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Monday, May 20, 2019

Ripples From Trump’s Huawei Crackdown Reach Mediterranean Shores

Ripples From Trump’s Huawei Crackdown Reach Mediterranean Shores

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    Monaco Telecom CEO says Huawei contingency plans being tested
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    U.S. blacklisting of Huawei poses global supply-chain threats

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The U.S. move to blacklist the world’s top telecom equipment maker has sent a shock wave through the industry that’s being felt acutely in a tiny principality on the Mediterranean Sea.
Huawei Technologies Co. started selling to Monaco Telecom in 2012 and is now the phone carrier’s biggest supplier, with a remit to build a new mobile network in the enclave of about 40,000 that’s home to wealthy tax exiles.
The Trump administration’s decision to put Huawei on a list that curtails its access to critical U.S. suppliers could now threaten contracts like the one in Monaco. Martin Peronnet, Monaco Telecom’s chief executive, said Huawei assured him on Friday that it has contingency plans to minimize the impact.
“That business continuity has to be tested now,” Peronnet said in an interview. With little visibility on what’s next, he said he’s staying optimistic and believes Huawei has been prepared. “Is it the end of Huawei? I don’t think so.”
The U.S. has campaigned against China’s largest tech company for months, lobbying allies to bar the supplier from their fifth-generation mobile networks over security concerns. This week’s two-pronged attack on Huawei, which also restricts it from supplying U.S. carriers, intensifies the trade war.
The world’s phone companies were hoping they’d survived the threat of outright bans on Huawei gear that would have forced some of them to overhaul 5G rollout plans. The governments of France, Britain and Germany have been leaning toward compromise solutions that would see oversight of their networks tightened while still affording Huawei an important role.
Asked on Friday if they needed to review their investment plans in light of Washington’s latest move, carriers in Europe, Canada and Latin America reprised some of arguments they have used to defend their continued association with the Chinese company: They don’t rely on just one vendor, and they have enough inventory to avoid supply disruptions for now.
“For the moment we have no reason to have any doubts about our relationship with Huawei,” said Christian Neuhaus, a spokesman for Swisscom AG, which uses Huawei for parts of its landline network.

5G Looms

Still, one major U.K. carrier was looking at fresh risks from its ties to Huawei on Friday following the announcements from the White House, according to a person familiar with the matter, who said any hard stop to supplies from Huawei would be disastrous. Some British mobile operators are weeks away from launching their 5G networks and all are using or trialing Huawei.
Telus Corp. considers Huawei’s radio-tower equipment to be superior to its rivals’, said an executive at the Canadian mobile-phone company. Other vendors’ technology might not be compatible, leading to higher costs, said the executive, who asked not to be identified because he wasn’t authorized to speak publicly.
Huawei’s competitors get some components in their equipment from China, so any retaliatory action could also disrupt their supply chains, the Telus executive said.
Ken Hu, Huawei’s deputy chairman, told employees in a memo that the company was ready for the latest move by the U.S. and has “made full preparations in a variety of areas, including R&D and business continuity, which will ensure that our business operations will not be greatly affected, even under extreme conditions.”

Chip Stockpiles

Huawei has stockpiled enough chips and other vital components to keep its business running for at least three months as the U.S. curtails its access to American technology, people familiar with the matter said.
Although accumulating stores of hardware like antennas mitigates the risk to network building, the U.S. moves sting elsewhere too. Huawei’s Mate 20 X 5G, one of the first 5G phones on the market, launches next month. But it uses Alphabet Inc.’s Android operating system -- U.S. software at risk of the same restrictions as the American hardware from the chipmakers.
“This latest decision will hurt the whole ecosystem, and there won’t be any winners,” said Bengt Nordstrom, CEO of telecom consultancy Northstream. While carriers have likely stockpiled Huawei gear for some months, now “they need to decide if there are more measures that need to be taken,” he said.
Swapping Huawei for another vendor isn’t as simple as flipping a switch. It takes about two years to plan and implement such a technology shift, adapt the procurement supply chain, and install the new equipment, Nordstrom said.
Peronnet at Monaco Telecom, a company jointly owned by the state of Monaco and French billionaire Xavier Niel, said the growing U.S. crackdown on Huawei could reverse a giant leap forward in global equipment standards that had benefited phone companies worldwide.
“A trade conflict like this threatens to slow down innovation and hurt our entire industry,” Peronnet said.

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