As part of a general rethink of the Huawei situation, the UK government seems to have decided it needs to do more than merely set vendor share thresholds.
The gossip comes courtesy of Bloomberg, via the SCMP. Having chatted to people who reckon they know a thing or two, the report claims “Officials spoke with Japanese technology company NEC Corp in May as part of efforts to diversify the range of telecommunications equipment providers for the UK’s 5G mobile networks.”
The rest of the piece goes on about political pressure from the US resulting in many parts of the government losing their nerve and wanting to do what whatever it takes to place Trump and co. It goes on to claim that no single company can currently step in to replace Huawei entirely, which seems to be the justification for government intervention.
That last claim is just wrong. There are no parts of the 5G network served by Huawei that don’t have Ericsson and Nokia equivalents and you have to wonder how Bloomberg thinks the US is coping without Huawei in any part of its networks. It feels like Bloomberg was fed that factoid by its ‘sources’ and has replicated it uncritically.
There is no need for the government to pick a winner when it comes to 5G kit. If it wants Huawei out then it simply has to mandate that. Operators are far better qualified to pick the best tech for the job than the state could ever be and if any of them fancy taking a look at NEC then they will. Hopefully the UK government is not planning to tell operators who they can work with, as well as who they can’t.
This story does coincide with a remarkable rise to prominence for NEC as a 5G player. Yesterday disruptive Japanese operator Rakuten revealed NEC as the primary vendor partner for its 5G core, having cultivated that relationship for a while. Over the course of a few months NEC has gone from being a bit-part player in mobile networks to everyone’s 5G secret weapon.
It’s far from contentious to assume the UK government is tapping up NEC for political reasons. It will be able to say to the US and its own MPs that it’s being proactive about the Huawei situation and is up to speed on the tech side. None of this has anything to do with the technological and commercial facts on the ground and we would expect UK operators to thank the government for trying to help, then ignore it and get on with the day job.
There aren’t many telecom operators in the world that have not yet realised the importance of digital transformation. However, too often we have seen piecemeal measures being taken, which almost invariably lead to unsatisfactory results.
To succeed in digital transformation, telecoms industry stakeholders need to collaborate and embrace a holistic approach, building from platform up, reaching out to partners beyond the conventional telecoms domains to develop an ecosystem that can address changing market demands, and continuously delivering the most up to date solutions to enable customer value creation.
It is a valid statement that every telecom operator is different from the next one, because the customers they are serving are different, by geography, by segment, or by demographics, often by all of these factors. On the other hand, there is also strong commonality between operators, because the fundamental requirements to support digital service provision that most of the customers demand are the same. These include data collection, storage, governance, and cross-domain data analysis, frictionless handling and delivery of content and service, accurate billing, payment settlement, and many more.
This makes it a classic scenario where the 80:20 principle should apply. In other words, about 80% of a typical customer’s demand to power their digital services can be satisfied by a strong unified platform. Such a platform should be able to satisfy most use cases, carry out common tasks like network planning, construction, maintenance, optimisation, and operations, and should be equipped with the full AI suite, including AI algorithm engine, one-stop AI development environment, and AI service operation.
The platform should also have the flexibility to enable partners to develop or customise their own use cases. This is where the other 20% of customer requirement should be addressed. Despite the strong commonality between operator demands, no single platform can satisfy all the different requirements, and these are better served by a vibrant ecosystem gravitated towards the platform. Such a “pull” effect can be achieved with the platform’s capability to enable, to certify, to support, to incentivise, and so on.
When it comes to incentives to attract more partners to the ecosystem, different revenue sharing schemes can be implemented. For example, if the customer’s demand can be satisfied by a partner’s standard solution, in other words, if the partner does not need to customise its solutions for the customer, revenues may be split equally between the platform and the partner. In cases where partners need to customise their solutions to meet customer needs, the partners should have a bigger share of the revenues. The platform can also set up an “application marketplace” to host apps developed by partners. In such cases, dominant revenue sharing models used by leading consumer and business application stores, for example Salesforce AppExchange should be applied.
One operational characteristic that has separated internet companies from conventional telecom operators is that internet companies would undergo continuous delivery of new features and functions while telecom operators’ networks and services are more static. This needs to change if telecom operators’ digital transformation is to succeed. Such continuous reinvention is not limited to functions and technologies of the digital platform either, it should also continuously improve the enablement of the ecosystem that the platform orchestrates. Equally important is that such continuous delivery of improvement should not only be frequent but also discreet, without interrupting customers’ business operation.
As we can see, successful interaction between the three key elements, the platform, the ecosystem, and the continuous operation, to create values for customers relies heavily on the strengths of the platform.
Huawei’s General Digital Engine (GDE) is such a unified big data platform. It is built with the company’s expertise accumulated and refreshed from over three decades’ experience of serving telecom operators and other customers around the world. Such expertise has been with our engineers but with the GDE platform, it is now digitised and can serve all the customers in a broad range of service scenarios. It is also equipped with Huawei’s artificial intelligence and machine learning capabilities to help customers cope with and predict market and business demands that go beyond the capability of manual calculation.
Such expertise and capability are continuously being updated, to make the platform more powerful and able to meet more customer needs, therefore simplifying the transformation, shortening the time to market, and optimising lifetime total cost of ownership. Huawei will keep updating the platform, at least twice a year, to enable partners to deliver customisation more easily.
The platform is also the anchor point of a broader ecosystem, working with operator customers to first engage qualified existing partners, then to recruit new partners.
Moreover, the platform, the ecosystem, and the continuous operation mode all live by these values:
Agility: always ready to adapt to new market and customer needs and opportunities
Openness: open-minded approach to new technologies and new approach to solve problems
Equality: treating all partners in the ecosystem equally and fairly
The latest numbers from analyst firm Counterpoint reveal the European smartphone market shrank by 7% in Q1 2020, but there was considerable variation between vendors and countries.
Huawei took by far the biggest kicking among the top vendors, but that was probably more due to US sanctions, especially those restricting access to Android. Ironically other Chinese vendors, especially Xiaomi, were the major beneficiaries of Huawei’s struggles.
“Huawei declined a sharp 43% YoY for the quarter as the US trade sanctions continue to bite,” said Abhilash Kumar of Counterpoint. “Xiaomi has been the biggest beneficiary from Huawei’s decline as it grew 145% YoY capturing 11% share in the quarter.”
By far the most heavily hit among the European countries that Counterpoint tracks was Italy, which saw its smartphone market shrink by 21% year-on-year. Italy was the first European country to be heavily hit by the virus and consequently imposed a strict lockdown. The UK didn’t start locking down until the end of Q1 and Russia was hit even later, so it will be interesting to see how this data looks for Q2.
“Q1 is seasonally weak, but the coronavirus outbreak amplified this,” said Peter Richardson of Counterpoint. “The smartphone market decline was primarily due to COVID-19 outbreak across the region in the second half of the quarter. The biggest five markets in Europe entered lockdowns of varying severity at different points in March. Consequently, most of the offline stores were closed, though online remained open throughout. Also, the economic impact of the pandemic has led to lengthening replacement cycles as consumers withhold making discretionary purchases.”
Smartphone shipments have been slashed across the industry during the first three months of 2020, though Xiaomi managed to post some year-on-year growth.
It might have only been marginal, a far shot from what the management team would have expected as this point last year, but a 1.4% year-on-year increase for Xiaomi shipments was as good as it got for the worlds’ leading smartphone manufacturers.
“The coronavirus pandemic caused the global smartphone market to experience its worst decline ever,” said Anshul Gupta of Gartner. “Most of the leading Chinese manufacturers and Apple were severely impacted by the temporary closures of their factories in China and reduced consumer spending due to the global shelter-in-place.”
Perhaps the most worrying aspect of this report from Gartner is the anticipation of the next one. Let’s not forget, the vast majority of societal lockdown procedures started during the latter stages of Q1 and continued through the majority of Q2. With economies beginning to reopen, consumer confidence is likely to be very low, resulting in delays to big ticket purchases. The smartphone slowdown is highly likely to extend throughout Q2, possibly pushing into the next quarter.
As one would expect, the fortunes of the different players are quite varied.
“Huawei will have a challenging year,” Gupta said. “It has developed the Huawei Mobile Service (HMS) ecosystem, but with the lack of popular Google apps and Google Play store, Huawei is unlikely to attract new smartphone buyers in international markets.”
For Huawei, trust and credibility are big factors. Yes, it has a solid reputation for manufacturing smartphones, but hardware is very different to software. It has an uphill battle to convince customers, both old and new, that its devices will deliver the desired experience without the Android ecosystem to underpin it.
Apple on the other hand, has a lot to be excited about.
In September (or October, if you believe the rumours), the iGiant will unveil its own attempt to crack the 5G market. This is a moment many analysts have been looking forward to, as few companies have the power to sway the opinions of the masses like Apple does. This launch could push 5G into the mainstream markets, such is the loyalty of Apple customers.
OPPO is an interesting company as it has been credited as one of the better performers when it comes to offline distribution and sales, though that was obviously severely distributed by COVID-19. This is a wake-up call, with the team needing to reinforce its online presence to ensure greater resiliency.
2020 is going to be a very tough year for the smartphone manufacturers and any company where products or services would be considered an expensive luxury. The damage inflicted to the industry during this pandemic will not be limited to Q1, though recovery could certainly be varied.
Apple has a lot to look forward to, though September might not come soon enough, as perhaps a major event is what the industry needs. Something to inspire the consumer and reinvigorate enthusiasm in technology purchases while pushing 5G into the mainstream market. Let’s hope sluggish sales trends do not drag through to September, but it is a very realistic possibility.
Huawei CFO Wanzhou Meng, the daughter of Ren Zhengfei, has lost her first legal battle in Canada and will now have to face an extradition case.
This story had been lost in the throng of news over the last few months, but it will almost certainly start to attract international interest once again. Not only is this a landmark legal case to set precedent, it will act as fuel to be tossed on the embers of the burning US-China relationship.
“For the reasons I will give, I find that the allegations depend on the effects of US sanctions,” a ruling from Honourable Associate Chief Justice Heather Holmes of the Supreme Court of British Columbia stated. “However, I conclude that those effects may play a part in the determination of whether double criminality is established.
“For that reason, Ms Meng’s application will be dismissed.”
Although this is a loss for Meng and Huawei, this is only the first stage. The next court case will be to decide whether Meng can be extradited to the US.
Once arrested and the prospect of extradition to the US to face sanction violation charges emerged on the horizon, Meng’s legal team filed objections to the process on the grounds of ‘Double Criminality’. This is a rule in extradition cases which states that an individual can only be extradited if the law in questions exists in both countries.
The team claimed that as Meng allegedly broke US sanctions against Iran, not Canadian sanctions, Double Criminality could not be satisfied. However, the Supreme Court has confirmed there are relevant laws in Canada, therefore Meng is eligible for extradition.
“Huawei is disappointed in the ruling by the Supreme Court of British Columbia, we have repeatedly expressed confidence in Ms Meng’s innocence,” a Huawei statement reads. “Huawei continues to stand with Ms Meng in her pursuit for justice and freedom.
“We expect the Canadian judicial system will ultimately prove Ms Meng’s innocence. Ms Meng’s lawyers will continue to work tirelessly to see justice is served.”
Meng was originally arrested in December 2018 while in Vancouver airport on layover to China. Canada made the arrest at the request of the US, with the US claiming Meng knowingly violated an embargo against Iran and misled US banks in 2013 by not making connections to Hong Kong firm Skycom, which works with Iranian parties, known.
While this is another sign of US aggression towards Huawei, the Chinese Government is bound to get involved sooner rather than later in protection of one of its domestic champions. Tensions between the two global superpowers could once again be ratcheted up a level, and it would be no surprise to see additional tariffs or corporate exclusions introduced as a result.
The political conflict will continue in the background, but for Huawei CFO Wanzhou Meng, attention will turn to the extradition case. Cynics will suggest that as soon as Meng crosses the border to the US it is game over, so enough money will have to be thrown at the Canadian extradition case if Meng is to return to China in the foreseeable future, if ever.
UK telco Three has announced the appointment of Carlo Melis as Chief Network Officer just as the Huawei saga starts to rear its head once again.
Over the course of the last week, the rumour mill has been churning at full capacity, with Huawei’s name popping up on more than one occasion. Prime Minister Boris Johnson is facing a backbencher revolt unless ‘high-risk’ vendors are removed from networks within years, while the National Cyber Security Centre (NCSC) is once again investigating whether the firm is in a sound enough position to work with UK telcos.
One might have said there were better times for Melis to join the business.
Arriving from Wind Tre in Italy, Melis has been working on network resilience during the on-going COVID-19 landscape though eventually his attention will turn to managing the spectrum portfolio and presumably creating a network which can rival market leaders within the UK. Much work has been done in recent years, though thanks to outside influences, Three is still in somewhat of a difficult position.
“Three has been on an incredible journey, completely overhauling its network and IT infrastructure and laying the foundations for a 5G network that will dramatically transform the experience for its customers, at the same time as delivering major 4G improvements,” said Melis.
“I’m looking forward to joining Three, bringing my expertise to build on the great progress already achieved and to deliver a network that will stand the business in good stead long into the future.”
The last few months have certainly been an eclectic mix of ups and downs for the Three business. The fixed wireless access (FWA) proposition and campus network offering was looking healthy before Ros Singleton left the business. These business units are still functional, but look a little weaker without Singleton involved, however it is the more mainstream 5G programme which looks more precarious.
Announced at almost the exact same time as the departure of Phil Sheppard, who was effectively the company’s CTO, was the conclusion of the Supply Chain Review. Huawei was designated a high-risk vendor, and therefore limited to providing a maximum of 35% of a telcos network infrastructure equipment. This is a significant problem for Three which decided Huawei was going to be the sole supplier of RAN equipment for its 5G network.
These are the complications Melis needs to manage over the next few months. Alongside the teething problems of a new cloud core and ensuring the 4G network remains stable during this period of dramatically increased traffic, the 5G deployment strategy needs to be reimagined. Of course, this becomes difficult when even more uncertainty is introduced by rebellious politicians and the NCSC investigation.
The National Cyber Security Centre (NCSC) has confirmed it is attempting to understand what impact potential US sanction directed towards Huawei would have on UK networks.
With Huawei equipment and components delicately woven throughout the complex tapestry of telecoms in the UK, sanctions from the US which would materially inhibit Huawei operations should be a major concern.
“The security and resilience of our networks is of paramount importance,” a cross-government statement reads. “Following the US announcement of additional sanctions against Huawei, the NCSC is looking carefully at any impact they could have to the UK’s networks.”
There have been reports circulating through the press suggesting UK Prime Minister Boris Johnson is once again considering the role of Huawei in the telecoms landscape. These rumours are a separate story, but directly linked; the US wants to reduce the commercial opportunities for Huawei, and this is yet another attempt.
First, the US Government attempted the diplomatic approach, with Secretary of State Mike Pompeo attempting to prove his debating skills. Secondly, fear was introduced with the US attempted to reignite xenophobic fears of communism. The third strategy was more directly aggressive; work with Huawei or have access to our intelligence data, you can’t have both.
None of these strategies worked, but the latest attempt is an interesting one. If Huawei’s supply chain can be compromised, the UK (and other) Governments might have to turn its back on the Chinese vendor because it does not meet the standards required for resiliency tests.
Should the UK Government be revising its position, it would certainly be a blow to Huawei’s credibility.
“We’ve seen the reports from unnamed sources which simply don’t make sense,” said Victor Zhang of Huawei. “The government decided in January to approve our part in the 5G rollout, because Britain needs the best possible technologies, more choice, innovation and more suppliers, all of which means more secure and more resilient networks.
“As a private company, 100% owned by employees, which has operated in the UK for 20 years, our priority has been to help mobile and broadband companies keep Britain connected, which in this current health crisis has been more vital than ever. This is our proven track-record.”
Looking at the other rumours outside this confirmed investigation into the impact of US sanctions on Huawei, the underlying cause could be directed back tor Conservative backbencher Sir Iain Duncan Smith. Once a prominent voice in the House of Commons, Duncan Smith’s influence has been wilting rapidly, so much so this is one of the first times anyone has paid attention to him for what feels like decades.
In March, Duncan Smith led a small group of Tory revolters in opposition of the Supply Chain Review. Instead of limiting ‘High Risk vendors’ to 35% of any telecoms network, this group wanted them banned completely. These politicians clearly did not understand the complexities of the situation and debates were riddled with inaccuracies, but it appears the pressure has been enough to turn the head of Prime Minister Boris Johnson.
What is worth noting is that while the industry has been in firm support of Huawei in recent years, this staunch stance seems to be softening.
Vodafone Group CEO Nick Read recently discussed the Huawei situation during the telco’s earnings call, and while Vodafone had been warning of catastrophic consequences to prevent work with Huawei, the current rhetoric is no-where near as firm. The executive talked of removing certain firms “moderately” and investments into alternatives. It does appear Vodafone is preparing for the worst-case scenario.
While the rumours are nothing more than rumours, with the US undermining Huawei’s ability to operate as desired some uncomfortable questions will be asked. Top of the list is whether the vendor can maintain security and resiliency credentials for its products and components following such a disruption to its supply chain. This could drastically impact its position in the UK telecoms landscape.
Trump needs fodder for the campaign trail, maybe Huawei fits the bill
A thriving economy and low levels of unemployment might have been the focal point of President Donald Trump’s re-election campaign, pre-pandemic, but fighting the ‘red under the bed’ might have to do now.
A thriving economy and low levels of unemployment might have been the focal point of President Donald Trump’s re-election campaign, pre-pandemic, but fighting the ‘red under the bed’ might have to do now.
In 2016, Donald Trump won the Presidential election for numerous reasons, but one very important element was his ability to mobilise the vote of elements of society who wouldn’t have had any interest in politics otherwise. One reason was because of who Trump was and is, a celebrity more than a statesman, but perhaps a more critical element was the message.
Trump ignored political correctness, seemingly appealing to racism and xenophobia as the Make America Great Again slogan was born. He proposed the deportation of all illegal immigrants, the construction of a wall on the US-Mexico border and a temporary ban on foreign Muslims entering the US. The forgotten men and women of the US were the focal point of this campaign.
This campaign, focusing on a single message of foreign people are bad for patriotic US citizens, worked. If Trump is to repeat the success of his 2016 Presidential Election in November, there will have to be another message at the core of the campaign to rouse the masses and build a slogan on.
There has been a suspicion that the success of the economy and low levels of unemployment would have been this focal point. Prior to the COVID-19 pandemic, the economy was on the rise. From Trump’s entry to the Oval office on 6 January 2017, to the final days before lockdown in February, the Dow Jones grew from 19,963 to 29,398, a 47% surge. Unemployment was down to 3.5%, slowly eroding through the three-year period.
The message could have been ‘look what four years of Trump has gotten you, wouldn’t you like four more?’. But then coronavirus hit, and the economy went down the toilet.
The Dow Jones will recover, as will unemployment, but the Trump campaign would be playing with fire by making this the central point of the campaign. Many believe Trump was too slow to act against the coronavirus after spending months claiming it was little more than the common flu. At its worst point, the Dow Jones fell to 18,591 while unemployment is currently as high as 14%, and likely to go higher.
Using the economy as a reason for re-elections is offering ammunition to the Democrat candidate, the opening round of a slug match where Trump can be undermined and embarrassed.
Without this weapon in his arsenal, Trump will have to find a new focal point to build a campaign around; China and Huawei could fit the bill.
Some wacko in China just released a statement blaming everybody other than China for the Virus which has now killed hundreds of thousands of people. Please explain to this dope that it was the “incompetence of China”, and nothing else, that did this mass Worldwide killing!
Trump needs to redirect attention away from his failings as a leader during the pre-coronavirus weeks. People generally need an enemy when times are hard, and the invisible enemy of today will not do; you can’t get people angry about a virus, not in the way that the Trump campaign will want. If Trump can further vilify the Chinese, he can position himself as the hero, the man to champion US values, whatever they might be.
Huawei has been made the proxy of the Chinese Government in the eyes of the US. If the US is scared about the ‘red under the bed’, the idea of communism creeping into democratic societies secretly, the successful telecoms vendor can be made public enemy number one.
This is clearly not a new campaign of hate from the President, but it is one which had quietened off over the last few months. It is an on-going conflict point between the US and Chinese Governments, and fuel was thrown onto the embers last week.
In a new assault from the US Department of Commerce, further efforts were made to inhibit the ability of Huawei to source semiconductor components for smartphones and base stations. The US is perhaps hoping the globalised nature of the technology industry, which has allowed Huawei to thrive, can be weaponised against it as few (if any) companies could operate without a single trace of the US in its supply chain.
“We have survived and forged ahead despite all the odds,” Huawei Rotating Chairman Guo Ping said at a virtual conference this week. “The US insists on persistently attacking Huawei, but what will that achieve for the world?”
Conflict with the Chinese might not sound good for economic reasons, but for political ones, it is fantastic. Trump needs an enemy so he can be the champion of for the forgotten men and women of the US.
While it is clear there are a lot of US politicians buying into the anti-China campaign of hate, we asked Telecoms.com readers how they feel about the on-going aggression towards Huawei:
Telecoms.com Poll: Do you feel the US Government is justified in its action against Huawei?
Yes, it is effectively a pawn for the Chinese Government
Yes, but Government links are not there
Maybe, but show us the evidence of foul play first
No, Trump shouldn’t punish a company just because it is Chinese
No, international competition should be left to sort itself out
Huawei might have enjoyed a brief breather over the last few months, but the signs are there to suggest there might be greater conflict on the horizon. Speaking at the Munich Security Conference this week, Secretary of State Mike Pompeo and Secretary of Defence Mark Esper both drew battle lines.
“Let’s talk for a second about the other realm, cybersecurity,” Pompeo said during his speech. “Huawei and other state-back tech companies are trojan horses for Chinese intelligence.”
“Under President Xi’s rule, the Chinese Communist Party is heading even faster and further in the wrong direction,” said Esper. “More internal repression, more predatory economic practices, more heavy handedness, and most concerning for me, a more aggressive military posture.”
Further sanctions and more aggressive policies against Huawei specifically, as well as other Chinese companies in the international markets, could be on the horizon. Huawei executives have certainly expressed concern, but there are numerous other companies who should also be sitting uncomfortably.
The US Senate recently passed the Holding Foreign Companies Accountable Act (S.945) which could result in numerous companies who do not pass strict criteria being delisted from US stock exchanges. China is of course a target with this legislation.
“The SEC works hard to protect American investors from being swindled by American companies,” said Senator John Kennedy, one of the politicians to introduce the original bill.
“It’s asinine that we’re giving Chinese companies the opportunity to exploit hardworking Americans – people who put their retirement and college savings in our exchanges – because we don’t insist on examining their books. There are plenty of markets all over the world open to cheaters, but America can’t afford to be one of them.”
This legislation would not impact Huawei, it is a private company after all, but it is further evidence of increasing aggression towards China, and suggestions there could be rising tensions.
And while Huawei might be attracting the most attention from US Senators right now, there are certainly more which could fall into the crosshairs. Tencent owns TikTok which has already come under criticism, Alibaba is hoping to expand its cloud computing venture into international markets, while the likes of OPPO and Xiaomi are proving to be quite successful in gaining interest as challenger smartphone brands. These are all companies which would perhaps fall foul of US opinion.
The first Trump campaign rallies will give more of an indication of what will be the focus of his scorn and hatred over the coming months, and where the pent-up frustrations of US citizens could be directed. We suspect Huawei could be in for a rough few months as Trump further vilifies the Chinese Government and looks for an opponent to bureaucratically challenge during the campaign.
Taking down Huawei could be the feather the Trump campaign is looking for in its quest for re-election to the White House.