Huawei has 22 commercial 5G contracts; U.S. government warns allies about the company

1.  Huawei has signed 22 commercial contracts for 5G as operators prepare for the commercial launch of the new technology.

The company’s executive director and president of carrier business group Ryan Ding made the announcement during a keynote speech at the Global Mobile Broadband Forum (MBBF) in London.

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During his speech, Ding noted that a number of operators are expediting 5G commercial deployment in order to secure the first mover advantage. Major countries representing a third of the global population are among the first adopters of the technology.

“So far, we have signed 22 commercial contracts for 5G, and we are working with over 50 carriers on 5G commercial tests,” Ding said.

“Through heavy investment and continuous innovation, we are committed to helping carriers deploy 5G networks easily, rapidly, and cost-effectively. And we are ready to work with all stakeholders to drive robust development of the 5G industry.”

Ding spoke of the technical capabilities of Huawei’s 4G/5G kit, such as an uplink and downlink decoupling that can achieve co-coverage of 4G and 5G using C-band spectrum, and the ability to offer end-to-end solutions meant it was an ideal partner for operators.Ding added that the first 5G smartphones will be available next year, and phone makers are expected to launch budget 5G phones priced at around $100 soon after the commercial roll-out of 5G networks.

He also mentioned the relatively small size and lightweight of Huawei’s wireless networking equipment. This will appeal to operators struggling to add more equipment to mobile sites, especially in urban areas

“Every new generation of network comes with new challenges, and this applies to 5G commercial deployment, too,” said Ding. “We take complexity and deliver simplicity. That means we will provide innovative solutions to address challenges in 5G commercialization. Our close collaboration with carriers will help them find the easy way to 5G.

“Huawei has earned customer recognition for our leading 5G end-to-end capabilities and innovative products and solutions. So far, we have signed 22 commercial contracts for 5G, and we are working with over 50 carriers on 5G commercial tests. Through heavy investment and continuous innovation, we are committed to helping carriers deploy 5G networks easily, rapidly, and cost-effectively. And we are ready to work with all stakeholders to drive robust development of the 5G industry.”

The 5G contracts could also be viewed as a vote of confidence in Huawei. It has effectively been frozen out of the U.S. and Australian markets due to national security fears, specifically that the use of its equipment risks the possibility of Chinese government backdoors.

–>The effort to ban Huawei is further described in 2. below.

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2. U.S.  Asks Allies to Drop Huawei – worried about potential Chinese meddling in 5G networks, but foreign carriers may balk

WSJ article front page lead story on 23 November 2018

The U.S. government has initiated an extraordinary outreach campaign to foreign allies, trying to persuade wireless and internet service providers in these countries to avoid telecommunications equipment from China’s Huawei Technologies Co., according to people familiar with the situation.

American officials have briefed their government counterparts and telecom executives in friendly countries where Huawei equipment is already in wide use, including Germany, Italy and Japan, about what they see as cybersecurity risks, these people said. The U.S. is also considering increasing financial aid for telecommunications development in countries that shun Chinese-made equipment, some of these people say.

One U.S. concern centers on the use of Chinese telecom equipment in countries that host American military bases, according to people familiar with the matter. The Defense Department has its own satellites and telecom network for especially sensitive communications, but most traffic at many military installations travels through commercial networks.

The initiative also coincides with rising tensions between Washington and Beijing on other fronts this year as the Trump administration moves to counter what some U.S. officials say they see as years of unbridled Chinese aggression. Washington has placed tariffs on some imports from China, drawing retaliation from Beijing. The U.S. has also tightened up foreign-investment rules targeting Chinese deal making.

Officials familiar with the current effort say concerns about telecom-network vulnerabilities predate the Trump era and reflect longstanding national-security worries.

The overseas push comes as wireless and internet providers around the world prepare to buy new hardware for 5G, the coming generation of mobile technology. 5G promises superfast connections that enable self-driving cars and the “Internet of Things,” in which factories and such everyday objects as heart monitors and sneakers are internet-connected.

U.S. officials say they worry about the prospect of Chinese telecom-equipment makers spying on or disabling connections to an exponentially growing universe of things, including components of manufacturing plants.

“We engage with countries around the world about our concerns regarding cyberthreats in telecommunications infrastructure,” a U.S. official said. “As they’re looking to move to 5G, we remind them of those concerns. There are additional complexities to 5G networks that make them more vulnerable to cyberattacks.”

The briefings are aimed at dissuading governments and telecom executives from using Huawei network components in both government and commercially operated networks. A core focus of the briefings is Beijing’s ability to force Chinese corporations to comply with government requests from government authorities, a U.S. official said.

Some major carriers say Huawei’s broad offering of components, lower costs and high quality make it a difficult provider to do without.
Some major carriers say Huawei’s broad offering of components, lower costs and high quality make it a difficult provider to do without PHOTO:MICHAEL HANSON FOR THE WALL STREET JOURNAL
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The talking points also emphasize how wireless and internet networks in a few years could be more susceptible to cyberattacks or espionage, people familiar with the briefings said. Today’s cellular-tower equipment, for instance, is largely isolated from the “core” systems that transfer much of a network’s voice and data traffic. But in the 5G networks telecom carriers are preparing to install, cellular-tower hardware will take over some tasks from the core—and that hardware could potentially be used to disrupt the core via cyberattacks. For that reason, U.S. officials worry that Huawei or ZTE cellular-tower equipment could compromise swaths of a telecom network.

Huawei is the world’s No. 2 smartphone maker behind Samsung Electronics Co. It is the global leader for telecom equipment, such as the hardware that goes into cellular towers, internet networks and other infrastructure that enables modern communication.

Huawei has long said it is an employee-owned company and isn’t beholden to any government, and has never used its equipment to spy on or sabotage other countries. It said its equipment is as safe as that of Western competitors, such as Finland’s Nokia Corp. and Sweden’s Ericsson , because all manufacturers share common supply lines.

In a statement Friday, Huawei said it has its customers’ trust and was “surprised by the behaviors of the U.S. government” detailed in this article. “If a government’s behavior extends beyond its jurisdiction, such activity should not be encouraged,” it said.

The Trump administration and Congress this year initiated a multipronged push to tighten up restrictions on Huawei and other Chinese telecom-equipment manufacturers, including ZTE Corp. The Federal Communications Commission, for instance, moved to restrict federal subsidies to some carriers if they buy Chinese gear.

Even without U.S. business, Huawei dominates the world’s telecom-equipment market. Last year, the company held a 22% share globally, according to research firm IHS Markit Ltd. Nokia had 13%, Ericsson had 11% and ZTE was in fourth at 10%.  Dell’Oro Group says Huawei has a 38% revenue market share in Asia Pacific, a 30% share in Europe, but only a 2% share in North America.

Some other members of the “Five Eyes,” a five-member intelligence pact among English-speaking countries that includes the U.S., have also publicly challenged Huawei. The Australian government in August banned Huawei and ZTE from its 5G networks. In October, U.K. authorities said they were reviewing the makeup of its telecom-equipment market, a move industry leaders said was clearly aimed at Huawei.

Still, there is a big hitch to U.S. efforts to curb Huawei overseas: The company is already popular among carriers in allied countries, including some of America’s closest military partners. Some major carriers in these places say Huawei offers the most products and often customizes them to fit a carrier’s needs. They also cite lower costs and high quality.

In an effort to narrow that advantage in some countries, Washington is considering ways to increase funding from various U.S. government sources to subsidize the purchase and use of non-Chinese equipment, according to people familiar with the matter. Countries buying Chinese telecommunications equipment would be ineligible for such subsidies.

In the past year, U.S. officials, including representatives from the National Security Council and Commerce, Defense and State departments, worked together to produce briefing notes about why they believe Chinese telecom equipment poses national-security risks, people familiar with the matter said. One U.S. government official said they focused on Huawei but also included ZTE, a Chinese rival with a much smaller business outside China.  A ZTE representative declined to comment on the U.S. effort.

Washington has circulated the notes to national-security officials as well as to embassies, with the idea that they can deliver the message to foreign officials and telecom executives, some of the people said.

A spokesman for the Commerce Department said it would “remain vigilant against any threat to U.S. national security.” Spokesmen for the National Security Council and the State Department declined to comment. The Defense Department didn’t return a request for comment.

U.S. officials have briefed counterparts in Germany, which has signaled a new wariness toward Huawei, according to people familiar with the matter. Huawei this month opened a lab in Germany similar to one it already operates in Britain, where Huawei products are inspected for security flaws. The U.K. government said in July it found shortcomings in the process.

Germany’s Federal Office for Information Security declined to comment.

American officials have also briefed Japanese officials about Huawei, people familiar with the matter said. A Japanese government official said “we share various information with the U.S.,” but declined to comment on specifics. Japanese officials in August said they were studying restrictions on Huawei.

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24 thoughts on “Huawei has 22 commercial 5G contracts; U.S. government warns allies about the company

  1. “It will be a difficult decision for telecom operators in Europe who already have been using Huawei,” said Achal Sultania of Credit Suisse . “They will have to change architecture around to shift to either Nokia or Ericsson. For them, it is going to be complicated and time-consuming.”

    U.S. officials say they worry about the prospect of Chinese telecom-equipment makers spying on or disabling connections at a time when more items—from factories to everyday objects—are connected to the internet.

    “It is unthinkable that vast installed bases of Huawei equipment, plus relationships with customers would get ripped out; but Huawei market share could get capped in some markets, leaving Nokia and Ericsson to benefit,” said Richard Kramer, an analyst at research house Arete.

    Huawei has long said it is an employee-owned company and isn’t beholden to any government, and has never used its equipment to spy on or sabotage other countries.

    In a statement Friday, it said it has its customers’ trust and was “surprised by the behaviors of the U.S. government” detailed in the Journal’s report.

    “If a government’s behavior extends beyond its jurisdiction, such activity should not be encouraged,” it said.
    ZTE declined to comment.

  2. Huawei, ZTE emerge as major winners in India 4G market

    Vodafone Idea has stepped up gear purchases from Huawei and ZTE as both Chinese network vendors offered more attractive prices and flexibility in payment terms over two to three year-spans unlike Ericsson and Nokia, which had quoted higher rates and sought payments at the point of deployment itself.

    https://telecom.economictimes.indiatimes.com/news/vodafone-idea-inks-4g-network-pacts-worth-1-4-bn-huawei-zte-emerge-as-major-gainers/66753251

  3. Indonesia’s Telkomsel has signed a memorandum of understanding with Huawei focused on digital transformation of the operator’s business. The agreement will see the companies collaborate on the development of flexible service offerings for customers, user experience assurance and the development of enterprise mobile broadband services.

    Telkomsel’s digital transformation strategies are aimed at transforming the operator from a traditional telco to a provider of digital and data services.

    Earlier this year, the operator worked with Huawei to migrate package quota management into Huawei’s Unified Policy and Charging Controller (UPCC), part of the vendor’s SmartPCC suite, as part of efforts to reduce operational complexity and time to market of new services.

    Now the companies are expanding their collaboration in the mobile broadband field, and plan to jointly develop new core network solutions to accelerate the rollout of Telkomsel’s new service offerings.

    https://www.telecomasia.net/content/telkomsel-signs-digital-transformation-mou-huawei

  4. New Zealand Bars Huawei From Its 5G Network Over Security Fears-The U.S. has been lobbying allies to oust the company, as neighboring Australia did in August.

    Chinese telecommunications giant Huawei Technologies Co. has been blocked from supplying a 5G mobile network in New Zealand, a fresh setback as a U.S. campaign to shun its equipment intensifies.

    Spark New Zealand said Wednesday that the Government Communications Security Bureau had told it that its plan to use Huawei equipment in the network—which Spark is due to complete by July 2020—would “raise significant national-security risks.”

    https://www.wsj.com/articles/new-zealand-bars-huawei-from-its-5g-network-over-security-fears-1543408355

  5. UK and Germany grow wary of Huawei as US turns up pressure-Delegation from Washington warns against using Chinese supplier for 5G networks. US, Australia and New Zealand have already blocked the use of Huawei 5G equipment on national security grounds.

    The UK and Germany are growing wary of allowing Huawei, the Chinese telecoms company, to install 5G equipment in their countries after a US delegation visited Europe to urge heightened vigilance against national security threats.

    UK security officials on Thursday issued a new public warning to Huawei, saying the Chinese company must fix problems in the equipment it provides to British networks or risk a further deterioration in what is an increasingly strained relationship.

    The clear message delivered by the US delegation this month and in online communications is that Germany and the UK as key American allies must safeguard the security of their telecoms networks and supply chains, said people familiar with the situation.

    The warnings come as Germany and the UK are preparing for auctions next year for 5G, a superfast service that will enable a new generation of digital products and services. Huawei is the world’s biggest telecoms equipment supplier and has been seen as a frontrunner to build the first networks in both countries, where it has conducted extensive 5G tests.

    The UK’s National Cyber Security Centre (NCSC), part of the digital intelligence agency GCHQ, said Huawei must fix problems, highlighted in July, that pose “new risks in UK telecommunications networks”.

    The issues came to a head in a tense meeting between the board set up to scrutinize Huawei equipment and the Chinese company earlier this month, said government officials and telecoms executives.

    “As you might imagine there are some strains in the relationship as we deal with the issues set out in the latest oversight board report,” the spokesperson said. “But we remain committed to working with the company to put it right.”

    Banning Huawei outright from providing 5G equipment to UK providers or removing them from existing telecoms networks remains unlikely, officials said. But the message to the Chinese company is clear.

    “They are slowing down Huawei to allow the rest of the market to catch up,” said one former intelligence official. “If I was part of oversight board or government, I would be putting the boot in right now.”

    UK security officials rejected the suggestion they are hardening their stance in response to growing pressure from the US, insisting the concerns are not based on Huawei’s Chinese origins as a company but on the way the company manufactures software and equipment which makes critical telecoms networks vulnerable to cyber attack.

    A spokesperson for Huawei said: “We are grateful for this feedback and committed to addressing these issues. Cyber security remains Huawei’s top priority, and we will continue to actively improve our engineering processes and risk management systems.”

    New Zealand this week became the latest country to take action against Huawei, blocking one of its biggest telecoms operators from using Huawei’s 5G equipment. The US and Australia have already blocked the company on national security grounds.

    In Germany, officials said the mood in government was growing increasingly wary of Huawei’s potential involvement in building the country’s 5G network. While it is too early to say if Berlin will ban the Chinese company from participating, concerns in some parts of the government, including the foreign and interior ministries, is deepening, officials said.

    “The US influence on this has really intensified recently,” said one German official, who requested anonymity.

    Cui Haifeng, vice-president of Huawei in west Europe, told the Financial Times in Hamburg that the company was doing everything possible to allay concerns over security. Asked if Germany was set to issue a ban, he said: “So far, I never heard about this kind of thing.”

    “[For] every technology for us at Huawei we always try to put the security and safety as top priorities so all the design, products and services will be safe,” Mr Cui said.

    Raffaello Pantucci, director of international securities studies at UK think-tank RUSI
    “The NCSC has concerns around a range of technical issues and has set out improvements the company must make,” a government spokesperson said. “In the UK, the conversation with regard to China has definitely shifted with the hawks becoming kind of dominant,” Mr Pantucci added.

    The main US concern over Huawei equipment is that the company’s ties to the Chinese government could enable snooping or interference. Huawei has strongly denied such charges.

    More generally, the US is worried about the potential application of China’s National Intelligence Law, approved in 2017, which states that Chinese “organisations and citizens shall . . . support, co-operate with and collaborate in national intelligence work”. The risk, said US officials, is that this could mean that Chinese companies overseas are called upon to engage in espionage.

    https://www.ft.com/content/6719b6b2-f33d-11e8-9623-d7f9881e729f (on line sub required)

  6. What is Huawei, and why the arrest of its CFO matters, By Julia Horowitz, CNN Business

    The arrest of a top Huawei executive has roiled the business world and threatens to derail the tenuous trade truce between the United States and China. Experts are warning that what happens with Weng’s case could have huge implications for the broader US-China relationship.

    https://www.cnn.com/2018/12/06/tech/what-is-huawei/index.html

  7. Financial Times reports: Huawei spat comes as China races ahead in 5G  (on line subscription required)

    A leaked memo, apparently written by a senior National Security Council official, revealed as far back as the start of this year exactly how worried the US is about Huawei. The rise of the Chinese company to become the world’s biggest supplier of telecoms equipment has given China a huge boost over the US in the race to introduce and develop 5G, the next generation of mobile communications, the memo complained.

    “We are losing,” it said. “Whoever leads in technology and market share for 5G deployment will have a tremendous advantage towards [ . . .] commanding the heights of the information domain.”

    Eleven months on, those fears have mushroomed into open conflict between Washington and Beijing, with American officials pushing allied countries to ban Huawei from building their 5G networks, citing concerns over security and the company’s unclear links to the Chinese state. The arrest and planned extradition to the US of Meng Wanzhou, Huawei’s chief financial officer and daughter to the company’s founder, has further exacerbated the spat.

    Several countries have begun to trial 5G networks, though the full international standards have not yet been agreed. The shift to the new technology carries profound implications, and countries are wary of being left behind. 5G is “by no means simply a ‘faster 4G’”, the US memo said, describing it instead as “a change more like the invention of the Gutenberg Press”. It will bring higher speeds, lower lag times between network and device, and a much larger capacity to transfer data. Together, these features are expected to underpin self-driving cars, AI and machine-to-machine communications that will transform the way everything from homes to hospitals to factories operate.

    References:

    https://asia.nikkei.com/Business/Companies/SoftBank-to-remove-existing-Huawei-equipment-amid-security-concerns

    https://www.reuters.com/article/us-usa-china-huawei-japan-idUSKBN1OC0E5

    https://www.cnbc.com/2018/12/13/japans-softbank-to-replace-huawei-equipment-nikkei-reports.html

  8. Huawei continues global push despite setbacks in west. Chinese company inks telecoms deals despite security concerns raised by US
    As the furor raged over whether Huawei is a security risk to the west a few weeks ago, a senior executive from the Chinese telecoms supplier gave a speech in London.

    “Actions speak louder than words,” said Ryan Ding, a Huawei board member, as he revealed that the company has signed 22 commercial contracts for 5G, the next generation of mobile internet, and is working with “over 50 carriers” on 5G trials.

    A few days later, the company revealed another major deal: one with Altice for 5G in Portugal. Last week, T-Mobile launched a 5G network using Huawei equipment in Poland.

    Both Malta and Papua New Guinea have in recent days shrugged off the criticism of Huawei from the US and its allies, pledging to continue to use Huawei for their networks.

    The deals underline that while it may be a blow to Huawei to see the likes of Australia, New Zealand and Japan pull away from its equipment because of security concerns, it remains a key supplier for huge swaths of the globe.

    In a sense, the company has grown from the world’s developing periphery before expanding into its core developed markets — and has managed to generate $92.5bn in 2017 revenue while remaining virtually shut out of the US.

    “We started in developing countries as well like Central Asia, Russia and Africa and then we moved into western Europe,” a senior Huawei executive, who declined to be identified, said in an interview.

    “We needed to understand customers requirements for our products and then provide innovations and we accumulated that experience in emerging markets before expanding into the sophisticated developed markets.”

    The legacy of that strategy means the overwhelming majority of the 170 countries in which the company sells products and services are in the developing world, including China, that account for the lion’s share of revenue.

    For example, Huawei set up shop in Africa several years before it won a vital UK contract that was a beachhead to more deals in Europe, and now claims to partner with customers in nearly every country in the continent.

    In developing markets, its critics complain that Huawei has the backing of the Chinese state, which provides financing. In September, for example, China’s ExIm Bank lent Nigeria $328m to improve its telecoms infrastructure with Huawei equipment.

    “Huawei could not become as giant as it is and as strong as it is without the government’s complete support,” said the former head of a Huawei supplier. “They provided a practically unlimited budget.”

    Huawei also wins market share by reliable technology, extensive post-sales service, and highly competitive pricing, say its fans and critics alike.

    “We run into them all over the world,” said an executive at one US rival. “And the way they win business is they charge 10-20 cents in the dollar.

    “Don’t get me wrong — they are formidable in the marketplace. But we all have to make money somehow and two or three years down the road they are figuring out ways to do it.”

    In Europe the dynamics may be more subtle but the methodology is similar. “Clearly there was commercial exigency on the part of certain governments,” said one former diplomat who was among those warning of the risks of adopting Huawei equipment in the UK.

    Advisers to Huawei point out to two further pages from its playbook that help cement its position: influence in R&D, and boots on the ground.

    Rivals such as Ericsson and Nokia, said one tech lawyer, may be able to sell kit into far flung markets in Africa, but are less willing to have teams of technicians ready to jump into action to fix glitches and maintain the service.

    Huawei has also funded universities, including the pioneering University of Surrey 5G Innovation Centre, and standard-setting bodies, as part of its huge research budget. 5G is a priority for China and Huawei has five chairmen and vice-chairmen on the 5G standard setting body, just one short of leader Ericsson.

    Huawei’s business model is one of scale that relies on recycling income into research and development — on which it is on course to spend hefty $16bn, or 15 per cent of sales, this year, according to Vincent Peng, president of Huawei in western Europe.

    Looking forward, telecoms analysts said developing markets are likely to continue to choose Huawei, especially because of cost. “We do not expect African governments to bow down to US pressure to keep Chinese telecoms players out of any potential 5G rollouts or 4G network upgrades,” said Kenny Liew at Fitch Solutions.

    “Operators will definitely be keen to slash costs where possible [for 5G], and one area is to adopt cost-effective Chinese telecoms equipment,” he added.
    https://www.ft.com/content/2d86836a-fd2b-11e8-aebf-99e208d3e521

  9. Huawei pushing back against security risk allegations 12/19/2018

    Huawei Deputy Chairman Ken Hu said at a news conference Tuesday that evidence doesn’t support allegations of national security threats from the company’s 5G products and warned that excluding Huawei from the 5G race would result in higher costs for consumers. Huawei also unveiled plans to invest $2 billion to boost its cybersecurity capabilities over the next five years.

    https://www.fiercewireless.com/wireless/huawei-fights-back-2b-security-pledge

  10. Trump may ban US firms from purchasing Huawei, ZTE gear

    President Donald Trump is reportedly considering signing an emergency executive order prohibiting US firms from using equipment manufactured by ZTE and Huawei, due to security concerns. Rural companies are particularly worried that such an order might require them to remove equipment from the Chinese companies, and that they wouldn’t receive compensation for replacement costs that could top $50 million at a single company.

    https://www.reuters.com/article/us-usa-china-huawei-tech-exclusive/exclusive-white-house-considers-new-year-executive-order-to-bar-huawei-zte-purchases-idUSKCN1OQ09P

  11. The US is like a bully boy who has to use outright fear-mongering and scare tactics to gets its way on the school playground of the world. There is no credible evidence to back up any of its fear mongering and scare tactics regarding Huawei but in this world if you repeat a lie or false assertion long enough there will be those who will believe it. I hope that the western allies who are gullible or are weak enough to believe the US lies regarding Huawei and ban Huawei outright will ultimately pay far more for their 5G service and will receive service that is inferior to what they would have received if Huawei had been given a fair chance to participate in their national 5G telecom rollouts.

  12. In my mind, this more than anything, shows the large and growing divide between the culture of the USA and that of China. The USA has and continues to have a world wide spy network. Five eyes (USA, UK, England, Australia, New Zealand) is one such network the USA is part of. The USA has been proven many times to be spying on itself (people living in America) and their allies. Remember the problems a few years back when Germany found out, via Wiki Leaks, the level of spying done by the USA on them and at every level. The UK found the same to be true.

    China has been shown to have industrial spy’s. Well not really spy’s, but people that worked for foreign high tech companies doing industrial espionage. Some of those workers later went back to their home countries and failed to forget what they had learned overseas. Yes this is true. Some Chinese people work overseas, then go home while still remembering what they have learned.

    Huawei has developed and patented, many key technologies for 5G. I believe they refused to incorporate a back-door in their network equipment that USA intelligence agencies could use to spy by monitoring user data traffic. The USA is now so paranoid they assume if they can’t use it for spying China must want to use it for itself. The remaining allies of the USA will then be forced to use (non-Huawei) network equipment that may contain back doors, which USA intelligence agencies could use to spy on Americans and their allies.

    The world is now far too small and interconnected to be governed by such paranoia. Its now time for the age of peace and prosperity. Its now time for the Silk Road of China to replace the bombs and napalm of the failed rogue state and warmonger USA. Its time for us all to become civilized. To pull together for the benefit of us all. Its time to reclaim the wealth of our beautiful little planet for the people and not just the 0.01% elitists.

  13. Huawei’s clout is so strong it’s helping shape global 5G rules by BLOOMBERG

    The future of the 5G technology that promises to revolutionize telecommunications runs through international bodies with esoteric names such as the 3rd Generation Partnership Project and the International Telecommunication Union. The organizations set standards for the emerging technology. But security officials are concerned China’s government and Huawei Technologies Co. are taking a bigger role in the technical groups, lending a competitive edge to a company under indictment in the U.S.

    As of September, Chinese firms and government research institutes accounted for the largest number of chairs or vice chairs in the International Telecommunication Union’s 5G-related standards-setting bodies, holding eight of the 39 available leadership positions, according to the U.S.-China Economic and Security Review Commission that advises Congress. By comparison, mobile provider Verizon Communications Inc. is now the only U.S. leadership representative, according to the commission.

    “Having a socialist government basically in charge right now is incredibly problematic for U.S. goals, and 5G specifically,” Michael O’Rielly, a member of the U.S. Federal Communications Commission, said in an interview. “They have loaded up the voting to try to get their particular candidates on board, and their particular standards.”

    Huawei, China’s largest technology company, has been the target of a broad crackdown by U.S. officials, who say the company’s telecommunications equipment could be used by China’s Communist Party for spying. U.S. prosecutors filed criminal charges Jan. 28 alleging Huawei stole trade secrets from an American rival and committed bank fraud by violating sanctions against doing business with Iran.

    Huawei denies the charges and rejects suggestions it poses a security risk or is beholden to Beijing. It also asserts the innocence of Chief Financial Officer Meng Wanzhou, who was arrested on sanctions charges in Vancouver and faces extradition to the U.S.

    On standards-setting, Huawei has worked with other companies, Andy Purdy, USA chief security officer for the company, said in an interview.

    “Industry has been working hard with a lot of visibility as they’ve evolved from 4G to 5G to make sure there’s a very strong consensus standards-based approach,” Purdy said.

    There’s no clear way for a nation to influence standards-setting in a way that would harm U.S. security, Doug Brake, director of broadband and spectrum policy at the Information Technology & Innovation Foundation, said in an interview.

    “There’s been a lot of consternation over the past few years over Chinese participation in the standard-setting bodies,” Brake said. “You can’t really sneak something into the standard developed through 3GPP since it’s an open process. We should be encouraging China to participate in global standards.”

    U.S. officials up to the White House level make no bones about the stakes as communications jumps from the current 4G, or fourth generation, technology to fifth-generation 5G that will feature always-on, ubiquitous connections with billions of sensors and controls. It will connect everything from banks and cars to factories and phones.

    The U.S. gained from being a 4G leader, and “and we are working hard to maintain our advantage as we shift to and expand towards 5G,” Michael Kratsios, deputy assistant to President Donald Trump for technology policy, said at a conference Jan. 29 in Washington. “The risk of losing American market leadership cannot be overstated.”

    Standards are set by bodies such as the 3GPP — the 3rd Generation Partnership Project, which unites seven telecommunications standards development organizations — and the International Telecommunication Union, or ITU, a United Nations agency.

    The ITU is headed by Houlin Zhao, the first Chinese official to be elected secretary-general of the group. Richard Li of Huawei is chairman of a group examining emerging technologies and 5G.

    Patents, Too

    “Huawei has been aggressive in standards-setting bodies” and in securing patents that other companies need to honor, Michael Wessel, a commissioner on the U.S.-China commission, said in an interview. “That creates vulnerabilities that have law enforcement as well as the intelligence community on guard.”

    U.S.-based chipmakers Qualcomm Inc. and Intel Corp. are among companies competing to develop 5G technology, as are Huawei and fellow Chinese manufacturer ZTE Corp. Trouble for Huawei could benefit rivals in the 5G network gear market, including Sweden’s Ericsson AB and Finland’s Nokia OYJ, according to a Dec. 7 note note by Bloomberg Intelligence analysts Woo Jin Ho and John Butler.

    “I’m really concerned about standard-setting,” the FCC’s O’Rielly said. “Skewed standards that lean toward Chinese companies should be incredibly problematic, because it’s at the expense of domestic and international partners that U.S. companies are involved with.”

    Qualcomm Leads

    The ITU assembles government representatives and companies. The 3GPP gathers company executives, and China has been active there, too. The number of Chinese representatives serving in chair or vice chair leadership positions rose from 9 of 53 available positions in 2012, to 11 of 58 available positions in 2017, according to the U.S.-China commission.

    In these roles, Chinese companies can set the agenda and guide standards discussions, the commission said in a report. Still, Qualcomm leads the most important 5G standards-setting group after beating Huawei for the position in a 2017 vote.

    “The Chinese go more with the goal of driving a standard that will advantage what they’re doing,” Wessel, of the U.S.-China commission, said.

    U.S. officials cited fear of losing ground in the standards race last year as they squelched a hostile bid for Qualcomm from Broadcom Inc.

    Qualcomm’s expertise and research spending drives U.S. leadership in standard-setting bodies, and weakening its position “would leave an opening for China to expand its influence on the 5G standard-setting process,” the U.S. Treasury Department said in a letter that signaled Trump administration hostility to the deal.

    Skeptical of Threat

    “China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover,” Deputy Assistant Secretary Aimen Mir said in the letter. “Given the well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States.”

    Qualcomm has about 15 percent of patents essential for 5G networks, and Chinese companies have about 10 percent, said Michael Murphree, an assistant professor of international business at the University of South Carolina.

    “There’s a lot of money at stake” since manufacturers pay fees to patent-holders, Murphree said. If 5G “incorporates a large amount of Huawei patents — then it doesn’t matter if you buy Huawei equipment or not, you still have to pay to use Huawei patents.”

    Murphree was skeptical of the idea Huawei could pose a threat via standards accretion.

    “Huawei is not at all going to control the standards as such,” Murphree said. “No single company or single country ever controls all the standards” that are forged by a mix of advanced-economy participants.

  14. A deeper tech concern is at the core of the U.S.-Huawei spat, By John Pomfret
    February 4, 2019 Washington Post:

    Over the past few months, the U.S. government has launched an assault against Chinese telecommunications giant Huawei for three publicly acknowledged reasons: Huawei, as the Justice Department alleges, was involved in sanctions-busting with Iran. The company also allegedly stole U.S. technology and even awarded its employees bonuses to do so. And third, because Huawei is a Chinese company and Chinese law mandates that it follow the orders of its security services, anything Huawei installs in equipment used by a U.S. ally could pose a security risk to the United States.

    But, in the three-dimensional chess game that is U.S.-China relations, underlying this battle is another conflict with China over technology and U.S. concerns that it is losing the fight. This battle centers on the rollout of 5G telecommunications technology that is expected to reshape not only modern economies but modern warfare, too. And so far, China appears to be ahead — very far ahead.

    This matters because 5G will produce enormously faster broadband speeds — upward of 10 gigabits per second — with no lags. This web of connectivity could facilitate the introduction of highways with driverless cars, advanced automation on factory floors and a brave new world where machines effortlessly exchange oceans of data. It could also transform warfare with integrated military operations that would make today’s joint operations look like children playing in a kindergarten sandbox. Imagine squadrons of pilotless fighters, drones and smart missiles along with a coordinated cyberattack.

    Tragically for the United States, China’s efforts to roll out its 5G network have lacked any of the catalyzing drama associated with the Soviet Union’s launch of Sputnik, the world’s first satellite, in 1957. According to a report last year by Deloitte, since 2015, China has outspent the United States by an estimated $24 billion in wireless communications infrastructure.

    Density is key to 5G. A successful network needs more cell towers than 4G. That means more small cells on telephone polls and street lamps. According to the Deloitte report, China Tower, the world’s leader in building these relay stations, has invested $17.7 billion since 2015, beating all its U.S. rivals combined.

    Nationwide, China today has 1.9 million wireless sites compared to 200,000 in the United States. For every 10 square miles, China has 5.3 sites, while the United States has a paltry 0.4. Chinese telecommunications firms are on track to begin standalone 5G service in 2020, five years ahead of their U.S. counterparts. Faced with this disparity, the Deloitte reports warns that “China and other countries may be creating a 5G tsunami, making it near impossible to catch up.”

    To get ahead, China has leveraged its systemic differences with the United States. A few decades ago, American analysts scoffed at China’s continued use of communist-era “Five-Year Plans” to manage its economy. Not anymore. According to Deloitte, China’s most recent plan earmarks $400 billion for 5G-related investments, dwarfing anything similar in the United States. China’s government has forced its three big telecommunications providers to work together to build 5G, something the U.S. government could not do. China also has strong-armed leading Chinese Internet platform companies — such as Baidu, Alibaba, Tencent, JD.com and ride-sharing company Didi Chuxing — into taking a nearly $12 billion stake in one telecom provider, China Unicom, to subsidize its 5G rollout.

    China has harnessed the full weight of its national government to ensure that Chinese firms are at the forefront of standards-setting negotiations worldwide. In a report released in November, the Eurasia Group consulting firm estimated that, while China was on the sidelines of the standards setting for 3G and 4G, Chinese firms could end up holding upward of 40 percent of the standard essential patents for standalone 5G.

    China is not the only country ahead of the United States in 5G. Japan has far more sites per 10 square miles — 15.2 — than both China or the United States. Germany has made similar progress to China’s — with nearly 10 times more sites per 10 square miles than in the United States. But, despite some of President Trump’s claims, neither Japan nor Germany are considered threats to the United States.

    At root, the issue here is trust. U.S. moves against Huawei are driven by a fear that the Chinese Communist Party not only rejects the values of a Western liberal economic system but also is at war with those values across the globe. What’s more, U.S. officials worry that the Communist Party has conscripted Huawei in this battle, both as a weapon to dominate cutting-edge technology and as an agent that can conduct espionage on the West.

    Despite Huawei’s protestations that American worries about espionage are unwarranted, its executives routinely cross the line between state and private actors. Take Meng Wanzhou, Huawei’s chief financial officer, who was detained in Vancouver in December and has now been charged with bank fraud in connection with Huawei’s alleged sanctions busting in Iran. She reportedly had eight passports, one a Chinese government official passport. Wang Weijing, the Chinese employee arrested in January in Poland on espionage charges, worked for the Chinese consulate in Gdansk before joining Huawei, again blurring the distinction between Chinese officialdom and private sector.

    Seen in this light, the American actions against Huawei mix both an independent law enforcement action and a high-stakes worldwide contest with a government whose core ideology is increasingly inimical to U.S. values.

    So, what’s next?

    Just a few years ago, pundits heralded the victory of globalization and the onset of a borderless world. Now, the Huawei case raises the prospect of a newly bifurcated globe, split into technological spheres of influence. The United States and its closest allies — Canada, Australia, New Zealand, Great Britain and Japan — are coalescing into one. China leads another. In the developed world, Germany and France are sitting on the fence. In the global south, Malaysia and Indonesia are up for grabs. And Huawei is at the center.
    https://www.washingtonpost.com/opinions/2019/02/04/deeper-tech-concern-is-core-us-huawei-spat/?noredirect=on&utm_term=.8a0f7456b478

    Read more:

    The Post’s View: The Huawei indictment tells a story of deceit and corporate espionage

    Josh Rogin: The U.S. government shouldn’t partner with Huawei

    Michelle Caruso-Cabrera: The Huawei case shows how China’s ambitions are on a collision course with the U.S.

    Michael Morell and David Kris: It’s not a trade war with China. It’s a tech war.

  15. Barron’s: A U.S. Ban of Huawei Would Reshape the Telecom Market

    The next salvo in the escalating battle between the U.S. and China could come through an executive order that bans U.S. telecom companies from using equipment from certain foreign companies. Any order would largely be directed at Chinese telecom giant Huawei Technologies. The ban, based on national-security concerns, could be good for Huawei’s rivals, problematic for foreign telecom operators, and worrisome for those keeping tabs on the deepening rift between the two economic superpowers.

    The Trump administration is reportedly preparing an executive order for such a ban. The overall effort is aimed at keeping certain foreign-company equipment out of the next generation of wireless networks, or 5G.

    Shenzhen-based Huawei, the world’s largest telecom-equipment maker, is in the crosshairs of the push. It has risen to dominance by often providing more-advanced and lower-cost gear than rivals and is now akin to Apple (AAPL), Qualcomm (QCOM), and Cisco Systems (CSCO) rolled into one. But Huawei has also long drawn scrutiny from U.S. security and intelligence officials, who have warned that its equipment could be used for spying by the Chinese. Privately held Huawei has denied the allegations, and officials have said the U.S. should offer evidence to prove its charges.

    Analysts describe a ban on the use of Huawei in U.S. telecom networks as mostly symbolic, given its limited presence here; many major U.S. carriers have said they won’t use Huawei for 5G. But a ban would bolster the case the U.S. has been making to allies to blacklist Huawei from their networks—where its gear is much more prevalent.

    The obvious loser from a ban is Huawei, but it would probably try to offset lost sales by intensifying its push into emerging markets, while continuing to reduce its dependence on U.S. companies, says TS Lombard China policy analyst Eleanor Olcott. Huawei didn’t respond to a request for comment about a potential ban.

    European telecom operators could be among the losers if governments there ban Huawei from their respective networks. Many telecom operators in Germany and Britain use Huawei’s equipment. United Kingdom–based Vodafone Group has said it is temporarily halting purchases of Huawei gear for the core of its 5G network.

    Removing and replacing Huawei gear with other, higher-priced alternatives could cost the industry billions of dollars, analysts say. Three of Germany’s telecom operators use Huawei in their networks. European telecoms have warned that cutting out Huawei could delay the 5G rollout on the Continent by at least two years.

    Australia was among the first to ban Huawei, and the companies that took the biggest hit were telecom operators like Singapore Telecommunications ’ Optus and TPG Telecom (TPM.Australia), says Chris Lane, Asia-Pacific telecom analyst for Sanford Bernstein. TPG shares fell 33% from late August to the end of the year.

    No one walks away a clear winner from a Huawei ban. But in the near term, Scandinavia’s Nokia (NOK) and Ericsson (ERIC) would benefit by losing their lower-cost rival in wireless-network equipment. Yet Nokia’s executives were hesitant to trumpet the prospects of market share gains in a recent conference call for fear of raising China’s ire and risking their sales in the world’s largest 5G telecom-equipment market, says Krishna Chintalapalli, a telecom analyst at Ariel Investments.

    Of the two firms, Nokia has more areas where it can gain share because it also competes with Huawei in its optical and routing businesses. The diversity in its business and a more attractive valuation are among the reasons that Raymond James analyst Simon Leopold favors Nokia, citing the diversity in its business and a more attractive valuation. At a recent price of $6.36, Nokia trades at roughly 19 times earnings-per-share estimate for the next 12 months, slightly below its five-year average, while Ericsson, at $9.38, trades around 23 times, slightly above its average. Leopold has an Outperform rating on Nokia and sees 18% upside for the stock. He has a Market Perform on Ericsson. But any Huawei benefit won’t be immediate. “Any transition is like turning around an oil tanker situation. It can take multiple quarters, even more,” Leopold says.

    Samsung Electronics (005930.Korea) is a smaller rival in telecom equipment but could also benefit as telecom operators try to hedge their bets and diversify their equipment suppliers. The company’s deep pockets could allow it to increase spending to fight for some of the market share and close the gap with its rivals.

    Huawei also dominates optical equipment, and a backlash against the Chinese company could help its two biggest rivals in that business, Nokia and Ciena (CIEN). The impact may show up more in Ciena’s results since it is a pure play in the optical space, Leopold says.

    On the router side of the business, Cisco and Juniper Networks (JNPR) could gain some share if telecom operators move away from Huawei. Carriers’ equipment is the main pipeline for data traffic and therefore most vulnerable to a cyberattack or cyberespionage. Both Juniper and Cisco have the advantage of not having much business in China, insulating them from potential retaliation. Leopold rates both companies at Overweight, with a price target of $28 for Juniper and $52 for Cisco, upside of 5% and 9%, respectively.

    For some companies, the threat of retaliation is real, given China’s willingness to boycott products from specific nations. Korean cosmetic makers and tour operators experienced that treatment in late 2017 after South Korea installed a U.S.-made antimissile system.

    But when it comes to technology, China may have a harder time with such boycotts. “Maybe Nokia’s market share goes down a bit, but I don’t see them kicking out Western companies completely,” Chintalapalli says.

    “Their domestic market is large, but if they become a tech island nation, they can’t see what others are doing and be a fast follower. That stymies the innovation they are trying to get.”

    https://www.barrons.com/articles/potential-impact-of-a-huawai-ban-51550096018

  16. Chinese tech billionaire mocks Trump’s eagerness to expand 5G

    Ren Zhengfei, the founder of Chinese telecommunications company Huawei, told CBS News that “5G is not an atomic bomb,” in reference to President Trump’s eagerness to expand the 5G infrastructure.

    The giant tech company is leading the charge on China’s efforts to dominate the global 5G space and has established contracts with over 30 countries, a move that puts China on the path towards wireless broadband hegemony.

    The White House has made American dominance in 5G infrastructure a critical component of its national security strategy. The expansion and transition into the 5G space will set a platform for innovation and revamped research, allowing stronger and more reliable connectivity, faster data transfer speeds, a wider bandwidth.

    Ren said of the U.S., “they’ve been regarding 5G as the technology at the same level of — some other military equipment.”

    5G technology is still not secure and is vulnerable to cyberattacks, something the Trump administration has repeatedly accused China of doing. Breaches into the wireless networks could jeopardize American intelligence. For that reason, the White House has deemed Huawei a threat to national security.

    NOW FOR A TOTALLY UNSUBSTANTIATED CLAIM FROM A FORMER US GOVT OFFICIAL WHO APPARENTLY BLINDLY ACCEPTS THE 5G HYPE, ESPECIALLY RELATED TO PERFORMANCE WHICH CAN NOT BE MEASURED TILL THE RAN/RIT/SRITs are standardized in IMT 2020:

    “It is so much faster, and it allows such a larger data flow that it significantly enhances the capabilities of an intelligence service to steal data,” former CIA acting director Michael Morell told CBS. “5G is going to allow a much larger number of devices to be connected to the Internet. When you connect more devices, you create more platforms from which an intelligence service can spy from.”

    https://www.washingtonexaminer.com/news/chinese-tech-billionaire-mocks-trumps-eagerness-to-expand-5g

  17. Shanghai Becomes World’s First District With 5G Coverage- China Mobile Trial using Huawei equipment

    The 5G stations are being installed in different parts of China, including Tibet, as part of Huawei’s plans to lead the 5G trials despite the opposition. Shanghai claimed on Saturday March 30, 2019 that it has become the world’s first district using both 5G coverage and broadband gigabit network as China seeks to establish lead over the US and other countries in the race to develop next generation cellular mobile communications.

    Trial runs of the 5G network, backed by state-run telecom carrier China Mobile, officially started the service in Shanghai’s Hongkou on Saturday, where 5G base stations had been deployed over the last three months to ensure full coverage, the report said.

    During a launch ceremony, Shanghai vice-mayor Wu Qing made the network’s first 5G video call on an Huawei Mate X, the world’s first 5G foldable, AI phone, it said.

    Huawei, China’s telecom technology giant, whose revenue in 2018 crossed USD 100 billion, is battling a wave of opposition to its 5G trials from the US and different countries. Huawei has denied official links with the Chinese government.

    https://www.news18.com/news/world/shanghai-becomes-worlds-first-district-with-5g-coverage-2083285.html

  18. Could US still win 5G race? –Global Times

    At a press conference on Friday, US President Donald Trump and other US officials declared that the US “must win” the race in ultra-fast 5G technology and argued the US was well-positioned to win. But that has been met with skepticism and criticism in China. Chinese industry analysts noted that not only did US officials exaggerate the US’ capabilities but they also brought geopolitics and its “America first” zero-sum theory into the development of a crucial technology that will have implications for not one country but the entire world for years to come.

    During the press conference, Trump said “the race to 5G is a race America must win… It’s a race that we will win.”

    Citing several reports that said that the US was leading in the race, Ajit Pai, the chairman of the US Federal Communications Commission, remarked that the US “is now well-positioned to win the race to fast, secure and reliable 5G.”

    Though the US is one of the leading players in the development of 5G technology, analysts said that the race is far from over and the US might have much catching up to do in many areas, including engineering standard setting, equipment manufacturing, 5G mobile phones and business and application development.

    Catching up

    “At the moment, I think the only advantage the US has is chips,” a Beijing-based industry insider, who requested anonymity, told the Global Times on Thursday. “Even that gap is being closed by Chinese firms like Huawei.”

    The insider pointed out that Chinese companies have been responsible for half of the global engineering standards for 5G, with China Mobile alone contributing more than 90 sets of standards, while the US only has a few.

    In terms of equipment manufacturing, the world’s top five makers are Huawei, Ericsson, Nokia, ZTE and Samsung. Chinese companies such as Huawei, Lenovo and Xiaomi are also leading in development of 5G mobile devices, the insiders said. In terms of 5G devices production, “China is the dominant player,” he said.

    “So I don’t know where their confidence comes from,” the insider said. “It sounds more like expressions of worry that it is falling behind.”

    Just over a week before the press conference, the Defense Innovation Board, which is affiliated with the US Department of Defense, released a report that warned about China’s advances in 5G and its “security risks” to the US.

    The report pointed out China will have over 350,000 5G base stations, nearly 10 times as many as in the US, and that Chinese companies such as Huawei and ZTE are pushing 5G development globally and China’s handset and internet applications and services are likely to become dominant globally.

    “Even if [the US] were to restrict use of Chinese equipment suppliers domestically, the United States is not a big enough market in wireless to prevent China’s 5G suppliers from continuing to increase market share globally,” it concluded.

    Though some US carriers such as AT&T claimed they had launched 5G or plan to soon, “they are mostly likely just slightly upgrading from 4G and not offering real 5G,” said Fu Liang, a veteran analyst in the telecom industry.

    Fu told the Global Times on Sunday that for technological advances that have as wide implications as 5G does, and are also as complex as 5G, “there is no simply way to say who is leading and who is not. Frankly, from the consumers’ standpoint, it’s not about who wins but how we can get the best services.”

    Politicization

    What’s more concerning, analysts say, with regard to the comments from the US officials is that they politicized the development of 5G technology, which likely to pose unnecessary obstacles for further advancement.

    “Putting politics ahead of technology development and markets will no doubt further complicate market competition and largely increase the difficulty of 5G development,” said Fang Xingdong, founder of Beijing-based technology think tank ChinaLabs.

    In what analysts describe the “America first” zero-sum theory in 5G, Trump said that “we cannot allow any other country to out-compete the US in this powerful industry of the future… We just can’t let that happen.”

    Fang said that although Trump did not mention China by name, he was clearly aiming at China when describing “rivals.” “In facing this 5G race propelled by the US, [China] must enhance its strategic will as well as stay rational and calm,” he said.

  19. How China’s Huawei took the lead on 5G — Washington Post

    As U.S. officials have pressured allies not to use networking gear from Chinese technology giant Huawei over spying concerns, President Trump has urged American companies to “step up” and compete to provide the next generation of high-speed, low-lag wireless service known as 5G.

    “We cannot allow any other country to outcompete the United States,” Trump said Friday at a White House event to unveil the administration’s next steps on 5G – a massive airwaves auction and a proposed $20 billion broadband infrastructure fund.

    There’s just one problem: Barely any U.S. companies manufacture the technology’s most critical components.

    The absence of a major U.S. alternative to foreign suppliers of 5G networking equipment underscores the growing dominance of Huawei, which has evolved into the world’s biggest supplier of telecom equipment, sparking fears within the Trump administration that a 5G network powered by Huawei’s wireless parts could endanger national security. And it throws into sharp relief the years-long retreat by U.S. firms from that market.

    Carriers such as Sprint and Verizon have moved swiftly to launch 5G services for consumers. But the wireless networking gear the industry relies on still comes from foreign suppliers: four companies – Sweden’s Ericsson, Finland’s Nokia and China’s Huawei and ZTE – account for two-thirds of the global market for telecom equipment, according to analyst estimates.

    Some U.S. technology giants such as Cisco sell switches and routers that reside in the innermost parts of a carrier’s network. But despite its size, Cisco doesn’t compete in the market for “radio access,” or the wireless infrastructure that allows cell sites to connect with smartphones and other mobile devices.

    “There is no U.S.-based wireless access equipment provider today that builds those solutions,” said Sandra Rivera, a senior vice president at Intel who helps guide the chipmaker’s 5G strategy.

    It’s this part of the Internet ecosystem that is increasingly important as more devices and appliances gain wireless connectivity and smart capabilities. 5G is expected to shape technological innovation for years to come, providing mobile data connections for virtual-reality headsets, driverless cars and more. Proponents say 5G eventually will support download speeds of 1,000 megabits per second, roughly 100 times faster than today’s 4G standard.

    The rising global demand for 5G equipment highlights how the United States, a technology leader in other respects, is largely absent from the wireless networking industry. It reflects the decline of a once vibrant ecosystem of American companies that formerly went toe-to-toe with the likes of Nokia and Ericsson. And it puts a focus on Chinese firms such as Huawei, whose rise to prominence has come at the expense of Western networking titans and sparked a global campaign by U.S. officials eager to persuade allies not to allow Chinese equipment into their networks.

    At the dawn of the wireless age 30 years ago, U.S. companies jostled for primacy in wireless networking. Companies such as Motorola and Lucent – an offshoot of the old AT&T monopoly – were sources of innovation, exploring new ways of delivering voice and data wirelessly. It was Lucent, for example, that helped introduce Code Division Multiple Access, or CDMA, a mobile technology that promised to improve the capacity of wireless carriers.

    But their fortunes declined around the turn of the century as they failed to keep pace with a changing market. No U.S. company stepped in to fill the gap as those companies faded – partly because of the growing strength of foreign alternatives and partly because of the immense scale required to survive in that line of business, according to industry experts.

    “Lucent basically collapsed because they didn’t have a big enough wireless arm to keep them afloat when the Internet backbone [business] collapsed” in the dot-com bust, said Roger Entner, a telecom analyst at Recon Analytics. “Motorola, over time, simply became less competitive because the other vendors had more economies of scale.”

    Motorola and Lucent’s wireless infrastructure businesses were soon gobbled up by Finland’s Nokia and France’s Alcatel, respectively. One reason the European companies proved so successful, Entner said, was because the European industry agreed from the start to develop a common standard for wireless communication, known as GSM, that all European telecoms would share. By contrast, the industry in North America took a looser approach, with some carriers backing network technologies that weren’t mutually compatible.

    Take CDMA. First developed for mobile use in the 1990s, the standard was technologically superior, allowing carriers such as Verizon to pump more traffic through their cell sites over the same amount of time compared with alternative standards. But the technology created headaches for consumers who found they couldn’t keep their phones when they switched from Verizon to a network like T-Mobile’s, which ran on GSM.

    While the American approach allowed for more technological experimentation and innovation, a fragmented market based on competing standards made it more challenging for U.S. wireless equipment sellers to amass a large customer base.

    Today, Nokia and Ericsson are the top providers of telecommunications networking gear in North America and are No. 2 and No. 3, respectively, in the world. The two companies each recorded revenue of about $25 billion last year.

    But both have been surpassed by Huawei, which in the span of three decades has become the world’s largest provider of telecom equipment.

    “I do think the Western companies did underestimate how credible Huawei was,” said Paul de Sa, a telecom industry analyst and co-founder of the advisory firm Quadra Partners. “There were executives who basically laughed [at the idea] that Huawei or ZTE could compete.”

    Founded in the late 1980s by Ren Zhengfei, a former engineer for the Chinese military, Huawei began as a technology supplier for Chinese customers. But by the early 2000s, Huawei had begun selling globally, and now does a robust business not only in network equipment but also in consumer smartphones and enterprise services. Last month, the privately held company reported that it had finished 2018 with revenue of $107 billion, up 20 percent despite the U.S. campaign. Profits rose 25 percent, the company said, to $8.8 billion.

    To give another perspective on Huawei’s enormous influence, the company’s chief rivals, Nokia and Ericsson, account for 17 percent and 13 percent of the global market for telecom equipment, respectively, according to figures compiled by the research firm Dell’Oro Group.

    Huawei’s market share, at 28 percent, is nearly as large as both of them combined.

    Despite an early reputation for cheap knockoff hardware, Huawei today is recognized for low prices, reliable equipment and engaging customer service, analysts say. As Huawei has invested in its own research and development, even Western telecom companies acknowledge that Huawei’s products are as good as – if not better than – competing equipment from Nokia or Ericsson.

    “About 25 percent of our members have Huawei or ZTE” in their networks, Carri Bennet, an attorney for the Washington-based Rural Wireless Association, told lawmakers at a recent House Judiciary subcommittee hearing.

    Gordon Smith, the chief executive of Sagent, a network intelligence and analytics company formerly known as Clover Telecom, estimated that Huawei gear typically costs “tens of percents” less than the competition’s.

    With the support of China’s state-owned development bank, Huawei also has been able to undercut competitors with attractive financing for its products. In February alone, Huawei announced partnerships with wireless carriers in eight countries, including Iceland, Switzerland, Saudi Arabia and Turkey.

    It doesn’t hurt that Huawei serves a massive domestic market in China, which grants it tremendous advantages of scale that many tech companies, including American ones, are hungry to access themselves. China is so critical to Apple, for example, that the iPhone maker blamed the country’s economic slowdown for a downward revision in Apple’s recent quarterly sales estimates – the company’s first such warning in 15 years.

    Huawei’s success, however, has been clouded by allegations of intellectual property theft.

    The U.S. government accused two Huawei units this year of trying to copy a robotic arm used by T-Mobile to test smartphones. (Huawei has pleaded not guilty.) In the past, Huawei has also been accused of stealing technology from Cisco; the two firms became locked in a legal dispute in 2003 and settled months later, after Huawei conceded that Cisco-made code had ended up in a Huawei product. The code was later removed.

    Then there is Nortel Networks’ discovery in 2004 that hackers – traced to IP addresses in Shanghai – had stolen nearly 1,500 sensitive files from the Canadian telecom giant’s computer systems. The company’s subsequent investigation failed to prove China’s direct involvement, much less Huawei’s. But after analyzing the stolen files – which bore cryptic names such as “Photonic Crystals and Large Scale Integration,” “Eco_Strategy.ppt” and “HDX R2 Standard Reconfigurations Test Plan – Draft 0.2†³ – and a months-long probe, Nortel’s security adviser at the time, Brian Shields, became convinced Huawei benefited indirectly from the breach. The file names, a list of which Shields provided to The Washington Post, have not been previously reported.

    “Nobody would be interested in these kinds of documents other than a competitor,” Shields said. “In my opinion, looking at what the hackers went after, it is likely these documents made it to Huawei.”

    That seemingly ancient history is newly relevant, as U.S. officials argue that incorporating Huawei gear into U.S. carriers’ 5G networks poses a significant spying risk.

    At an industry conference in Barcelona in February, U.S. officials urged allies in bilateral meetings not to use Huawei equipment over concerns that it could enable eavesdropping by authoritarian regimes. U.S. partners largely acknowledge the risk but have asked for more concrete evidence to back up the case.

    “The Europeans really keep pushing for this concept of, ‘Where’s the smoking gun?’ ” said a person familiar with the discussions, who spoke on the condition of anonymity to speak more freely about the closed-door meetings. “They say, ‘Hey, we don’t want security threats, either . . . but you can’t just come in here and tell us that there is a unity of interest between Beijing and Huawei and have that be the end of your presentation.’ ”

    Some analysts say that in a previous era, America’s allies might have been more sympathetic to the Trump administration’s message. But Trump’s conduct, they say – berating NATO allies, canceling a visit to a World War I memorial because of rain, calling Europe a “foe” on trade – has not helped.

    “In a world where the U.S. had more soft power,” Entner said, “I’m pretty sure the Europeans would be a lot more receptive.”

    brian.fung@washpost.com

  20. A bruising fight is under way between the U.S. and China over 5G, which promises superfast data transmission that will underpin autonomous driving vehicles, robotic assembly lines, remote surgery and other emerging businesses.

    Telecommunications operators are expected to spend hundreds of billions of dollars in the coming years to build out the networks. In China, the government and major carriers have said they plan trials of 5G in 2019 and aim to roll it out on a larger scale in 2020. In the U.S., companies are expected to test pilot network installations by the end of the year and the government is preparing to auction off broad swaths of airwaves.

    The U.S. has effectively barred Huawei from domestic 5G networks and is trying to persuade allies to do likewise, saying that the Chinese company is beholden to the Communist Party and thus presents an espionage and security risk in networks that will be pervasive.

    Huawei denies the allegations. The firm is the world’s largest maker of telecommunications equipment, a leader in superfast 5G technology and a top seller of smartphones globally.

    Huawei has long said that it doesn’t pose a cybersecurity threat and has denied all of the legal charges against it.

    Recently, its founder, the former Chinese army engineer Ren Zhengfei, has given a series of interviews defending the company while also praising President Trump, telling CNBC in an interview set to air this week that Mr. Trump is a “great president” whose tax policies are “helping revitalize enterprises.”

    https://www.wsj.com/articles/china-investigates-ericsson-over-licensing-as-5g-competition-heats-up-11555332158

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