As laid out in my last blog, Huawei continues to demonstrate that it has maneuvered, at least partially, around US-imposed restrictions on advanced chips. Last week, it introduced a more advanced version of its 5G-enabled smartphone, the Pura 70, and expects to sell some 60 million such handsets this year. Semiconductor chips will also play a key role in Huawei’s ability to compete with regard to advanced equipment—particularly 5G base stations. As noted previously, under US pressure, ASML, the sole manufacturer of leading semiconductor-manufacturing machinery, has refused to sell Huawei its most advanced models, the extreme ultra-violet lithography system (EUV). Still, utilizing ASML’s last generation equipment, the deep ultraviolet (DUV) equipment that is not banned, Huawei, in partnership with China’s leading semiconductor company, SMIC, has managed to cobble together a system that is producing the 7 nanometer chips utilized in the new Huawei 5G smartphones. With seemingly unlimited funds, Chinese companies are sucking up large numbers of ASML’s DUV systems: In the first quarter of this year, 49 percent of ASML’s DUV sales went to Chinese companies.
5G base stations utilize multiple varieties of semiconductors. While Huawei has access to cobbled together 7nm chips, it is by no means clear that Huawei will be able to supply highly efficient and capable multipurpose components over time. This is particularly true as companies such as TSMC and Samsung are already producing 5nm chips and planning to move to 3nm chips soon. Tellingly, Huawei thus far has refused to provide a roadmap to customers regarding when they can expect moves to 5nm or even 3nm chips. Indeed, it has (incorrectly) downplayed the significance of advances to more advanced components. As John Strand, a keen observer of the telecoms industry has observed: “It is ironic that Huawei which earlier branded itself as the technological leader, now claims that having the latest chips doesn’t matter.”
Residual Strengths. While future chip unerring remains cloudy, Huawei retains residual strengths from its competitive position in mainland China and the backing of huge resources from the Chinese government. Beijing is embarking on a large-scale rollout of 5G networks domestically, and is providing large subsidies to Huawei for dotting the country with kits to replace existing 3G and 4G systems. The company, thus, starts with a residual base of some 60 percent of the 5G rollout in the world’s second largest economy. Further, with export subsidies in abundance by the Chinese government, Huawei still holds a strong position in the Global South, particularly in the Middle East and Africa.
US Responses. Both the Trump and Biden administrations have mounted strong attempts to rein Huawei. Both have attempted to persuade and cajole other nations not to utilize Huawei network equipment, with dire warnings about security and espionage. This campaign has had some success among close US allies and in Europe, since many developing countries seem worried about security dangers associated with substantial Chinese subsidies for 5G installation.
O-RANN. Over the past three years, the Biden administration has given top priority to creating an alternative to the unitary box-based RANN system with s-call Open-RANN (open radio access network), a software-based system that utilizes software and components from different vendors for 5G base stations and cell towers. The goal is to break the monopoly of Huawei that results from its control over all elements of the 5G architecture (it should be noted that the same is true for single-box technology by Ericsson and Nokia). For more of the technical details, see work by my AEI colleagues Shane Tews and Bronwyn Howell.
The Biden administration is devoting large resources to pushing Open-RANN technology, with substantial funding from the Commerce and State Departments. Commerce has been given $1.5 billion to promote Open RANN, and State will have half a billion to augment these efforts diplomatically. Importantly, the administration is also establishing a test center in Dallas to aid vendors to test and configure components for compatibility across systems. Despite these stepped up efforts, including personal intervention by the president, skeptics abound. Later blogs will add more, but two issues will be noted here.
First, while the system operators’ competitive position regarding the vendors will improve with Open-RANN, the complexities of dealing with multiple vendors for multiple products increases complexity—and not least removes the comfort of dealing with one entity if something goes wrong in the system—who is on the other line for emergencies? Of even greater significance is adding different components from different vendors, which also increases the dangers of security lapses (ironic, as it is the Huawei security risk the US is attempting to counter).
In sum, there is still much to play out in both Huawei’s future dominance in 5G rollout, and in attempts by the US government and some of its allies to topple that hitherto commanding position.
The post Huawei’s 5G Resilience: Will It Last? appeared first on American Enterprise Institute – AEI.