In recent months, the governments of many rich and advanced states – or the telephone operators active in these states – have decided which companies to entrust with the construction of 5G networks, the latest generation networks that will bring important benefits to telecommunications. These decisions are being watched very carefully, because a largely political battle has been underway around 5G for years: the United States is trying to limit the influence of the Chinese company Huawei in Europe and among allied countries, because, he argues the US administration, Huawei is close to the Chinese government and poses a security risk (the company and the Chinese government, of course, reject these allegations). This economic-political dispute has been going on for some time: there have been diplomatic pressures, trade duties and judicial processes.
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Judging by the latest announcements, the campaign against Huawei is working. First there are the political decisions: in July of this year, the UK government decided to eliminate Huawei from companies active on 5G network infrastructures, citing national security reasons. Australia did the same in 2018. The two countries are among the United States' closest allies. In India, however, according to the media, the government has eliminated Huawei from the list of possible suppliers for 5G. In this case the reasons are always geopolitical, but concern the border disputes between India and China in the Himalayas. The decision is not yet final.
Then there are the contracts. In January, the French operator Orange had excluded Huawei from 5G supplies, preferring European companies Ericsson and Nokia, respectively Swedish and Finnish. In June, two Canadian telecom operators Bell Canada and Telus announced that they will use Ericsson and Nokia as 5G suppliers. Considering that there are three large Canadian operators, and that the third, Roger, had already announced in January that he would build his 5G network with Ericsson, this means that in fact Huawei has been excluded, even if the government has not yet taken the its final decision on a possible ban. Also in June, the Singapore telecommunications authority decided on the winners of the tender for the construction of the 5G network: Ericsson and Nokia also won in this case, Huawei was left out.
In September, British Telecom signed a contract with Nokia for part of the 5G upgrade. In August, Deutsche Telekom said it was “diversifying its suppliers”, and the following month the Financial Times wrote that the German government could exclude Huawei from suppliers for 5G, although no decision has yet been made. Telefónica, the most important Spanish operator, signed contracts with Ericsson and Nokia in September. In October, the two largest Belgian operators, Orange and Proximus, chose Nokia as their 5G supplier.
In Italy the two main operators, Vodafone and Tim, intend to eliminate Huawei's components from the “core” part of the network, that is the most important part that manages sensitive data, but not from the entire infrastructure. Vodafone announced it in February, the decision comes from the London parent company and concerns all the countries where the company is present. Tim did not make an announcement but in July excluded Huawei from the tender for the construction of the “core” part of the network both in Italy and in Brazil. Speaking with Corriere della Sera, Huawei Italia president Luigi De Vecchis said the company continues to work with both Vodafone and Tim. At the end of September, US Secretary of State Mike Pompeo was in Italy on an official visit and again asked the government to completely eliminate Huawei from possible 5G suppliers, as the United Kingdom has done. For now, however, the government has not made a decision, even if there has often been talk of the possibility of using the “golden power”, that is, the power to block acquisitions and even private transactions.
As you can see, the companies competing for the 5G market are mainly three: Huawei, Ericsson and Nokia (Cisco, Samsung and ZTE have smaller roles, even if Samsung is increasing its market shares a lot), and judging by these announcements it seems that Huawei, which has been an industry leader for years, is losing ground. But beware: the value of these ads, for now, is purely anecdotal. Although many analysts see in recent months a trend that penalizes the Chinese company, for now this trend has not materialized in a shift in market shares, which are difficult to assess and are recorded with a delay of months.
All three major companies in the industry in their press releases claim to have signed dozens of contracts and agreements with telecom operators and other customers. In February, a Huawei manager said the company had signed 91 commercial contracts for 5G. Ericsson claims to have 60 announced contracts and 111 supply agreements. Nokia claims to have 160 “business relationships” regarding 5G, but not all of these are contracts for the construction of infrastructure.
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When it comes to market shares, however, it is more difficult to understand how to evaluate them, both because the 5G sector is still quite immature, and because not all companies provide the same data. Analysis agency TrendForce, for example, tried to estimate market shares in 5G by counting how many antennas each company has installed or plans to install. With these criteria, not only is Huawei not affected by the problems but it is also growing, because its market shares would go from 27.5 to 28.5 percent, while Ericsson would go from 30 to 26.5 percent and Nokia from 24. , 5 to 22 percent. These data, however, must be tempered with the strong expansion of the Chinese market, of which Huawei has the dominion: only in the second half of 2020, Chinese telephone operators plan to build 350,000 new 5G antennas. This is another important element: many announcements unfavorable to Huawei come from countries allied to the United States in Europe and North America, but the rest of the world continues to see the Chinese company differently.
Another analysis company, Dell'Oro Group, tries to understand who is doing better and who is doing worse by measuring the turnover shares of each company operating in the sector. Huawei is first with 31 percent, Ericsson and Nokia have 14 percent each. The data, however, are old: the latest version of Dell'Oro's research calculates the turnover for the first half of the year.
In general, for countries that have decided it or are in the process of doing so, removing Huawei from 5G infrastructure is a complicated and expensive business, for various reasons. First of all, because Huawei's components are known to be cheaper than those of the competition, while maintaining high quality (critics say this is made possible by the proximity to the Chinese state apparatus, which provides favors and incentives: the Wall Street Journal last year he calculated that Huawei would receive $ 75 billion in tax breaks and other forms of aid; the company disputes these reconstructions.) Secondly, because Huawei has already built many of the infrastructures of the 4G networks, the previous generation, currently in use in the vast majority of smartphones: according to experts, it is not very convenient to change supplier between one generation and another. Finally, the various companies that deal with 5G also produce components for third-party companies, or even for the competition, and therefore in many elements of the network there are some things built by Huawei and others not.
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In June 2019, the association that brings together telephone operators, GSMA, estimated that completely eliminating Huawei from the development of 5G in Europe would cost 55 billion euros more, in addition to the expenses already foreseen. In the UK, where the government has decided to phase out Huawei's supplies for 5G, operators have estimated that the company's elimination could end in 2027 (although it could ultimately be done a little earlier), it could cost. billions of pounds (estimates range between 7 and 18 billion) and could delay the adoption of 5G technology. Competing companies, especially Ericsson and Nokia, say instead they are ready to avoid delays and problems.
The development of 5G will ultimately depend on political decisions as much as technological and economic ones, and many factors have yet to be defined. In August, for example, the Trump administration imposed an outright ban on the sale of American microchip-making components to Huawei. American technology in microchips is so widespread that doing without it is virtually impossible. Fearing this ban, Huawei had stocked up on microchips in recent months, but if Trump doesn't think twice, Huawei could run out of components “early next year”, according to some estimates, and be forced to stop production. Other analyzes, such as that of the Economist, argue that in the long run, the boycott of Huawei will contribute to the development of indigenous Chinese technology.
