Geopolitics are Strangling the Global Telecoms Supply Chain

The ban on Chinese vendors will delay the global 5G rollout by several years

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Jan 12, 2021, 04:00 ET

LONDON, Jan. 12, 2021 /PRNewswire/ -- Banning Chinese vendors from Western countries' 5G deployments on the grounds of alleged equipment security concerns will have a detrimental effect on 5G rollouts and technology evolution for the years to come. According to new research by global tech advisory firm ABI Research, excluding Huawei from deployments will delay the 5G rollout by several years and burden network operators with additional costs of several billion dollars to replace existing infrastructure.

"Our research shows that banning Huawei and ZTE from 5G deployments and restricting their access to silicon and semiconductor supply chains will have severe implications on economic performances. Furthermore, banning these Chinese vendors will hamper 5G and 6G R&D," says Leo Gergs, Research Analyst for 5G Markets at ABI Research.

First and foremost, restricting vendors from 5G deployments poses consequential economic implications for network operators. Gergs explains, "Banning Huawei and ZTE not only imposes additional costs for operators having to replace Huawei equipment from existing network deployments but also restricts the vendor landscape, reducing the degree of competition within the market. This imperfect competition inevitably decreases downward pricing pressure, forcing network operators to pay higher costs for network equipment than if they were under perfect competition conditions."

In addition to imposing higher deployment costs on operators, restricting Huawei's access to 5G chipsets from U.S. semiconductor companies can easily prove to be more harmful to the American economy since Huawei is now planning to start their own chipset production in a newly built factory in Shanghai to circumvent these restrictions. "Even though Huawei will produce 5G chipsets for its products only, Huawei's long-term ambitions will be to serve the entire Chinese market," says Gergs. As a result, Chinese demand for U.S. chipsets will continuously decrease. "American semiconductor companies generate a substantial portion of their revenues from China. The impending demand erosion will impact the U.S. semiconductor industry severely."

On top of economic effects, a Huawei ban will also have severe implications on 5G standardization. Huawei and other Chinese telco companies are among the top contributors for 5G related patent declarations to the 3^rd Generation Partnership Project (3GPP). "Stripping Huawei from the opportunity to monetize this R&D investment will cause Huawei to reconsider and decrease their efforts. As a result, rollout and evolution of 5G will suffer not only on a national level but also globally," explains Gergs.

"Regulators need to be very careful and avoid taking a politically motivated decision on economic and technology matters," warns Gergs. "To ensure that 5G can unveil its true transformative effect to the world, regulators and political bodies need to prevent the 5G rollout from becoming a bargaining chip for geopolitical interests." At the heart of this, regulators and politicians need to fully understand what's at stake by banning these vendors. "If certain network equipment was found to be insecure from a technology point of view, a healthy and unrestricted economic market would naturally move away from these infrastructure components. This would happen without the political intervention, which is harmful to the economy and will jeopardize the immense value that 5G and future generations of cellular connectivity will bring to societies around the globe," Gergs concludes.

These findings are from ABI Research's Impact of Huawei Restrictions on 5G Markets application analysis report. This report is part of the company's 5G Markets research service, which includes research, data, and analyst insights. Based on extensive primary interviews, Application Analysis reports present in-depth analysis on key market trends and factors for a specific technology.

About ABI Research
ABI Research provides strategic guidance to visionaries, delivering actionable intelligence on the transformative technologies that are dramatically reshaping industries, economies, and workforces across the world. ABI Research's global team of analysts publish groundbreaking studies often years ahead of other technology advisory firms, empowering our clients to stay ahead of their markets and their competitors.

For more information about ABI Research's services, contact us at +1.516.624.2500 in the Americas, +44.203.326.0140 in Europe, +65.6592.0290 in Asia-Pacific or visit www.abiresearch.com.

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Deborah Petrara
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SOURCE ABI Research