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Summary
- Earlier this year, the UK had decided to phase out Huawei telecom equipment from its 5G networks, after its cyber security establishment CSC concluded that its equipment posed national security risk.
- The government has already banned buying of new Huawei 5G kits after the end of the year and removal of all Huawei equipment from the 5G network by the end of 2027.
- Huawei 5G equipment has been facing backlash from many countries after the US raised objections saying that the security loopholes could allow Chinese intelligence agencies to spy on other nations
The UK government has announced on Monday that the telecom companies cannot install new 5G kits provided by Chinese firm Huawei after 30 September next year. The decision is part of the government’s roadmap to remove all 5G telecom equipment provided by high-risk vendors such as Huawei by the end of 2027.
Reacting to the decision, Chinese ambassador to the UK Liu Xiaoming said that it was disappointing and incorrect. He tweeted that the decision questions the UK’s intentions for providing an open, fair, and non-discriminatory business environment for foreign companies.
Huawei has other major investments in the tech sector in the UK, which are unlikely to be affected by this decision.
In July, the UK government had told mobile network operators to stop buying Huawei equipment from the end of 2020 and said its decision was based on concerns cited by the US.
At that time, Huawei had said the decision was disappointing, and it was about US trade policy rather than security.
The UK government has chosen telecom giants Eriksson and Nokia to supply 5G equipment in the country. Though the 5G telecom services are available in many cities in the UK, their coverage is sparse. Following the ban on Huawei equipment, a slowdown of these services is expected to scale up.
Economic impact on the UK
The phasing out of Huawei may cost the UK a lot of investment. After July’s decision, the UK government has given the telecoms operators seven years to remove its existing technology from their 5G infrastructure, which will cost them at least 2 billion pounds.
The late rollout of the 5G services in Britain will have a significant bearing on the national economy. In the past few months, the global economy has speedily turned towards digital commerce, thanks to the pandemic and the lockdowns, and is expected to scale up in near future. Increased digital transactions would necessitate a faster and robust 5G network.
The 5G network is faster and more efficient, it can also lower the cost of digital transactions drastically. The switch over to the new network can make British companies more competitive at the global front. Besides, many new emerging technologies like driverless cars depend a lot on the 5G technology. So, a delayed rollout can slow down many projects in the pipeline. The UK government has already earmarked £250 million ($333 million) to help diversify its 5G supply chain.
Impact on Huawei
Global telecommunications supplier and phone manufacturer Huawei is in a soup after top countries banned the use of its equipment citing national security issues. Not only 5G equipment, Huawei phones have also been in the US markets.
Despite its aggressive pricing strategies, Huawei may not be able to become a leader in the 5G global equipment market and that would affect its balance sheets. As the world telecom market advances forward, the demand for telecom equipment would rise significantly and the volume of business coming will also surge.
As mentioned earlier, the Huawei equipment has a major cost advantage over its competitors. The company had a good chance of becoming a dominant player in the market had the US sanctions not come in its way.
The US had first banned its mobile operators from using Huawei equipment in 2012 and had added the company on the US Department of Commerce’s Bureau of Industry and Security Entity List in May 2019. This might restrict the company to a limited market in China and a select few nations to sell its product.
