jensen said.

Vodafone said removing all Huawei equipment would cost the company "billions of pounds".

4. The sanctions make us more courageous, and the second half of the year will be even more difficult

Yesterday, Huawei just announced its operating results for the first half of 2020, with sales revenue of 454 billion yuan, a year-on-year increase of 13.1%, and a net profit margin of 9.2%, of which operator business revenue was 159.6 billion yuan.

It can be said that Huawei’s performance in the first half of the year was "remarkable", but the US sanctions and the UK’s actions this time have undoubtedly added a lot of "uncertainty" to Huawei’s performance in the second half of the year.

According to data released by market research firm Dell Oro, in the global 5G communication equipment market in the first quarter of 2020, Huawei's market share was 35.7%, ranking first, a month-on-month increase of 0.4%; Ericsson ranked second, Nokia third, Samsung and ZTE ranked fourth and fifth.

Currently, the number of 5G orders announced by Ericsson on its official website is 97, and the number of 5G orders announced by Huawei in February this year is 91. After more than five months, the number of orders must have increased, but the specific number has not yet been announced.

Huawei has been at the top of the global 5G communications equipment market for four consecutive quarters. From the second place in 2018 to the first place today, Huawei has become more courageous amid the US sanctions.

Apart from the UK, other countries around the world have different attitudes towards Huawei's participation in 5G construction. For example, Germany has made it clear that it "strongly supports Huawei" and has continuously strengthened its 5G cooperation with Huawei, proposing that Huawei equipment will account for more than 65% this year. Countries like Canada, Australia, and Italy have clearly banned Huawei's 5G equipment.

There are also countries like France and Japan. Although the government's attitude is to boycott Huawei's 5G equipment, there are no mandatory requirements for other private companies.

Summary: The UK ban makes matters worse. How can Huawei break the impasse in its overseas 5G expansion?

The UK's official ban on Huawei's participation in 5G construction has put an end to the cooperation between the UK's telecommunications industry and Huawei, and has added more "gunpowder" to Sino-British relations. It may also increase the likelihood that other small European countries that have not yet made a choice will move closer to Britain and the United States.

Overall, the current international situation for Huawei's 5G overseas expansion is still relatively unfavorable. The majority of countries are boycotting, and traditional capitalist powers such as the United Kingdom have expressed their boycott attitude. Only a very small number of countries, such as Germany, dare to openly defy the will of the United States and accept Huawei.

However, although many countries are currently looking for alternatives to Huawei, it is basically impossible to find a 5G communication infrastructure solution that is more competitive than Huawei in a short period of time, and it requires huge capital investment. Huawei's technological advantage in 5G is still relatively obvious.

Huawei has not given a clear answer as to whether the US sanctions will have a significant impact on Huawei's subsequent 5G device shipments and how big the impact will be. There are still variables as to whether the sanctions will actually be implemented.

The UK ban has a grace period of more than five months, and the official deadline for removing all Huawei equipment is seven years. Who can predict how the international situation will change in these seven years?