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Who wins if Huawei loses? The firms set to benefit

Huawei - DADO RUVIC/Reuters
Huawei - DADO RUVIC/Reuters

The UK should have been in the middle of a “golden era” with China by now.

Ahead of a visit by Chinese President Xi Jinping to Britain in 2015, David Cameron claimed it was “a very important moment for British-Chinese relations”. “The change we will see is obviously the investment into our infrastructure, Chinese companies employing people and creating jobs," he said.

"But I think it’s also a big win for China as well, having access to a country that is a leading member of the EU and has so many other contacts and roles in the world.”

Clearly, Cameron’s comments have not stood the test of time. Relations between the two nations are now on the verge of collapse, with Hong Kong and Covid-19 proving to be flashpoints.

Yet, it is a decision on telecoms equipment which could ultimately force a showdown.

It was only a few months ago that the UK gave the green light for Huawei to be involved in building its 5G network, but already it seems to be regretting that decision. MPs are threatening to vote down the telecom bill which allows the Chinese supplier a role, and there are concerns that new US sanctions could make Huawei’s supply chain more obtuse.

A U-turn may soon be on the cards. New suppliers are said to be being drafted in. UK officials have reportedly begun discussions with alternatives to Huawei, and are readying to pile pressure on telecom operators to use their equipment.

Names such as Japanese firm NEC Corp and South Korea’s Samsung are floated as potential manufacturers which could be brought into the UK 5G networks.

European players set to gain market share

Yet, it is not just newer players Britain might turn to. Huawei may be responsible for around a third of the UK’s 4G mobile broadband antennas, but rivals Nokia and Ericsson aren’t too far behind - having been chosen as part of telcos' “multi-vendor approaches”.

All four of the country’s mobile network operators launched 5G services last year using Huawei’s kit, for example - but equally, BT has also agreed a deal with Ericsson for its core, while Nokia powers O2’s UK 5G network.

Read more | Huawei 5G storm
Read more | Huawei 5G storm

“If they are being forced by the Government to stop using Huawei they will just go ahead and start using Ericsson or Nokia, or even someone like Cisco”, Liberum analyst Janardan Menon says. “These networks can be built entirely without Huawei involvement.”

Longer-term, there are hopes to widen the pool out even further. The Telegraph this week reported that government ministers had also been considering investing in OpenRAN schemes to standardise 5G network equipment, which have been backed by BT, Vodafone and tech giants including Facebook.

It is hoped that such a move would make it easier for new entrants to come into the market, and offer more alternatives - potentially allowing for a British firm to finally make progress in the market.

No one firm could 'pick up the slack'

Yet, this will likely take some time. 'Developing a competitive 5G product is the result of years of research and development," says James Barford, from Enders Analysis.

For now, although Nokia and Ericsson are major companies in their own right, there is no single company which can replace Huawei. It has built up a strong position in the UK, its equipment is a core part of 3G and 4G networks, built well before any row around whether to trust the Chinese company kicked off.

If a full ban is implemented, with requirements to strip out kit within the next three years, “it's not as though Ericsson and Nokia could suddenly come in and pick up the slack and deliver all the swaps that would be needed”, says one industry source. Aside from the cost, set to total at least £1.5bn, “that isn't realistic.”

A cluster of smaller suppliers may provide a way forward. Regardless of whether any formal U-turn comes on whether telecom operators are allowed Huawei in their networks, the UK could offer an opportunity for them to grab market share. Telcos are "looking at Huawei rather differently than three years ago,” one source says.

This should not come as much of a surprise. After all, much has changed since then. This was supposed to be a “golden era” for China and the UK. But, right now, things could not be frostier.