Huawei's place in the global technological ecosystem can make it too big to fail
That kind of clout will make it very difficult for the US to stop Huawei's momentum.
As President Donald Trump and China's Xi Jinping are preparing to meet this weekend at the G20 summit in Japan, the US must consider whether it is worth including Huawei in any deal between the two economic superpowers, especially if government officials believe that the technology company can harm national security interests.
"This is a $ 1[ads1]10 billion company that is really too big, somehow to be killed this way because it is too intertwined with the supply chain and with standards and with critical infrastructure globally," says Paul Triolo, Global Technology Policy Director at Eurasia Group
5G and Wireless Infrastructure
The US government wants to push Huawei out of the coveted position because it fears that its equipment could be used by Chinese intelligence services to spy on other countries, a requirement Huawei has refused. The United States has also urged its allies to take similar steps to curb Huawei's ambitions.
But it would not be easy for companies that are already using Huawei to simply switch to another equipment provider.
Huawei's absence in Europe and other developed markets would leave a huge gap in the market. It may not be a Huawei competitor, it will be able to scale up fast enough to fill, said Triolo, Eurasia Group's expert.
"If they suddenly can't trust Huawei to be there, they must consider tearing out all their base stations," he said. "You have to figure out the replacement costs and the price increase because the other competitors are more expensive."
The worst case is that we never get to 5G because of the cost, Triolo said.
In the United States, Huawei's equipment serves only a small percentage of networks. But these customers – small, federally-subsidized wireless networks – have claimed that the equipment is up to 40% cheaper than other companies' equipment, according to the Rural Wireless Association, a small carrier trading group.
"General uncertainty is not good for business," says Tommi Uitto, president of mobile network in the Finnish company, referring to the political situation around Chinese suppliers. "Some of our customers may postpone their decisions. If you have an operator that has Nokia and a Chinese provider, this current situation may slow down its own decision-making process."
Damage to US companies
While Trump is considering a trade agreement, he may also have to consider American companies relying on Huawei as a customer. [19659000] Huawei bought $ 11 billion in US goods in 2018, such as chips from Intel ( INTC ) and Micron () and software from Google ( GOOGL ) .
"It had an impact because we couldn't send any product to them at nearly $ 200 million," said Micron's CEO Sanjay Mehrotra to earnings call analysts.
Micron has found ways to still trade with Huawei. The company said it has been able to start restructuring some products that are not covered by export restrictions.
American chip companies want to keep Huawei as a customer, because if they don't, they fear they will lose out to foreign vendors who can continue to work with the Chinese giant. US companies may also worry that other foreign customers may see them as unreliable because of their inability to sell to Huawei.
"Every Chinese company that designs complicated circuits based on American technology must re-evaluate its strategic plan over the next five to ten years," said Triolo. He added that it could mean that Chinese companies stopped using US chips in their design.
