Why is Huawei such a big deal... US aims to boost competitors in telecom equipment

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The pressure from the Donald Trump administration in the United States on Chinese telecommunications equipment company Huawei is intensifying day by day. Feeling the limits of continuously demanding allies to exclude Huawei, the U.S. has taken a stance that it must support American companies for 5G technology development and secure stakes in Huawei's competitors in the telecommunications equipment market to prevent monopoly.

According to the Wall Street Journal (WSJ) and others on the 6th (local time), U.S. Attorney General William Barr said in a speech at the Center for Strategic and International Studies (CSIS) in Washington DC that "It is the first time in history that the U.S. is not a leader in key technology sectors that will support future innovation," adding, "The future of our economy is at risk."

Attorney General Barr argued that the U.S. government should support Huawei's competitors, Finnish company Nokia and Swedish company Ericsson. As a method of support, he proposed, "The U.S. should actively consider holding controlling stakes in Nokia and Ericsson, either through a consortium of private companies or directly." He continued, "If we bring these companies (Nokia and Ericsson) under our sphere of influence, we can further enhance competitiveness," emphasizing, "We and our allies should actively consider such measures."

Last year, the U.S. government demanded allies to ban Huawei, and this year it has been focusing on neutralizing Huawei by discussing 5G equipment development with domestic companies. This is based on the judgment that simply demanding allies not to use Huawei without alternatives makes it practically difficult to block Huawei. In fact, during his speech, Attorney General Barr mentioned the limitations, saying that there are too few 5G equipment providers, Nokia and Ericsson are Huawei's only competitors, and these companies are smaller in scale and do not receive support from huge markets like China.

Earlier, Larry Kudlow, chairman of the White House National Economic Council (NEC), said in an interview with WSJ on the 4th that they are cooperating with Microsoft (MS), Dell, and others to develop advanced software for 5G networks to prevent Huawei's monopoly. In the U.S. Senate, a bill was introduced last month to provide subsidies worth about 1 trillion won to American companies for 5G development.

The reason the U.S. is focusing on technology development, which inevitably takes time, is because it has felt limits in pressuring allies recently. On the 28th of last month, the UK decided to partially accept Huawei 5G equipment despite U.S. opposition. A foreign media reported that U.S. President Donald Trump was furious during a call with UK Prime Minister Boris Johnson on the 28th, who decided to partially accept Huawei 5G equipment.

Anonymous sources described the call between the two leaders as "very difficult," expressing that President Trump’s pressure on Prime Minister Johnson caught him off guard. Although U.S. Vice President Mike Pence expressed disappointment with the UK's decision, foreign media explained that President Trump's level of anger had never been revealed before. It is interpreted that President Trump showed strong emotions as pressure on allies did not go as expected.

The reason the U.S. is desperately clinging to 'killing Huawei' is because Huawei's technological capability and price competitiveness in the global 5G infrastructure market are outstanding. Foreign media analyzed that there is a strong perception that Huawei offers cheaper and higher-quality products than Nokia and Ericsson. Especially considering interoperability with major countries' 4G systems already built mainly with Huawei equipment, installing equipment from other companies is evaluated as less efficient. This is also why major countries like the UK are determined to bring in Huawei despite U.S. pressure.

Since 5G networks are likely to play a pivotal role as the digital economy expands in the future, strong pressure must be applied from the equipment introduction stage. According to Dell'Oro Group, Huawei's market share was 27.8% in the first to third quarters of last year. This is higher than Nokia and Ericsson. Including ZTE, Chinese telecommunications equipment companies account for 37.6% of the global market. Huawei's market share has gradually increased from 25.5% in 2016. From the U.S. perspective, if Huawei's movements are left unchecked any longer, it will inevitably lead to more irreversible consequences. The U.S. has taken out the technology development card, which takes a long time, considering this situation.

On the same day, Huawei filed a lawsuit against U.S. telecommunications company Verizon demanding payment of patent royalties. According to the complaint Huawei submitted to the Texas Federal District Court the day before, Verizon is using telecommunications technology incorporating Huawei's patents in its network and is required to pay patent fees. Song Liuping, Huawei's Chief Legal Officer (CLO), claimed that Verizon "has benefited from patented technology developed through years of Huawei's research and development (R&D)." However, Huawei stated that the monetary value of the patents was not specified and that the compensation amount should be determined through the lawsuit.

This content was produced with the assistance of AI translation services.