source electronics360
In May, the Trump Administration signed an executive order that effectively blacklisted Huawei Technologies from doing business in the U.S. and making it extremely difficult for American companies to sell to the Chinese communications vendor. But will that blacklist give new opportunities to Huawei’s 5G equipment competitors?
So far, the U.S., Japan, Australia and New Zealand have all essentially banned the use of Huawei 5G equipment in their countries while others such as Canada and India are still deciding what to do with the company. The U.K. has not ruled out using Huawei’s 5G equipment for its current or future network after finding no evidence to exclude the company. Germany has also not ruled out using Huawei 5G equipment from its own network with the country stating it must evaluate the conditions on its own.
The blacklist from the U.S. already produced ramifications.
Google made the move to suspend business with Huawei, which means that any Huawei smartphones with Google apps will continue to use and download app updates but new smartphones won’t receive access to apps such as Google Play Store, Gmail, Maps and YouTube.
Semiconductor vendors based in the U.S. including Qualcomm, Xilinx, Broadcom and Intel will also be impacted, since they will only be able to sell to Huawei if they apply for licenses. However, such licensing will likely be subject to high scrutiny and will need justification for the transfer of technology components to China. IHS Markit sees the blacklist impacting more companies as well, including U.S.-based Micron and Western Digital, both of which supply memory chips and storage devices to the Chinese manufacturer.
Opportunities lost, opportunities gained
Because the blacklist may take opportunities away from Huawei, it may also open the door for other 5G equipment vendors such as Ericsson and Nokia. But Huawei may have new opportunities as well.
Huawei and ZTE dominate the Chinese networking market, accounting for an estimated 70% to 80% of the total LTE 4G market, according to International Data Corp (IDC). In response to the troubles the company is facing, the Chinese government and operators may engineer the market more in Huawei’s favor, reducing the market share from foreign vendors even further.
“I wouldn’t be surprised to see Nokia and Ericsson see their market shares fall closer to 10% or 15% in the 5G era [in China],” said Patrick Filkins, senior research analyst for IoT and mobile network infrastructure at IDC. “Perhaps even lower if it helps buoy Huawei and ZTE’s revenue performance. Said differently, Huawei and ZTE have some cards to play to help offset their reduced opportunities elsewhere.”
The 5G deployments from Ericsson across the world. Source: EricssonIf India — which is still determining whether or not to use Huawei — were to ban the Chinese vendor, it would be a major blow to growth but may allow other companies to take those design wins.
An Ericsson spokesperson told Electronics360 it will not comment on geopolitical situations or how the potential developments are good or bad for the company or the industry. However, the spokesperson claimed that Ericsson is the first company to go live with commercial networks on four continents including the U.S., South Korea, Australia and Europe. Because 5G is still in its early days and the company already has a 5G portfolio in place in numerous countries, customers can switch to 5G in all main frequency bands for global deployments, the spokesperson said.
Likewise, a spokesperson for Nokia when asked about the matter said it is closely monitoring the situation and remains neutral but suggests that overall it is something that governments will have to address.
RAN all day
IDC’s Filkins said the blacklist is likely to impact Huawei’s packet core network business the most, which is coming online in 2020.
However, the radio access network (RAN) layer is likely to still generate revenue for Huawei. The RAN layer are the cell towers and small cells tucked into urban environments, which is the aggregation point for smartphones and other devices. It also performs the higher-order functions and acts as a multi-intersectional repository for data, network management and broader connection to the internet.
Because the packet core layer is where many countries are having a problem, some operators are looking at keeping Huawei in the RAN layer, while removing the packet core network layer, thus reducing the potential for security intrusions.
“I’m not sure I buy that argument, because Huawei will still be in the broader network, but it seems to be resonating with policy-makers, particularly those in Europe, as a potential compromise with operators, of which many would prefer to have Huawei kit in the RAN for many reasons,” Filkins said.
The good news is that the packet core network accounts for about 4% to 6% of total capital expenditure while the RAN layer is closer to 50% of total operator spend on network builds, he added.
“Even if it is pushed out of a number of core network contracts, the impact will be minimal, whereas if it continues to see operators push it from both domains, the ramifications are much more severe,” Filkins said.
