Huawei’s dominance in 5G should be challenged
Supporting EU competitors may offer economic and security benefits
Few technologies are as important to future growth as 5G communications, the enabler of smart cities and the interconnected internet of things. That makes the increasing dominance of a single Chinese company, Huawei, all the more sensitive. The US and EU are right to look at ways to counter it.
Huawei’s growing clout — one study found it supplied 28 per cent of global telecoms equipment in the past four quarters — reflects its combination of increasing technological prowess, decent-quality equipment and low prices. But the company, though apparently privately owned, has achieved global scale in part through Chinese state support, including cheap finance.
The US has taken the lead in warning of the company’s potential risk to cyber security. China has a history of cyber attacks and, despite Huawei’s insistence that it would never allow itself to be used this way, could potentially use laws obliging Chinese companies to co-operate with security services to gain access to businesses’ data.
The US has arguably been throwing its weight around too much in trying to dissuade western allies from using Huawei equipment in 5G networks. But an EU security assessment warned on Wednesday that unspecified non-EU businesses bidding to build next-generation communications systems could be “subject to interference” if they are linked to their country’s government. The report could be invoked by EU states when considering future business with companies such as Huawei.
As the Financial Times reported this week, US officials are looking at other ways to counter Huawei’s ascendancy. One idea — attempting to turn a US company into a 5G champion — is far-fetched. Federal government and corporate decisions since the 1990s have already ceded the US lead in this area. Trying to reverse that would be costly and time-consuming. Washington would be better off following the model of Darpa, the government agency which explores emerging military technologies. Rather than beef up specific companies, it should invest in research that could bear fruit in the form of future innovations.
Proposals to provide US support to boost Europe’s 5G aspirations have more merit. One of Huawei’s advantages has been generous financing arrangements made possible through Chinese state bank support. US officials are toying with funnelling credit to Nokia and Ericsson, the next biggest 5G companies, to help them compete.
The EU also has a role to play here by trying to create the best conditions for its 5G players to thrive. EU officials including the incoming European Commission vice-president Margrethe Vestager, will need to strike a careful balance. As competition commissioner, Ms Vestager made a name by policing the dominance of US technology giants. She rightly blocked a merger between train manufacturers Siemens and Alstom in February, arguing it was wrong to reduce intra-EU competition to combat a hypothetical threat from a Chinese rival.
The challenge from Huawei in 5G, by contrast, is real and pressing. As Ms Vestager assumes the additional responsibility of “making Europe fit for the digital age”, she should consider whether having a single company dominating the EU’s future is healthy.
Western governments should aspire to open, competitive markets. Yet in China they face a superpower rival that does not share this belief. The open market imperative seems to conflict with the need to preserve competition and innovation. A degree of dirigisme to support western 5G technology is preferable to the alternative: a future in which the only choice is Huawei.