EU to exclude Chinese firms from 5G?

The European Union is considering proposals that would effectively amount to a de-facto ban on Huawei Technologies Co equipment for next-generation mobile networks, adding to mounting international pressure on the world's largest maker of telecom gear.

Background 

Huawei Technologies is a Chinese multinational networking and telecommunications equipment and services company headquartered in Shenzhen, Guangdong. It is the largest telecommunications equipment manufacturer in the world, having overtaken Ericsson in 2012.

Huawei is under investigation for potential violations of US sanctions against Iran. US lawmakers have repeatedly accused the company of being a threat to US national security, arguing that its Huawei-made telecommunication equipments may be designed to allow unauthorised access by the Chinese government and the Chinese People`s Liberation Army. Meng Wanzhou, the chief financial officer of Huawei and the daughter of its founder was recently detained in Vancouver at the request of US authorities. A spokesperson for Canada's Justice Department said that the United States wants to extradite Meng, and a bail hearing has been set.

5G is the next - fifth-generation of mobile internet connectivity promising much faster data download and upload speeds, wider coverage and more stable connections. It is about making better use of the radio spectrum and enabling far more devices to access the mobile internet at the same time.

Analysis 

While efforts by the EU's executive are still at the very early stages, it could prove complicated and difficult to implement. The move marks a shift in the EU's stance amid growing security concerns in the West about China.

A move to exclude Chinese firms such as Huawei would likely be welcomed by the United States, which has been trying to prevent American companies from buying Huawei infrastructure equipment and has been pressing allies to do the same. US security experts are concerned the gear could be used by China's government for espionage - a concern Huawei calls unfounded.

According to senior EU officials, one option under consideration by the European Commission is to amend a 2016 cyber-security law, which requires businesses involved in critical infrastructure to take appropriate security measures.

By amending the definition of critical infrastructure to also include so-called fifth generation mobile networks, the law would effectively prevent EU businesses from using such equipment provided by any country or company suspected of using its equipment for spying or sabotage, the officials said.

Other changes could also be required or made, such as changes to procurement rules, the officials added. The officials stressed that any changes were not about one company only and were prompted by broader national security concerns regarding China.

A Huawei spokesman said that "Huawei is open and committed to work with European institutions to develop a cyber-security standard for Europe," and added that the company's opening of a new cyber-security centre in Brussels in March underlines its commitment to Europe. "Huawei has a clean track record on cyber security," the spokesman said. Huawei has denied accusations of spying and sabotage.

The Chinese government denies any intention to spy on the West and has decried a ban on Chinese 5G suppliers in the US and Australia as unfounded. China's Ambassador to the EU, Mr. Zhang Ming, took a similar message to a private meeting at the Commission with EU tech commissioner Andrus Ansip on Jan 29, arguing that Huawei should not be blocked from 5G auctions in Europe, one of the four officials said.

The tougher stance reflects growing security concerns in the West about Huawei. Some Western countries, including the US and Australia, have restricted Huawei from accessing next-generation mobile networks, and Germany is considering doing the same.

European telecoms companies are preparing for the 5G technology that promises to link up everything from vehicles to factories at far greater speeds. If such measures were introduced by the EU, it could prove a setback for European efforts to stay competitive in 5G because it would likely lead to delays and extra costs in building out networks. According to an internal Commission document, the EU shift has been prompted by changes to Chinese intelligence and security laws in recent years.

Assessment 

Our assessment is that the EU’s decision to exclude Chinese companies from its 5G network construction is a massive dent for Huawei. We believe that one by one, US allies are withdrawing or blocking agreements with Huawei in response to China’s recent treatment of Canadian and Australian citizens.