Trump Blacklists Huawei from 60% of 5G Market
President Trump has export blacklisting the exclusion of China’s giant Huawei Technologies Co Ltd from about 60 percent of the world’s potential market for 5G gear.
China’s last-minute walk away from an agreed upon Trade War truce caused President Trump to first slap China with increased tariffs, and then go for a jugular by declaring a “national emergency” that directs the U.S. Commerce Department to place Huawei and 70 affiliates on its “Entity List” that bans the telecom giant from buying components and software from U.S. companies without prior U.S. approval.
Huawei was founded in 1987 by former People's Liberation Army officer Ren Zhengfei. The company, with 180,000 workers -- 76,000 focused on research -- is one of seven companies that provincial and local governments were commanded by the Party to work with in achieving ‘Made in China 2025’ worldwide tech dominance.
That global triumph looked promising prior to the new federal edict. Wall Street analysts had predicted Huawei’s 2019 revenue would grow by 40 percent to $125 billion, spiking profit up to $14 billion. But that sizzling growth was predicated on the Huawei achieving global first-mover dominance in suppling 5G telecommunication networking equipment.
The U.S., Japan, China, South Korea, and Australia began 5G testing in 2018. But only China is prepared to go live with a commercial stand-alone 5G network in 2020, five years before U.S., EU, Japan, Canada, South Korea, and Australia go live in 2025.
IoT offers the hope for smart cities that could uninterruptedly monitor the healthcare and safety of its residents, while maximizing the efficient use of water and energy resources.
But the Utilities Technology Council warned there is no U.S. or European government standard for managing the underlying electronic grid necessary to handle the 47 percent annual compound growth in exabytes of data expected in the 5G rolls out. Gaining such an early 5G head start was expected to give China a massive competitive advantage.
The White House posted ‘Executive Order on Securing the Information and Communications Technology and Services Supply Chain’ will “prohibit transactions posing an unacceptable risk” to national security, Huawei cannot quickly find alternative vendors for the $12 billion in U.S. software licenses and key functional components such as Qualcomm semiconductors to power 5G’s speed, capacity, reliability, and ultra-low latency required to implement the Internet of Things (IoT) mission critical services.
The “Entity List” is normally used to deter the proliferation of weapons of mass destruction and terrorism, but the U.S. government has targeted “Denied Persons” and imposed the sanction on China telecoms equipment company ZTE for blatant tech theft.
Huawei responded to the sanctions by offering to engage with the U.S. government to find solutions that would ensure the security of its products. Its spokesperson stated:
“Restricting Huawei from doing business in the U.S. will not make the U.S. more secure or stronger; instead, this will only serve to limit the U.S. to inferior yet more expensive alternatives, leaving the U.S. lagging behind in 5G deployment, and eventually harming the interests of U.S. companies and consumers.”
But former head China analysis at CIA Dennis Wilder told the Financial Times that the executive order and blacklisting represented a U.S. government “full court press” and “the beginning of decoupling” of the West from Chinese efforts to infiltrate national telecommunications infrastructures by funding next-generation high-speed 5G networks.
With Japan, Australia, and Canada already onboard in support of the Huawei ban, the Trump administration is going all-in to convince Western nations such as the UK and Germany to follow its lead and prevent Chinese telecommunications supremacy.