The US has mounted a global campaign to rid telecoms networks of equipment made by Huawei, which it accuses of spying. Now, it is tempering its hostility, tweaking rules to let US companies work with the Chinese group in setting standards for 5G networks. The move is belated and any benefits to investors would be limited.
The rapprochement lifted quoted shares in suppliers to privately held Huawei, including NeoPhotonics, Shennan Circuits and Sunny Optical, more than 6 per cent. The stocks of China’s three largest telecom operators rose too. But neither these companies nor US telecoms businesses have much to gain.
The US banned Huawei from its domestic market last May. US companies need special licences to deal with the Chinese group. In theory, this should exclude Huawei from technology-related discussions as well as blocking its US revenues.
But the US plan has backfired. The proscriptions have discouraged US companies from participating in international discussions on standards for the 5G networks taking shape around the world. Huawei is central to these talks, given its dominant position in the industry.
That has strengthened China’s influence at a crucial time. A manufacturer can reinforce its competitive position by nudging standards in a direction that favours its technology. Huawei already has more patents related to 5G standards development than any competitor. It is set to add to that.
Innovations could span technologies beyond dreary network equipment. Thus, 5G will be a foundation on which new AI, autonomous car systems and cloud computing will be built. Countries ahead in the race to install 5G should have an advantage in these areas too.
None of this helps Huawei in the short term. The company, which makes nearly half its sales outside China, still risks exclusion from markets where it is well established, such as the UK. Chief financial officer Meng Wanzhou is still fighting extradition to the US on charges of bank fraud.
However, this modest retreat by the US proves a key point. American hopes of creating a technosphere that excludes China are balanced by a danger: a hinterland where it is the US that finds itself marginalised.
The Lex team is interested in hearing more from readers. Please tell us what you think of Huawei’s role in 5G in the comments section below.
