US’ Huawei Ban and the Ongoing 5G Race with China

February 07, 2019


Huawei comes under a long list of Chinese companies that had been subjected to restrictions from doing business in the United States. In all these cases, the Trump administration and the Obama administration before it, has cited ‘national security’ reasons to keep out the Chinese companies from the US domestic market. The national security threat from the 5G equipments supplied by Huawei appears to be a matter of concern given that the 5G infrastructure provides backbone for future technologies like Artificial Intelligence (AI) and Machine Learning (ML). These platforms are likely to transform every aspect of human life with applications like self-driving cars, virtual and augmented reality, and smart cities, among other things.

Various government agencies in the United States, including the FBI, CIA, NSA, as well as the Director of National Intelligence, have warned that the Chinese companies like Huawei, which supply telecommunication gears to 5G infrastructures, have close connections with the Chinese government. This connection indicates that under the behest of the Chinese government Huawei could add backdoor in the equipments supplied by them. Subsequently, the Chinese government could use the backdoor to perform cyber espionage activities in the United States.

Intense debate has ensued to ascertain the possibility of beating China in the 5G race and protecting the 5G infrastructure from infiltration. This requires keeping the Chinese companies like Huawei out of the US market for 5G infrastructure equipments, among other policy decisions. Though American chip companies like Qualcomm owns majority of the patents in 5G technologies, yet at present there are no American producers of telecom equipments that could replace the foreign vendors. Therefore, blocking Huawei and ZTE means that there are only two other European companies (Ericsson and Nokia), which could suit the purpose. Any plan to develop a domestic manufacturing base for telecom equipments is unlikely to succeed, at least in the near future.

Keeping Huawei and ZTE out of the US market means that the US telecom operators would face escalation in installation costs. This will ultimately translate into increased tariffs for the 5G customers. This could slow down the full-scale adoption of 5G technologies in the United States. Costly equipments also mean that the operators would be unwilling to take 5G services to low-density areas, as it would be unprofitable to them. This would create a digital divide within the United States. Another problem is that, with the globalization of supply chains, the vulnerability threat does not go away unless the Trump administration decides to internalize the entire telecom equipment supply chain.

Yet another important question to ponder over is the possibility of winning the 5G race with China. China is already on the verge of rolling-out a country wide 5G infrastructures in 2019. This would put them in the leadership position in concomitant technologies like Artificial Intelligence (AI), Robotics, Internet of Things (IoT), Virtual and Augmented Reality (VAR), and Big Data. All these technologies have huge military applications and, thus, Chinese superiority in them would naturally pose a national security threat to the United States.

In these trying circumstances, a leaked power point presentation prepared by a senior NSC official revealed that the Trump administration is planning to nationalize the country’s 5G infrastructure within three years. Though the plan sounds prudent from the point of view of overcoming vulnerability, nationalizing would mean erasing the gains made so far by private telecom operators and starting once again from the scratch. Meanwhile, China would build on the advancements made so far in 5G and use it to make great strides in associated technologies like AI and ML. This would result in widening technology gap between US and China.

Widening technology gap will give PLA an edge in the battlefield over the US military. Additionally, China will be reaping all the economic benefits that a leadership in 5G is likely to offer. Both these conditions would pose national security threat to the United States. All this means that Trump administration’s nationalization plan would entail swapping one form of national security threat (vulnerability to Chinese infiltration of 5G infrastructure) with another (Chinese military and economic superiority).

In the short run, if the United States wants to stay in the 5G race with China, the Trump administration needs to drop the ill-advised plan to nationalize 5G infrastructures. The right policy choice would be to encourage the private players with tax cuts, provide tax rebate for R&D investments, remove custom duties on the import of telecom components, and fast pace spectrum allocation plans. In order to avoid the supply chain vulnerability, the equipments that go into creating 5G infrastructures should pass through a careful vetting process. All these steps wouldn’t guarantee a win in the 5G race with China but at least make sure that the United States doesn’t fall too far behind early in the race.

*** The author is currently a PhD scholar at the Centre for Canadian, US & Latin American Studies, School of International Studies, Jawaharlal Nehru University ***