By Ulvi Hagverdi.
Your commercial awareness dose!
Huawei Technologies Co., Ltd, a Chinese multinational technology company based in Shenzhen, China, is a technology equipment supplier and consumer electronics manufacturer. Having founded in 1987 by Ren Zhengfei, a former Deputy Regimental Chief in the People’s Liberation Army, Huawei expanded from manufacturing phone switches to building telecommunications networks and selling state of the art laptops and mobiles.
As a Top 15 Chinese company, Huawei declared an annual revenue of $121.72 billion in 2019 by deploying its products and services in more than 170 countries. The technology conglomerate employs more than 194,000 people and overtook its main competitor Ericsson in 2012 as the largest telecommunications equipment manufacturer in the world.
Due to its strong links with the People’s Republic of China and potential cybersecurity threats, Huawei has been central to the political agenda of the strongest governments in the world, such as the USA. The negative global reputation of the authoritarian regime in China, which often criticised for oppressing Uyghur minorities and passing controversial Hong Kong national security law, aggravates the standing of Huawei in the eyes of the international community. The rise of the Chinese economy and slowing economic growth of the USA increased Trump administration’s fears and concerns, which resulted in one of the biggest trade wars of the history recently.
The USA government forbade American tech companies to take part in trade with Huawei last year. The Federal Communications Commission regarded Huawei as a national security threat and imposed a total sanction to the company’s operation in the US this year. In addition, “Uncle Sam” has also focused on pressuring and influencing other major economies, such as the UK, Germany, and France, on adopting strict measures in response to Huawei’s operation in Europe. As a result, the UK government made a U-turn from its decision back in January, that allocated a 35 per cent 5G stake to Huawei. Starting from 31st December 2020, Huawei is barred from providing new equipment for UK 5G networks, while its current equipment should be discharged by 2027.
Germany is still sitting on the fence when it comes to having a say in Huawei’s future in the EU. China is its biggest trading partner, while EU-Chine trade is also highly essential for the European Union. Germany will handle the EU Presidency for the next six months, while Chancellor Merkel is planning to sign an EU-China investment deal at a summit in Leipzig in September. Nevertheless, taking into account the Chinese government committing significant human right breaches and hostile expansions of Chinese businesses within Europe, the EU’s standing on China shifted from a liberal view to a balanced trade-focused aspect.
However, in practice, wiping Huawei out of the USA and Europe will bring its costs and controversies. In the UK, British telecom operators will be obliged to purchase equipment from more costly, but “secure’ providers, risking being left out of a potential 5G revolution. In terms of the American point of view, manufacturers such as Apple and Tesla have already secured a significant presence in China, while China can in return also question the reliability and security of such software providers in China.
Germany’s largest mobile provider, Deutsche Telekom, (32% government-owned) is heavily dependent on Huawei equipment and has condemned strongly against any action that would make it harder for it to roll out 5G. Devoid of any home-grown significant tech companies and has failed to join the consumer tech market, Europe definitely does not want to feel left out of the 5G revolution. Experts estimate that in total with the contributions to the GDPs, excluding Huawei will cost the Union ten billions of euros.
Despite US sanctions and global pressure, Huawei achieved to grow consistently and significantly in the last decade, benefitting from cheap labour costs in China and the lack of a low-price mobile manufacturer in the world. However, it is very questionable how Huawei will expand its businesses and maintain its sales without accessing the biggest consumer markets such as the USA, UK and Germany. When it comes to analysing the matter generally, China accounts for 13% of world exports and encompasses 18% of world market capitalisation, whilst being the dominant economic force of Asia. Notably, following the post-coronavirus economic downturn, the EU and US need a strong political ally and trade partner. Thus, ditching China from the global trade community does not seem to be a good idea economically.
Written by Ulvi Hagverdi and edited by Stephanos Christodoulou.
Make sure to follow our social media accounts.
Donate & Support