Huawei comes between U.S. and allies
The smartest business insight and analysis, from all perspectives, rounded up from around the web
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British Prime Minister Boris Johnson "defied U.S. hawks" this week to let Huawei build part of the U.K.'s next-generation phone network, said Gordon Rayner at The Daily Telegraph (U.K.). The U.S. has lobbied Europe heavily to ban equipment from the controversial Chinese telecom company. But such a ban could delay the rollout of advanced services by as much as three years. Ultimately, Johnson concluded that "the potential risk to national security posed by the Chinese telecom giant was outweighed by the estimated £126 billion ($164 billion) boost to the economy" of having the 5G rollout proceed as planned. Huawei has "made considerable technological progress" in recent years, said Ina Fried at Axios, and China is exerting its own pressure on European countries that are wavering. It has threatened, for instance, "to close off a key market for German auto exports" if Germany passes on Huawei. "Like it or not," Siemens CEO Joe Kaeser said last week, "they are a year or two ahead."
The U.S. insists that Huawei is dangerous, but even Trump's own Cabinet agencies can't agree on how, said Ana Swanson at The New York Times. Last week, the Commerce Department withdrew its proposal to close a loophole allowing some U.S. companies to sell products to Huawei, after "officials in the Defense Department and other agencies argued that it would actually undermine national security," pushing Huawei to source chips from competitors in Korea or Taiwan. The Commerce decision "appears to be an admission of defeat in the U.S.-China tech war," said David Goldman at the Asia Times. Trump's effort to block Huawei's access to U.S. chip technology backfired: "Taiwanese companies who for years had begged for Huawei's business are now flooded with orders." U.S. firms are petrified that "Chinese companies will retaliate against export controls with a price war for high-end chips."
Still, this is about more than sales for U.S. chipmakers, said Annie Fixler and Mikhael Smits at The Hill. Remember, Huawei is a company with "close political and financial ties and legal obligations to the Chinese Communist Party," and "the combination of CCP ruthlessness and Huawei technology threatens human rights" and European security. Banning Huawei and patiently developing their own secure networks through companies like Nokia, Ericsson, or Samsung could add $62 billion to Europe's 5G tab. But it's either that, or "roll out 5G infrastructure quickly with a baked-in Trojan horse."
This started as a worry about cybersecurity, but it has "burst into a much wider conflict" between Washington and Beijing over whose country will develop the latest technology, said Stu Woo and Asa Fitch at The Wall Street Journal. The standoff means we're headed to a repeat of the "VHS-versus-Betamax era," with much higher stakes. "Imagine two countries with completely different sets of hardware and software for the internet, electronic devices, telecommunications, and even social media and dating apps." Unlikely as it may have seemed just a couple of years ago, "mutual suspicion all but guarantees the march toward a two-system tech world."
This article was first published in the latest issue of The Week magazine. If you want to read more like it, try the magazine for a month here.