Thursday, January 31, 2019

"View from Washington: How do you solve a problem like Huawei?"

From Engineering & Technology Magazine, Jan. 29:

Concerns about collateral damage from Washington’s face-off with the Chinese telecoms giant are growing.
The US Department of Justice’s unsealed indictments against Chinese telecoms giant Huawei, its CFO Meng Wanzhou “and others” have provoked a range of reactions from western high technology.
On one side, there is satisfaction that the Trump administration is following through on its rhetoric about China’s lax – many would claim still larcenous – attitude to foreign intellectual property (IP).
The IP issue has been a Silicon Valley bugbear for decades. However, it appears to have been accentuated now by the allegation in one indictment that Huawei encouraged staff to steal from rivals and offered bonuses to those who did (page 19, paragraph 47 here).

Let’s set aside those long-standing concerns, because - alongside unquestionably serious allegations that also cover sanctions-busting - another issue lurks in the background: can the global 5G market mature outside China, as it needs to, without Huawei? It is the technology’s largest and arguably most advanced supplier.

Following the indictments, questions that have been asked ever since Washington began to ratchet up its attacks on the Chinese conglomerate have taken on greater urgency.
They reach beyond infrastructure. The Internet of Things (IoT), artificial intelligence (AI), machine learning and machine-to-machine (M2M) communication are seen as fundamental to returns on 5G investments. They justify the capital cost for a technology that, according to Deloitte, will not ramp among consumers much faster than 4G.

Many M2M applications will indeed operate over unlicensed, short-range wireless networks (Wi-Fi, Zigbee, Bluetooth etc) and pass data over wired broadband. 5G is nevertheless seen as a source of extra capacity (Cisco forecasts that M2M connections will account for almost 3ZB [zettabytes] of all Internet traffic by 2022) and as fundamental to applications in areas such as autonomous driving, e-medicine and agriculture because of speed, lower latency and, eventually, ubiquity.

Analysts reckon that Huawei today has a healthy technological lead over its main 5G infrastructure rivals, Nokia and Ericsson. It has invested $1.4bn (£1.1bn) in research and development during the last decade and participated widely in the standardisation process at the Third Generation Partnership Project (3GPP).

Similarly, the company’s willingness to compete aggressively on hardware prices is thought to have made some 5G proposals economically viable.
In that context, here are five of the key questions those who feel uneasy about the Washington-Huawei/China standoff are asking, but which have not got as much of an airing as the allegations surrounding IP and also spyware.

Like many such questions, they tend to suggest worst possible scenarios. Those are unlikely to come about in full. The aim instead is illustrate why uncertainty is spreading and why, in the words of Vodafone CEO Nick Reed, this crisis is being addressed at a “too simplistic level”.
  1. Could ‘No Huawei’ mean ‘No 5G’?
In global terms, no.

US carriers have already excluded Huawei. China will move ahead as originally planned. Most of Europe seems prepared with, for example, Vodafone ‘pushing pause’ on supplies from the company last week, while BT/EE has excluded Huawei from bidding on its core 5G network – both regardless of any specific instruction from Brexit-bedevilled Westminster.
In Australia, one putative carrier, the wired broadband operator TPG, has just abandoned plans to enter 5G because the Australian government has followed the US lead (and encouragement) in banning Huawei from infrastructure.

“In light of the government’s announcement in late August 2018, [the] upgrade path has now been blocked,” TPG said. “It does not make commercial sense to invest further shareholder funds.”
Will others reach the same conclusion and - far more likely than no 5G at all - could the rollout therefore be slower, geographically patchy and have fewer competitors than expected? Nobody knows, but TPG is a warning sign of that rising uncertainty.
  1. Could the rest of the 5G supply chain support ‘No Huawei’?