Nikeii: Softbank to drop Huawei LTE equipment in favor of Nokia and Ericsson

SoftBank Group Corp, Japan’s third largest telco, plans to replace 4G LTE network equipment from China’s Huawei Technologies Co Ltd with hardware from Nokia and Ericsson, Nikkei Asian Review reported on Thursday, without citing sources.  SoftBank is also expected to place orders with the two European companies for its 5G networks, Nikkei reported. SoftBank is the only telecom carrier in Japan that uses Huawei equipment, according to the news outlet.  Nokia and Ericsson are already big suppliers to SoftBank.

The move comes at a time of heightened scrutiny of Chinese tech firms by the United States and some prominent allies over ties to the Chinese government, driven by concerns they could be used by Beijing for spying.  The U.S., Australia and New Zealand have already banned Huawei from their countries 5G networks while Canada and the U.K. are considering that.

Last week, British multinational telecoms company BT confirmed it has been removing Huawei equipment from the core of its 3G and 4G networks since 2016, and will be excluding the Chinese company when selecting vendors for its 5G core.

A SoftBank spokesman said the report was “based on speculation and no decision has been made.”  It also has the longest running relationship with Huawei among Japan’s top three telcos, but the firm has previously said that the amount of equipment it uses from Chinese makers “is relatively small.”

Replacing the 4G equipment, which Nikkei reported will be done over several years, is likely to be time-consuming and expensive, industry sources have said.

The Nikkei report on the supplier switch comes as SoftBank is preparing to list its telecoms unit in Tokyo on Dec. 19.  The report also comes on the heels of Japan issuing a policy document on maintaining cybersecurity during procurement.

While Huawei was not explicitly named, sources have said that the policy document was aimed at preventing Japan government procurement from the company as well as China’s ZTE Corp.

Huawei has already been locked out of the U.S. market, and Australia and New Zealand have blocked it from building 5G networks amid concerns of its possible links with China’s government. Huawei has said Beijing has no influence over it.

Japan’s decision to keep Huawei out would add to the woes of the firm, whose chief financial officer was recently arrested by Canadian officials for extradition to the United States.

“It’s extremely important to avoid buying equipment that includes malicious functions like stealing or destroying information or halting information systems,” Nikkei reported Japanese Prime Minister Shinzo Abe as saying.

Addendum:  The 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.



2 thoughts on “Nikeii: Softbank to drop Huawei LTE equipment in favor of Nokia and Ericsson

  1. 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.

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