Britain was still a happy place for Huawei just five years ago. It had previously found a receptive market for its various network products and telecom executives dissatisfied with what its European rivals had to offer.

By the end of 2019, Huawei's basestations dotted the land – as common a feature as the British pub, although less recognizable to locals – and its broadband equipment powered connections for many households. BT, after its EE acquisition, even had Huawei software in its "core," the sensitive control center of the mobile network. If Huawei's products did include "backdoors" for China to sabotage communications, as critics have repeatedly argued, the UK could have been switched off from Beijing like a giant, remotely controlled TV.

Huawei's main concern seemed to be the impact of Brexit. It topped the list of risks identified in an annual filing with Companies House, which put revenues at £1.26 billion (US$1.7 billion) in 2019. The addition of Huawei's name to the US Entity List appeared way down in sixth place. "The Company has taken positive measures to mitigate the impact of the Event," said a seemingly unperturbed Huawei.

Annual sales had rocketed by more than £1 billion ($1.3 billion) over a ten-year period as UK telcos feasted on Huawei's goods. But they have fallen at twice the speed since authorities began taking those products off the table in 2020. Made available by Companies House this week, Huawei's latest annual filing shows sales were down to just £229.6 million ($305.9 million) last year, a drop of 36% since 2022. An even lower number is expected for 2024. Headcount, meanwhile, fell from 350 in 2022 to 261 last year.

(Source: Companies House)

Clinging on

Authorities justified the clampdown after a tightening of US sanctions that denied Huawei access to US chips and chipmaking technologies. The rationale was that policing Huawei's homegrown substitutes would be harder. But telcos have until the end of 2027 to complete the removal of Huawei's 5G network equipment. In July, they had to show that no more than 35% of their 5G traffic in the previous year had passed through Huawei equipment.

Three of the UK's four mobile network operators – BT, Three and Vodafone – relied on Huawei for 5G radio access network products at the time of the government decision, and none has yet replaced it. Continued use explains why Huawei's revenues have not vanished altogether and remains a sore point for the most ardent critics.

Before the 5G era that began in 2019, Huawei accounted for about two thirds of BT's RAN and one third of Vodafone's. Having counted Nokia as its other RAN vendor, BT has subsequently been introducing Ericsson as well. Vodafone, meanwhile, has been substituting the Swedish vendor for Huawei at about 3,500 sites. Across another 2,500, it is switching to an "open RAN" mix of Samsung, NEC and various IT players. But that is not happening fast.

Three, the smallest of the lot, had built its original 3G network using Nokia before shifting to Samsung with 4G. In what seemed like a cost-saving attempt to reduce the number of RAN vendors, it later named Huawei its sole 5G supplier. With 3G ultimately set for scrappage, the Chinese vendor would also replace Samsung's 4G equipment, Three indicated at the time. But government restrictions thwarted those plans, forcing Three to hire Ericsson. Today, all four vendors remain active in the network.

All this makes the UK's mobile infrastructure look messier and more complicated than networks in other countries of comparable size. What's more, a drawn-out regulatory review of a planned merger between Vodafone and Three seems likely to have slowed progress on replacing Huawei. Neither telco sounds very motivated to invest in network upgrades before the regulator has made a final decision. Three's capital expenditure plummeted from £743 million ($990 million) in 2022 to £454 million ($605 million) last year, although Vodafone's dipped by only 2%, to €866 million ($964 million), over a similar period.

Still the best?

The possible surprise, after all those US sanctions, is that Huawei continues to make better products for massive MIMO, an advanced 5G technology, than either Ericsson or Nokia, according to one senior industry executive. US rules have had no impact on its ability to design its own basestation silicon or obtain raw materials like gallium nitride, used in the production of power amplifiers. In that area, Huawei still claims to be a generation ahead of its competitors.

Any pain has been felt on the chip-manufacturing side. Denied access to TSMC, a Taiwanese foundry reliant on US and European equipment, Huawei has had to fall back on SMIC, a Chinese alternative. Yet SMIC lacks the extreme ultraviolet lithography machines made by ASML of the Netherlands. Without those, producing chips with the tiniest transistors is much harder, according to experts. Despite this, teardowns of 5G smartphones recently launched by Huawei have revealed advanced chips, confounding the architects of sanctions. And network equipment can make do with chips that are not quite as advanced.

Virgin Media O2 (VMO2), the only telco with a Huawei-free RAN, was this year deemed the poorest 5G network for outdoor population coverage by Ofcom, the UK telecom regulator. But that is probably down to network strategy and investment rather than technical differences between RAN vendors.

Indeed, both Ericsson and Nokia, on which VMO2 relies, are far more competitive now than they were at the dawn of 5G, according to an industry source. Unfortunately, a global decline in 5G investment has left them in bad shape alongside Huawei's international business, which has successfully diversified into other activities. With scant chance of any UK reprieve for Chinese vendors, and few other kit-making options, these are nervy days for the telcos.