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US Ban on Huawei Would Trigger Turmoil in Telecom Industry

Iain Morris

Rising tension
But optical systems are only one part of the story. Outside the US, where major US operators are already forbidden from using its equipment, Huawei sells a diverse array of fixed, mobile and core network equipment to many of the world's biggest operators. In Europe, service provider giants including Germany's Deutsche Telekom AG (NYSE: DT), Spain's Telefónica and the UK's BT Group plc (NYSE: BT; London: BTA) all have long-established relationships with the Chinese vendor.

And while Huawei is more self-reliant than ZTE, its product lines still use gear from US companies to varying degrees. Finding alternatives to those suppliers could be a long, arduous process.

As unlikely as a ban might seem at this stage, service providers will be edgy. If they cannot get the equipment they need from Huawei, they will also need to find alternatives. Given the role that vendors now play in managing service provider networks, swapping one for another may not always be a straightforward task.

The disappearance of Huawei as an equipment option could also lead to an increase in prices. That may sound like good news for the likes of Ericsson and Nokia, whose earnings have suffered partly because of price-based competition from Huawei and ZTE. But it would be unwelcome to service providers making costly investments in next-generation 5G networks and the supporting infrastructure.

Tension between operators and vendors is already high. At trade shows and conferences, telcos continue to grumble about the lack of interoperability between different suppliers, especially when it comes to new virtualized network products. Some of the biggest have their eyes on open source technologies and software startups as alternatives. Disruption to the equipment triumvirate could fuel that interest. (See DT Demands Automation, Cloud Tech From Pan-Net Suppliers.)

There is still hope that an investigation by the US Department of Justice will clear Huawei. It denies any wrongdoing, which would appear to include the sale of equipment to Iran. But the clampdown on ZTE and other anti-China measures do not offer encouragement. Politicians are trying to introduce legislation that would make it even harder for both Huawei and ZTE to operate in the US. President Donald Trump has proposed slapping tariffs on up to $60 billion of Chinese imports. (See Trade Warmonger Trump May Slap Tariffs on Chinese Tech – Reuters.)

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

Behind all this is deep-seated resentment about Chinese protectionism and the suspicion that Chinese companies have plundered US innovation. That has morphed into anxiety the US could now fall behind China in technologies like 5G and artificial intelligence. (See Huawei, ZTE in the Eye of a Trade Storm.)

But a ban on sales to Huawei could backfire, not least by hurting the US component makers that depend on business with the Chinese vendor. It could also prompt retaliatory measures. Even now there is some concern that Chinese regulators may try to block a takeover of NXP Semiconductors N.V. (Nasdaq: NXPI), a semiconductor business headquartered in the Netherlands, by Qualcomm Inc. (Nasdaq: QCOM), a Californian chipmaker.

Investors and analysts look uneasy, if not panicked. Shares were down this week in components companies, including Nvidia Corp. (Nasdaq: NVDA) and Advanced Micro Devices Inc. (NYSE: AMD), falling as much as 7% in NeoPhotonics on Wednesday. Genovese points out that an investigation could take at least one year and lead to a fine, in the first instance, if Huawei is found guilty.

"It is worth noting that ZTE's sanctions violation case brought by the Commerce Department originally resulted in fines and penalties against management and employees," he said in this week's research note. "Investors are clearly worried that Huawei may eventually be banned from buying US technology. We share this concern, but we do not think this outcome is either preordained or imminent."

Across the global telecom industry, many will pray he is right.

— Iain Morris, International Editor, Light Reading

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4/27/2018 | 12:41:07 PM
Trigger turmoil and...
...end sponsorship of all those pro-Huawei articles in Lightreading- you guys are screwed.

[email protected]
4/27/2018 | 1:53:58 PM
Re: Trigger turmoil and...
Ah tojofay... But then you'd need to find somewhere else to cut and paste links to the press releases of your fave optical vendor! 

In all seriousness, this situation deserves a reasoned debate - I hope the next message posted will kickstart such a conversation because this is increasingly looking like a pivotal moment for the industry. Major instability in the supply chain caused by any further curtailments in the trading options for US components firms would favor only the few.
4/27/2018 | 2:08:36 PM
Re: Trigger turmoil and...
Cut and paste is lazy, only slightly better than a company paying you to write, promote, and say favorable things about it in the guise of objective analysis. May the best product win in an open market!

4/27/2018 | 3:22:18 PM
Re: Trigger turmoil and...[Huawei will NOT be missed]
What turmoil? Huwaei will NOT be missed as it was anyway irrelevant here in USA and hope Europeans too wake up. Why is Lightreading so worried with what is going on with Huawei? Looks like Lightreading is being paid to write rosy articles about Huwaei? Is thjis true?

Read WallStreeet Journal.....Huawei Pulls Bond Sale Amid U.S. Scrrutiny......Did they sell to IRAN using components purchased from U.S. suppliers? 

Request to Lightreading...please stop being a mouthpiece for Chinese vendors...if you have to publish rosy articles regarding Chinese vendors, please also publsih the negative ones. 


There will be no turmoil at all. There are plenty on vendors out there, no need to worry.


Joe Stanganelli
Joe Stanganelli
4/27/2018 | 4:25:20 PM
Huawei's unpopularity
Huawei has long attracted way more political attention than ZTE has.

That said, the situation for Huawei has gone from bad to worse, politically. Case in point: HPE's recent emphatic distancing of itself from a standard collaborative announcement in which Huawei mentioned HPE by name. (link)
R Clark
R Clark
4/27/2018 | 11:39:26 PM
Re: Trigger turmoil and...[Huawei will NOT be missed]
THe one thing we can say for sure is there aren't plenty of vendors. IF we cut out Huawei and ZTE that leaves... two.

I think for now the US will  use the Huawei Iran probe as just a means of pressing its case of China as mercantilist scofflaw.  The nuclear option of banning component supply is highly unlikely - and there are even some in CHina who think ZTE deserved the ban for its stupidity.

But interesting that Tim Cook met with Trump this week. Apple is the one most vulnerable to China retaliation.

5/3/2018 | 8:06:59 PM
Huawei is a bad ACTOR

They steal american jobs and designs, Cisco was one. They have dam cheap labor and have run many equipment manufactures in the US and in the Euro out of business. For a long time they have had secret back door access to their equipment to monitor every thing. So the dam cheap labor is the killer used to out bid everyone. It a company that needs to be throttled back.

TV Monitor
TV Monitor
5/4/2018 | 12:01:10 PM
Re: Huawei
"They have dam cheap labor"

This is not true. The average salary at Huawei in China is 700,000 Yuan($115K USD).

Such high wage allows Huawei to attract the best and the brightest across China.

Huawei gets its price competitiveness from attractive financing from Chinese state banks and state subsidies, not from low wage.
5/4/2018 | 7:53:14 PM
Re: Huawei
>>The average salary at Huawei in China is 700,000 Yuan($115K USD).

Is this true? Where did you get this info? 115K USD is not cheap at all, it could be

a bit less in Silicon Valley, but definitely a good number for the rest of USA. Given the army of employees Huawei has, how can they afford to be profitable, employee owned with NO meddling from the Chinese Government as per Huawei? Even the other competitors like Nokia and ERIC may not have 115K as average salary. 

TV Monitor
TV Monitor
5/4/2018 | 10:47:13 PM
Re: Huawei


Huawei stands: annual sales revenue exceeds 600 billion yuan per capita annual salary of nearly 700,000 yuan
via:博客园     time:2018/4/9 10:01:35     readed:85

in addition, the annual report also disclosed that currently there are approximately 180,000 Huawei employees and over 160 nationalities. The localization rate of overseas employees is approximately 70%. In terms of 180,000 employees, the annual salary per employee of Huawei was 688,900 yuan in 2017 based on the amount of employee salary, salary, and other benefits, and the amount of time under the project plan.


Huawei actually triggered a controversey in Japan, when it offered its brand new college graduate Japanese employees 2.5 times what Japanese big companies were paying as the starting salary.
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