Huawei, the Chinese telecommunications company, is on its way to becoming one of the world’s top five telecommunications companies, and it is not alone. Huawei is now on the verge of becoming a major player in China’s next generation of mobile telecommunications technology.
Chinese company is developing its own version of the open source operating system Android. This means that every new Huawei phone will ship with the latest versions of Android in addition to its proprietary software. There will be no competition for the mature Android ecosystem for years to come, and Huawei will be stuck with an open-source version for Android, with all the apps consumers have come to expect.
When the state-owned operators were unable to upgrade their networks to 4G, Beijing ordered them to buy their equipment from Huawei and ZTE. When Beijing also ordered its state-owned operator to shift more from foreign to domestic suppliers, it increased its combined share to 70%, leaving only 30% of the market to foreign suppliers. Telecoms companies are also banned from buying new Huawei 5G kits until the end of this year.
In Singapore, where Nokia Ericsson received the country’s main contract, Huawei was cut out of the list of interested parties. The technology war has clearly hurt Nokia’s business in China, and the losses suggest that its other businesses outside China – including a joint venture with China Unicom – may be in trouble. But the company has won orders from overseas to reduce its dependence on Chinese technology like Huawei. Moreover, the United States is specifically supporting accelerated production in the United States, eliminating the need for Chinese exports, which Beijing has already threatened to disrupt.
While ITU leaders are staffed with Chinese telecommunications officials tasked with implementing Beijing’s ambitions, China is providing Huawei and other Chinese companies with financial resources to help them submit technical contributions and send engineers to participate in standardization – and help shape the decision-making process. Chinese banks could extend the grace period for loans if the United States increases pressure on Huawei, making the loans even more tempting and granting Huawei customers three years after the first payment matures. The China Development Bank, which has reportedly provided credit lines to both Huawei (and ZTE, another Chinese competitor) in the past, could become blunt if needed. Huawei now has enough cash to fund its operations, and Beijing can channel the money by providing a market share that guarantees China a significant share of the US market for its next-generation technology.
The Center for American Progress has compiled a database of iron triangular agreements between China, the China Development Bank, Huawei, and the US government to better understand China’s role in developing the next generation of wireless technology. The CAP’s Huawei database is based on other databases that track Chinese credit and technology projects, including the China Economic and Political Consultative Conference, the World Economic Forum’s Global Competitiveness Report, and the International Monetary Fund’s Economic Policy Report.
Huawei has started with few resources and relies heavily on direct Chinese government subsidies to fund the process. Chinese companies have reportedly been instructed by CAICT, the China Communications Standards Association, to support Huawei, and Huawei has lobbied its customers to do the same. The European Commission removed from its list of trade measures to be applied Beijing’s promise to grant more market access to China to Ericsson, Nokia, Alcatel-Lucent, etc., while the Commission promised not to act against China’s market – resulting in distorting subsidies.
Earlier this year, China Mobile dropped Nokia and split off the remaining contracts of the other three companies, and the stock plunged about 35%. The deal made Nokia the second largest mobile phone company in the world with a market share of over 30% in China. S-5 G, which is expected to pick up speed in the second half of the year with the launch of China’s first ever 5G mobile phone.
The exclusion suggests Nokia has tacitly abandoned the idea that China could become the world’s largest 5G market by 2025. Beijing has already doubled its commitment to 5G, and if this trend continues, Huawei will have a lead of more than 6G.
Huawei is reportedly putting pressure on companies that buy its devices and receive Chinese government funding to support its efforts to bring its own technology into the emerging global 5G standard. The move is intended to tilt the global market in Huawei’s favor, making it unattractive for telecommunications operators around the world to choose someone other than Huawei, even as Huawei devices raise growing national security and privacy concerns. The fact that Beijing is giving Huawei access to much of its 5G technology gives it a huge advantage over its competitors.
In addition to direct financing for Huawei, China’s state-owned bank, the People’s Bank of China (PBOC), has provided billions of dollars to Huawei customers, and its state-owned banks have provided loans to mobile network operators in other countries that use the money to buy Huawei equipment. Beijing calls this relationship an “iron triangle,” and in 2018 Nokia was contracted to supply the equipment for a $1.5 billion deal between Huawei and China Mobile, one of the world’s largest telecommunications providers.