The Global War for 5G Heats up

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The Global War for 5G Heats up

U.S. moves have undermined Huawei’s prospects outside China, but their long-term efficacy to constrain China’s development and export of 5G technology is uncertain.

The Global War for 5G Heats up
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U.S. Secretary of State Mike Pompeo’s claim that “the tide is turning against Huawei” seems to have been vindicated by several negative decisions in European countries regarding Huawei’s involvement in their next-generation telecom networks. Most notably, the U.K. government changed its February decision allowing Huawei’s participation as a “high-risk vendor” after a new security review. U.K. telecom operators are now required to stop buying new 5G equipment from Huawei by the end of 2020 and to remove such equipment from their networks by the end of 2027. Similarly, the new progress report on implementation of the European Union’s “5G Toolbox” risk mitigation framework recommends that member-states establish plans to phase-out “high-risk suppliers.”

These developments reflect growing distrust of China around Europe aggravated by Chinese economic practices, the COVID-19 pandemic, and events concerning Hong Kong. They coincide with enhanced U.S. efforts to check expansion of Chinese firms’ global role in 5G networks. Pompeo’s recent call for struggle against Chinese totalitarianism as “the mission of our times,” in which he singled out Huawei, has framed the issue of global 5G leadership in larger terms. But on inspection, it is doubtful that current U.S. measures add up to an effective strategy for Washington’s declared goal to “lead the development [of] 5G communications infrastructure worldwide.”

The Stepped-up Campaign Against Chinese Vendors

The U.S. State Department has begun promoting a “5G clean networks” initiative that seeks to build a “coalition of like-minded countries and companies” to secure critical infrastructure against “malign actors… such as the Chinese Communist Party.” An example of what this means in practice is a new requirement that network traffic entering U.S. diplomatic facilities follow an end-to-end “clean path” that is free of equipment from Chinese vendors. This step toward decoupling digital networks reflects moves by the Federal Communications Commission to disconnect and remove Chinese telecom operators from U.S. networks.

Other recent U.S. projects, including draft legislation in Congress and a new industry advocacy group, seek to promote “Open Radio Access Networks” (O-RAN) as a global 5G solution developed by a “trusted vendor” community defined through U.S. leadership. The State Department recently convened a conference on “integrated and open networks” aimed at reconciling competing interests among Western firms. This advocacy for network architectures “open” to providers beyond the three dominant telecom equipment vendors, among which Huawei leads in global market share, was presumably pushed by Trump’s national security adviser during his July visit to Europe’s key 5G battleground states.

But the critical factor has undoubtedly been expanding U.S. export controls to penalize foreign parties that supply Huawei with components for its most advanced equipment, including 5G base stations. By cutting Huawei off from the Taiwanese firms that manufacture cutting-edge processing chips using U.S.-origin technology, the U.S. government has cast a shadow over the firm’s ability to deliver on third countries’ 5G infrastructure roll-outs.

Even if Huawei successfully substitutes non-U.S. controlled technology to deliver products with a comparable performance level, this re-engineering effort will harm customers’ confidence in the equipment’s reliability and security. This latter factor was cited by the British government as the reason for its changed security assessment around using Huawei equipment in the U.K.’s 5G networks.

This is a textbook case of “weaponized interdependence,” with the U.S. government leveraging control by U.S. firms of upstream technologies in the global semiconductor supply chain to exert power against China and, indirectly, against allies that allow Huawei even a limited role. Yet the same interdependencies raise doubts about the long-term viability of this approach.

No Silver Bullets: O-RAN and Export Controls

O-RAN is not a stand-alone 5G solution that can be developed from ground-up by a “trusted vendor” community. It builds on existing standards developed through a transnational collaborative process in which Chinese contributions are foundational, and through which Huawei has become the largest single holder of essential 5G patents. The leading industry alliance promoting O-RAN still has various Chinese contributors. Even were “open architecture” 5G networks equipped entirely by U.S. and European vendors, they would be built on Chinese patents with royalties payable to Chinese firms.

While O-RAN will evolve to provide new technical options to telecom operators, the latter are unlikely at this stage to bet nationwide 5G roll-outs on O-RAN solutions that lack proven deployments at scale, established systems integrators, or performance metrics competitive with Huawei’s current offerings. Meanwhile, the transnational 5G standards-setting process keeps adding functions that enable real-world applications. Washington recognized this reality last month by relaxing export controls so that U.S. firms can exchange information with Huawei in standards-setting forums, in order to “not cede leadership in global innovation.”

U.S. export control measures have undermined Huawei’s prospects outside China, but their long-term efficacy to constrain China’s development and export of 5G solutions and applications is uncertain. “Weaponizing” interdependence leads those affected to take countermeasures, and non-Chinese players in the semiconductor ecosystem are already taking steps to circumvent U.S. export controls, prioritizing access to Chinese markets and technical collaboration. The U.S. government’s capacity to monitor work-arounds by U.S. firms and their foreign competitors and to coordinate responses is questionable, while the growing role of open-source development further complicates the challenge. The history of U.S. export controls failing to prevent technological diffusion does not suggest they will succeed in preserving the level of U.S. dominance that allows the current knee-capping of Huawei, which by some estimates might last only a few years.

A Fragmented 5G World?

It is unlikely that many nations will commit to a “trusted vendor” community for 5G solutions defined by the total absence of Chinese technology.  Most will probably take the middle road typified by Singapore, which in June announced that European vendors will supply its major 5G network core without excluding Huawei, while also signing agreements to accelerate integration with China’s Shenzhen-oriented digital tech-ecosystem. Others, like Japan and India, are hedging by indigenizing development of next-generation networks, potentially accelerating global technological fragmentation.

Even in Europe, the short-term outlook for Huawei remains mixed.  The “5G Toolbox” progress report urges member-states to institute plans for mitigating extant dependencies on “high-risk suppliers” and avoiding such dependencies in future. That most have yet to do so is unsurprising, given that Chinese vendors’ share of 4G RAN products across Europe is estimated at over 50 percent. With phase-one 5G roll-outs being built on previous-generation equipment, banning Huawei implies a massive exercise in physically replacing gear, and dependence on one or two vendors whose equipment may not meet performance expectations.

The U.S. campaign against Chinese technology faces mixed success if it continues to be framed as an ideological crusade. Most foreign actors do not see the issue in such stark terms, while Washington’s capacity to force choices through “weaponized interdependence” will be diluted the more it is used. The outcome of a “scorched earth” approach to 5G decoupling is less likely to be a future networked world safe for like-minded democracies, than acceleration of a “6G arms race” and the rise of a global “splinternet”.