The UK’s 5G U-Turn

Britain Shuts Out Huawei Technologies

Yesterday, the British government announced that UK telecom companies will be barred from buying materials produced by Chinese electronics company, Huawei Technologies Co. The ban will take effect starting at the end of 2020. Companies in the UK will also be required to extract Huawei technology from their 5G networks by 2027.

This new policy follows restrictions placed on Huawei by the US government. In May, the US passed a rule that foreign semiconductor manufacturers could not ship products that use US-created software to Huawei without a license. This gave the US Commerce Department control over Huawei’s access to certain technology. These restrictions raised concerns about the reliability of Huawei’s products for the British government.

Rising Tensions

Relations between China and the UK have been strained recently, especially since China imposed new security laws on Hong Kong, a former British colony.

Tensions between the US and China are rising as well, and the US has also been putting pressure on EU countries to exclude Huawei from their 5G networks because of security considerations. Some US leaders have raised concerns about the Chinese government spying through 5G networks, or having the power to sabotage them. China has denied these accusations. This week, US National Security Adviser Robert O’Brien will meet with security leaders from Italy, France, Germany, and the UK to discuss these concerns.

Looking Ahead

The UK’s decision to exclude Huawei will likely delay the advancement of its 5G networks by two to three years, and will cost $2.5 billion, according to British Minister, Oliver Dowden. However, Britain has decided that reducing dependence on China is worth the cost.

Following this news, investors are looking to see which companies might step in to fill Huawei’s place. Two of Huawei’s largest European competitors are Ericsson AB (ERIC), based in Sweden, and Nokia Corp (NOK), based in Finland.

Zooming out, Britain’s decision will likely fuel more discussions about how countries can become less dependent on products from China. During the onset of the coronavirus pandemic, the world was faced with its reliance on Chinese-made PPE. As tensions between China and other nations ramp up, some countries are looking for alternative supply chains.

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