Ericsson, Huawei & Nokia Are Facing an 'Oil Crisis' Upheaval
The end of globalization?
The conditions are now ripening for a seismic shift to regional or even local sources of production. The UK has delayed a Huawei decision while it assesses the impact of a US components ban that could leave Huawei-dependent operators high and dry. Before vacating the role of digital secretary in a government shake-up this month, Jeremy Wright told members of parliament that "diversification" in the choice of equipment vendors would have to be a long-term goal. "Part of the reason you want a larger number of suppliers is not simply because it is commercially and economically beneficial but because there is a security benefit too and not overdependence on one supplier," he said.
The diversification imperative is also partly behind a plan by Ofcom, the UK's telecom regulator, to free up 5G spectrum for organizations that are not telcos. Introducing that plan at Informa's 5G World event in June, Mansoor Hanif, Ofcom's chief technology officer, presented it as a potential boost for start-ups involved with the Telecom Infra Project (TIP), a Facebook-led initiative to spur innovation in the network equipment sector. "There has been skepticism about mobile operators buying from start-ups but now it can be a new ecosystem for TIP and that should incentivize more start-ups to go out and build products," he said.
Similar geopolitical dynamics are evident in other countries. Last week, a state-backed Russian company called Rostec said it would begin developing standards-compliant equipment for Russia's 5G market. "We are making developments in the field of 5G and are interested in partnerships with foreign manufacturers, such as from India and China," said Victor Kladov, Rostec's director for international cooperation and regional policy, in a prepared statement. Despite news of a recent 5G partnership between Nokia and Russian mobile operator MegaFon, Russia's gravitation toward China and the emergence of Rostec may limit the role available to Western vendors in the Russian 5G market.
Opportunities are also shrinking in China amid growing support for "local vendors," said Nokia CEO Rajeev Suri on a call with reporters last week. Asked if it had the same concern, Ericsson referred Light Reading to comments in the risk factors section of its latest financial report. "Geopolitical turbulence and trade frictions… could result in material negative impact on Ericsson's global operations, lead to increased, unrecoverable costs and may have a negative impact on the company's profitability," that reads. "It may also be disruptive to Ericsson's international supply chain and export/import activities (including component supply, manufacturing, sourcing and deliveries of products and services)."
India is another big country showing a determination to be less reliant on certain external parties. Last year, it announced a $77 million funding allocation for local 5G development. Under those plans, authorities are developing a 5G test bed to help telcos and start-ups develop 5G products. In partnership with state authorities, the Indian Institute of Technology (IIT) in Chennai is setting up a development center to work on 5G. Meanwhile, Ericsson is collaborating with Delhi's IIT on a "5G for India" program.
Enthusiasm for the local as opposed to the global is rising in the US, too. A major 5G network built by Dish Networks, as a regulatory condition of the merger between Sprint and T-Mobile, will rely heavily on "American vendors," said Charlie Ergen, the chairman and co-founder of Dish Networks, during an interview with Light Reading shortly after the deal was announced. "I'm unaware of any operator today that uses any equipment from US vendors. It's all European or Chinese or Korean," he said. "Nobody writes better software than in the US, and most of our network will be software. So we know we'll have a much more American-centric set of vendors than the traditional incumbents."
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