US warns Europe against using Huawei

As European governments move ahead with their auctions for 5G mobile networks, the battle between the US government and Huawei has become a complicating factor

In a further spillover effect of the ongoing trade spat between the world's two largest economies, the US is putting pressure on European and other countries not to use equipment provided by Huawei, according to sources in the Wall Street Journal. The Americans fear that the security of their many military bases in Europe could be compromised, especially with the onset of the next generation of mobile technology.

These developments come after recent moves by Europe's largest economy, Germany, to tighten the review process for acquisition of companies and with a notable German industrialist issuing dire warnings about the nature of Chinese takeovers.

In late December, UK Defence Secretary Gavin Williamson said that the UK took the dangers of spying by China very seriously, and would be looking very closely at any Huawei involvement in 5G. It is known that Huawei is intimately involved with a string of network projects across Europe, so some European governments are bound to have misgivings about any outside interference unless based on sound reasoning, such as a threat to national security.

Various countries outside Europe are certainly taking the threat seriously, with Australia and New Zealand, both members of the so-called Five Eyes intelligence sharing alliance (along with the US, UK and Canada), recently making moves to stop 5G network providers using Huawei equipment.

French telecoms group Orange has also ruled out any Huawei involvement in 5G networks in France, though the two companies continue to cooperate elsewhere.

For instance, in February 2017, Orange Group and Huawei announced the signing of a partnership to cooperate in 5G and cloudification. Teams from the two companies are working together on these technologies and related use cases, in order to foster 5G innovation in three areas: infrastructure, operations, and ecosystem development. Orange Spain and Huawei are already working together on developing 5G in Spain, following spectrum auctions in 2018.

In a note of caution, the German Federal Office for Information Security expressed scepticism over calls to block Huawei, saying that it would need proof of spying activity before putting a ban in place.

The biggest telecoms provider in Germany, Deutsche Telekom, has said it takes the discussion about the security of network equipment from Chinese vendors very seriously. Nonetheless T-Mobile Poland, a subsidiary of Deutsche Telekom, is building a 5G network incorporating technology developed by Huawei.

In December, T-Mobile Poland announced the launch of what it described as the first fully functional 5G network in Poland, with the support of Huawei Technologies. The company said that the network is currently available in the centre of Warsaw, and that devices to access the network have been given to some of its most important business customers.

Huawei is the sole vendor supporting the T-Mobile Poland 5G network, and has been working closely with Deutsche Telekom on 5G since 2015.

In the neighbouring Czech Republic, the National Cyber and Information Security Agency (NCISA) issued a three-page warning just last month about the use of technical or programme tools from both Huawei and ZTE.

This flurry of activity comes ahead of several planned EU auctions for the latest generation of 5G wireless technology, where Chinese companies are hoping to win major contracts alongside telecoms network providers. The UK auctions have already begun, and are likely to be completed around April, with initial roll out early next year.

Telefonica subsidiary O2 came out of the first UK 5G spectrum auction with more winnings than any rival, putting it in a strong early position for 5G. O2, which partners with Nokia, has no plans to commercially launch 5G before 2020.

Meanwhile, in another sign that Chinese involvement in European hi tech sectors is becoming more challenging, Siemens CEO Joe Kaeser has warned about research & development (R&D) capabilities and intellectual property being moved back to China after takeovers in Europe.

Kaeser specifically mentioned German robotics firm Kuka as a prime example of malpractice. Kuka was acquired by Midea in 2016, in a deal which at the time caused disquiet within German industrial circles and was one of the triggers for a stricter review process for inward investment in Germany. Last November, Till Reuter, who was Kuka chairman for a decade, resigned amidst press reports of tensions between local German management and the new bosses at Foshan in Guangdong Province.

"The Chinese go into a company, give guarantees about employment and then everything is calm for a while," Kaeser told German newspaper Augsburger Allgemeine in an interview. "At some point, they set up a separate company that swallows the old one, and take away the research and development."

His comments are significant, since CEOs of large German companies are often wary of criticizing China because of their extensive business interests in the world's second largest economy. The comments are particularly powerful because Kaeser had traditionally been viewed as a supporter of working closely with China and fostering trade relations.

In December, Germany tightened its rules on non-EU share purchases and company acquisitions, lowering the threshold for a review from 25% to 10% for certain sectors.

The measures were announced on 19 December by Peter Altmaier, Minister for Economic Affairs and Energy.

"Companies like to invest in Germany and that should not change," said Altmaier. "But for sensitive infrastructure, we should be able to see exactly who is buying it and what implications that has."

He cited companies involved in electricity, gas, water supply, telecoms and media industry as being covered by the new rules, which are designed to strengthen national security.

-------------------------------------------------------

Social Media Links (This section can be seen in office only):
Twitter : https://www.theasset.com/article-single.php?id=35604&social=twitter
Linkedin : https://www.theasset.com/article-single.php?id=35604&social=linkedin
Facebook : https://www.theasset.com/article-single.php?id=35604&social=facebook

Date

9 Jan 2019

Share this article