5G: Huawei and ZTE set off in China

Washington's growing efforts to curb Beijing's 5G ambitions are clearly starting to do damage. Huawei and ZTE, the two largest Chinese telecom equipment manufacturers, recently decided to slow down the installation of their 5G base station in the country and asked some of their suppliers to ease off on material deliveries, the newspaper learned. "Nikkei".

The goal, according to the Japanese daily, is to remove as much as possible all the elements and technologies of American origin involved in the manufacture of base stations. “Our customer told us to slow down our deliveries in June, and deliveries almost completely stopped in July,” said a ZTE supplier.

The statements come as Washington continues to tighten its grip on Chinese OEMs, led by Huawei, dealing a heavy blow to their 5G ambitions. In addition to pressure on allied countries to ban Huawei from calls for tenders, the United States is seeking to strike Huawei at the source, by prohibiting it from buying chips as soon as these components have been manufactured or designed with technologies or American software.

The latest initiative, the United States last week placed 38 subsidiaries of the Chinese group in the "black list" of the Department of Commerce to prevent Huawei from circumventing sanctions.

Strong pressure from Beijing

“The US government has sentenced Huawei to death,” said Dan Wan, in a recent memo from the Gavekal cabinet in Beijing. Huawei is probably done as a maker of 5G network equipment and smartphones once stocks run out early next year. The Huawei case is followed in higher places in Beijing, which has promised not to stand idly by in the face of the American offensive.

While it is becoming increasingly difficult for Huawei to purchase chips and components needed for its 5G base stations, the historic flooding in southern China this summer has undoubtedly contributed to slowing down infrastructure deployment. The decision of the two equipment manufacturers to ease off is probably not to displease Chinese mobile operators.

The latter are under strong pressure from the authorities and industry to rapidly deploy 5G despite uncertainties regarding the return on investment. The three state-owned mobile operators China Mobile, China Telecom and China Unicom have so far made leaps and bounds and have already installed 250,000 5G base stations, mostly Huawei and ZTE hardware. The goal is to reach 600,000 by the end of the year, allowing China to take the lead.

Temporary slowdown

Operators, also under pressure to offer 5G packages at no additional cost, remain cautious in their investment spending. The boss of China Unicom recently revealed that the network-sharing agreement with China Telecom saved the two groups more than 40 billion yuan (5 billion euros) in capital expenditure during the year. year, in addition to other reductions in operating expenses, such as the use of towers.

For his part, the chairman of China Mobile reiterated that he would not increase his investment plan and keep the dividend amount unchanged this year, despite a slight drop in profit in the first half of the year.

The slowdown in the rollout of 5G in China may well be only temporary. Beijing has made 5G a priority in its post-Covid19 recovery plan and set ambitious goals from which operators and equipment manufacturers can hardly avoid.

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