5G has become an arms race, with the U.S. and China the protagonists. The conflict began quietly when the 3GPP, telecommunications companies and regulators set out to define the next generation of mobile technology.
The human desire to make every generation better, goaded by the seemingly insatiable demand for connectivity and speed, led the group to define an all-encompassing, ubiquitous network, one that would simultaneously provide speed, low latency and massive connections. Seeking to understand — even create — the market’s needs, the forward-thinking consortium imagined seemingly unimaginable use cases, such as remote surgery and interconnected autonomous vehicles interconnected by the cloud.
A bow wave from the resulting hype accelerated the standard-setting process, leading a score of companies to push for an early incarnation of 5G, dubbed non-standalone (NSA), to precede the “real” standalone (SA) specification and enable an earlier rollout.
As the virtual ink on the standards dried, the action moved to labs and field, testing various elements of this 5G generation. The dance involved operators, equipment manufacturers, baseband and RF chipset developers and test and measurement companies, changing partners like a square dance — but not before a press release announcing a seminal “first,” perhaps as much to impress investors and assuage any fears about the capital investment required to implement an unproven technology.
The development frenzy snowballed into a competition among mobile operators, each aiming to be first to light up 5G over the air. The avalanche then turned into a national competition. Which country would be first to implement 5G? Projections of economic gains to be enabled morphed into a zero-sum competition: the first country with 5G would have both technological and economic superiority.
Mixing this nationalistic “winner take all” mindset with the simmering trade tensions between the U.S. and China, 5G became an “arms” race. Witness the U.S. politicians and bureaucrats arguing that China’s 5G development is a national security threat — even leading to a short-lived idea circulating in the White House that the U.S. should nationalize the 5G network.
Unfortunately, the rarefied atmosphere in Washington led some to confuse the communications standard (i.e., 5G) with the supply chain of network equipment, mobile phone and chip-set suppliers who are building the equipment to implement the standard (e.g., Ericsson, Huawei, Nokia, Samsung, ZTE).
The Issue: Chinese Espionage
Despite what you may hear or read, the core issue is not the balance of trade between the U.S. and China nor American competitiveness — as the U.S. no longer has an “American” wireless infrastructure equipment manufacturer. The issue is a longstanding concern about Huawei and ZTE enabling the Chinese government’s espionage, concern the two companies’ infrastructure equipment has, or could have, back doors to China.
The timing of 5G provides a lightning rod for exorcising this perceived threat. Capitalizing on the transition from LTE to 5G, which requires mobile operators to upgrade their networks, the U.S. is aggressively lobbying countries to block Huawei and ZTE from supplying equipment for 5G networks. Australia, Japan, Taiwan and New Zealand have bans, Canada is reported to be considering one, and several operators in France and the U.K. have independently decided to forgo Huawei equipment. The U.K.’s defence minister is quoted saying he has “grave, very deep concerns” about Huawei providing equipment for the 5G network in Britain.
As expected, the Chinese government, Huawei and ZTE are seeking to allay fears. In an email to CNBC, Huawei wrote, “Cybersecurity is Huawei's number one priority and an area in which we are investing heavily. We fully agree with the need to ensure the security and integrity of national networks.”
Nevertheless, Edward Snowden’s disclosures of the surveillance programs employed by the U.S. and several U.S. allies suggest concern about a Chinese triumvirate is not baseless.
Export Violations a Separate Issue
Separately, the U.S. is pursuing Huawei for illegally exporting products to Iran, products containing U.S. components. This led to the high profile arrest of the company’s CFO, Meng Wanzhou, while she was changing planes in Vancouver on December 1. A Canadian judge has released her from jail, stipulating she remain in Vancouver until a hearing to decide whether Canada will extradite her to the U.S. to stand trial for her role in the illegal exports, including allegedly defrauding several banks.
ZTE admitted to similar export violations and almost died when the U.S. Commerce Department prohibited U.S. companies from supplying ZTE, after ZTE failed to follow the terms of its original sentence.
Huawei will likely fall from its position as the world’s largest infrastructure equipment manufacturer if the U.S. campaign successfully bars the company from supplying 5G equipment to many countries. While it will retain the leading share of the Chinese market and win some business outside China, Huawei’s meteoric growth — ignited by an ingenious, fast follower R&D strategy — and industry position will certainly be dampened.
While I have no expertise in network security, it seems unlikely that Huawei will ever convince suspicious security agencies that the company only sells “dumb pipes,” particularly with the escalating cyber-attack and trade tensions between the U.S. and China, playing out against a backdrop of economic and political competition.
The Huawei saga is one of the top stories I will be watching this year.