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Summary
- Huawei telecom equipment's to be phased out of UK 5G networks after National Cybersecurity centre concluded that the company's equipment poses a security risk
- This decision may not have a bearing on other big-ticket investments being made by the company in the country, like the £1 billion optoelectronics Chip facility in Cambridgeshire
The UK government will not allow Huawei-made equipment to be used in British 5G networks, according to government sources. An official announcement in this regard is still awaited. The decision, which now is a mere formality, has come after months of deliberation by UK’s National Cybersecurity Centre that was investigating if the equipment and technology brought in by the Chinese company posed any espionage threat.
Huawei has been facing backlash from many countries over its 5G telecommunication equipment, after the United States raised objections and claimed that loopholes will allow Chinese intelligence agencies to spy on other countries. The Chinese company has strongly refuted the allegations and insisted that its equipment pose no such threat. Germany, Vietnam, South Korea, Poland, and the Philippines have, however, decided not to ban Huawei equipment.
The 5G telecom equipment controversy
Over the years, the US has accused Huawei of supplying equipment with loopholes which could allow Chinese intelligence agencies to spy upon other countries. These 5G-specific equipment are currently being rolled out across several countries and made available by Huawei at highly competitive prices. The opposition against Huawei equipment first originated in the US and spread quickly among allies and close associate nations. Despite strongly lobbying against the Chinese company, the US has not yet been able to offer any strong evidence to suggest the alleged wrongdoings. Several countries have initiated their own investigation into the matter and have either decided to ban Huawei equipment or are encouraging telecom network companies in their country to source equipment from multiple vendors to ensure adequate security.
During its investigation, the National Cybersecurity Centre concluded that the US sanctions imposed on the Huawei would force it to use an unreliable and untested technology making it difficult for security agencies to keep a tab on the tech. The agency, however, added that it sees the Huawei equipment as a threat to the nation. This conclusion drawn by the agency thus takes a middle path, where it rejects the Chinese equipment, yet does not show that it is doing so under the influence of any other country.
So, is there a threat to Huawei's other big-ticket investments in the UK?
Well, the answer is not really! The decision, if taken by the British government, may not fully sour UK’s relations with Huawei. In June , the company announced that it is going to invest in a chip-making facility for optoelectronics equipment in Cambridgeshire worth £1 billion. The project, which has already received approval from the local council, will not only bring in investment into the high technology sector in the UK but will also help create hundreds of highly-skilled jobs. While the UK has not taken an adverse view of this investment by Huawei, significant pressure exists from the American side to block this project.
The UK is unlikely to oppose Huawei’s chipmaking project at this time because it is not related to the 5G networks. Also, rejecting the project without a valid ground will be a violation of World Trade Organization rules. More importantly, such a move will clearly show that the UK is influenced by American assertions and will be viewed by many as not being able to take independent decisions. The British economy, which has been badly battered by the coronavirus pandemic, needs significant funding to rebuild itself. It will not be in its best interest to reject a project that will bring technological advancement to the country.
UK-China Diplomatic Ties
Diplomatic relations between the UK and China have not been at their best for the past few months. Following the coronavirus pandemic, imposition of a new security law in Hong Kong, and it’s aggressive stance against some nations have put China at odds with many countries. The blame-game between the British and Chinese officials has also increased significantly, with the British side accusing the Chinese of walking back on its agreement on Hong Kong, while China accuses the UK of meddling in its internal affairs.
However, many British companies have significant investments in China. From British banks to car manufacturers, all have increased their presence in the Chinese market in the past few years. There are also a significant number of British companies that import components and other intermediate goods from China, which helps them control their cost of production and make them internationally competitive. The Chinese government is yet to come out with a response to the National Cybersecurity Centre report over Huawei's 5G telecom equipment. Going by previous Chinese responses, it is highly likely that Beijing will take action which may be detrimental to the businesses of British companies.
Conclusion
To sum up, the British government has decided not to make Huawei a part of its 5G telecom networks. Not being able to take hold of the 5G equipment market in the world would be a major setback for Huawei. As the world telecom markets make further advancement, the volume of business coming to the telecom equipment companies will continue to grow. Huawei’s equipment provides a major cost advantage to its users, and gave it a chance to capture the lion’s share of the global market. However, the American sanctions will now restrict the company to a very limited market of China and a select few countries where it is permitted to sell.
