July 23, 2020
The geopolitical storm over Huawei hits Europe
Only one week after the UK banned Huawei, the French are to phase out the licences for Huawei too, Reuters reports. It is not an outright ban, but de facto it is, only delayed by a few years. The National Agency for the Security of Information Systems (Anssi) told telecom operators that they won't be able to renew the 3-5 year licenses they just issued on Huawei gear. It also actively discourages other operators to even start thinking about getting into Huawei.
A 2019 law obliges French telecoms to seek permission from Anssi for their 5G hardware. Operators must each apply for dozens of licences for equipment covering different parts of the country. The decision had not yet been made public. The president of Anssi told Les Échos earlier that Huawei is already subject to some refusals in certain areas, while Nokia and Ericsson have green light with broad permissions for the maximum length of eight years.
Two of the telecom operators, SFR and Bouygues Telecom, currently use Huawei on 50% of their 4G networks. The short and temporary permission for Huawei for 3-5 years de facto discourages the two operators from extending their investment into the company's hardware, as the investment lifetime is more around 15 years.
China is already thinking about retaliation. According to the Wall Street Journal, the Chinese ministry of commerce is currently considering banning Ericsson and Nokia from exporting 5G antennas they manufacture in China if other EU countries follow the UK ban. France is de facto joining the UK in banning Huawei, while other EU countries still hesitate. Germany is not expected to vote on the subject until September. Angela Merkel's latest comments, however, suggest that Germany may take a different route. Yesterday Merkel said that Hong Kong was no reason to break off economic relations with China.
China is the hub of global electronics and assembles almost all 5G equipment. Nokia and Eriksson manufacture in China, and over 14% of their employees work in North EastAsia. Both providers are heavily invested in the region. But they also already started to shift part of their production outside China, partly because of Trump's US sanctions. China cannot completely chase the two European competitors away, as their antennas are used by some of Chinese telecom operators.