Restrictions on Chinese imports hurting equipment vendors

Vendors have requested a relaxation on imports from China so that domestic telecom operators can roll out upgraded networks faster.

With 5G deployment around the corner, telecom equipment vendors are finding themselves in a catch-22 situation. Since the Indo-Sino clash on the Galwan border in 2020, cross-border trade with China has been severely restricted.

ZTE and Huawei have been unable to secure 'trusted sources' approval.
 (Source: Jordi Boixareu/Alamy Live News)
ZTE and Huawei have been unable to secure "trusted sources" approval.
(Source: Jordi Boixareu/Alamy Live News)

Multinational vendors such as Hewlett Packard, Nokia, Ericsson and Cisco want to source network gear and related components from their Chinese factories to speed up deployment, but are unable to do so on account of the embargo.

What is the situation?

Chinese kit makers like ZTE and Huawei are facing a shadow ban by all telecom operators. This is now impacting vendors who are not based in China.

US-based Cisco and Europe-based Nokia and Ericsson have a third-party manufacturing setup in India contracted through Jabil under the Production Linked Incentive (PLI) scheme.

However, they also rely on importing some components from China.

What is the way forward?

According to new processes introduced by the National Security Council Secretariat (NSCS) under the National Security Directive 2021, telecom equipment vendors must secure government approval as "trusted sources" who provide "trusted products" to Indian telecom operators.

They have to provide company information including directors, ownership structure, manufacturing location, shareholding pattern, intellectual property rights, etc.

Notably, China-based ZTE and Huawei have been unable to secure "trusted source" approval due to incomplete paperwork that fails to disclose both organizational structure and the shareholding pattern.

For products to be approved as trusted, details regarding active components such as core equipment, access and transport equipment and support systems, must be given to the NSCS.

Steps towards immediate resolution

Telecom vendors have assured security agencies that they will comply with processes and mandates listed by the NSCS. However, completely shifting manufacturing capabilities to India will take another six to nine months.

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In the meantime, they have asked for a relaxation on imports from China, so that domestic telecom operators can roll out the upgraded networks faster.

In return, equipment makers have promised full transparency regarding imported products in an attempt to allay any security-related concerns.

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— Gagandeep Kaur, contributing editor, special to Light Reading

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