This month Huawei filed a complaint against Spain’s rural 5G contracting process, because the tender made it too risky for bidders to include the Shenzhen, China telecom giant’s hardware. The filing is the company’s latest move in its long, involuntary departure from Europe and other global telecom network markets.
Huawei holds a strong, global market-leading position in telecom network hardware, says Stéphane Téral, founder and chief analyst of Téral Research in San Francisco. However, he adds Ericsson and Nokia have in recent years made “competitive hardware in a timely manner” such that they should be up to the challenge of replacing Huawei networks wherever there’s demand.
Huawei and ZTE, the other major Chinese-headquartered telecom supplier, are stuck between a law and a hard place. Two, actually: the equipment manufacturers are subject to a pair of laws that, if enforced, could require them to comply with security-related instructions from the Chinese government. On the other hand, other countries are writing more and more restrictive language into their telecom and security regulations that restrict suppliers subject to such explicit pressure from third countries—which effectively means China.
European Countries Remove Huawei at Their Own Paces
In some places, private companies are reading the writing on the wall: Earlier this summer, a Spanish telecom operator, Masorange, announced that it was voluntarily phasing out its use of Huawei and ZTE components in its networks over the next few years in favor of supplies from Stockholm-headquartered Ericsson.
In others, officials are dragging their heels. German officials met in July with domestic telecom operators to negotiate how fast to replace Chinese hardware. Many governments are requiring replacement only as network operators upgrade to 5G or 6G anyway, keeping costs down, but provoking criticism from lawmakers who say their governments are too complacent about China’s control over its critical infrastructure.
“The Chinese can shut down or slow or meddle with the mobile network. It will devastate the European economy. It will make the Russian gas story look like a trailer to a horror movie,” says John Strand, the director of Strand Consult in Copenhagen, Denmark, referring to the impact on Europe of Russia limiting its natural gas shipments after the latter’s 2022 invasion of Ukraine. Indeed, merely allowing telecom infrastructure to degrade over time or shutting it down altogether would be a major threat to any economy, and one that Huawei, with its market-leading position, could hold over much of the world.
A July cybersecurity risk assessment by the European Commission concluded that malware and other cybersecurity threats militate against too much Chinese-made equipment in the region’s telecom infrastructure. Specifically, in the words of the Commission’s report, “The unavailability of communication sector services caused by ransomware and destructive malware carries large potential for spillover harm into other sectors. Moreover, the risk of disruption is heightened in areas where a telecommunications operator is the sole provider for critical entities or in a particular region.” The impact of any spying for China via Huawei and ZTE infrastructure, on the other hand, it calls “much harder to assess.”
Huawei has attracted the suspicion of security services and political leaders in other countries since at least 2008, when U.S. officials began publicly investigating Huawei and its government links. By 2011, the U.S. had banned Huawei from supplying the national emergency network. In 2018, it convinced Canada to arrest a senior Huawei executive who was also the daughter of the company founder and kept her under house arrest in Vancouver for nearly three years.
As a collective, the European Union (EU) agrees that it is risky to leave critical telecommunications infrastructure, including 5G, in the hands of foreign telecom operators. But the E.U. has lagged the U.S. in taking enforcement action. The E.U.’s 2020 5G Toolbox called on member states to ensure the use of multiple vendors and restrict “suppliers considered as high risk.”
Yet, a 2023 follow-up report noted that “key measures have not been fully implemented [and] Member States should achieve the implementation of the Toolbox without delay.” As of August 2024, only 11 of the EU’s 27 countries had implemented restrictions on Huawei or ZTE, whether via law or regulation, according to Euronews.
Instead, some countries are taking the less confrontational approach of inserting language into their bidding processes that put so-called “high-risk” suppliers at a disadvantage, such as the Spanish rural 5G case. There, the tender terms require any winners to replace equipment from high-risk suppliers, even if the government makes the designation after installation. That happened in Portugal and Romania, where operators bet on Huawei equipment that those governments banned soon after, costing the operators removal and re-installation.
Getting out ahead of such bans may be far cheaper: Strand estimates the one-time cost of ripping out existing Huawei radio access network (RAN) base stations and replacing them in Germany at only 29 euros per person, equivalent to a month or two’s typical cellphone bill. The cost was even lower in networks that had not yet installed as much Huawei 5G equipment: In 2019, Strand estimated that for Europe as a whole, it could be as low as 6.50 euros per person.
This article appears in the December 2024 print issue as “Europe Struggles to Quit Chinese Telecom.”