More US Senators try to pressure UK over Huawei

While the impact on UK policy is questionable, that does not seem to be deterring US politicians from attempting to influence decision-making on Huawei’s 5G fortunes.

In a letter to Parliament, 20 Senators have urged UK politicians to reconsider their position on Huawei in the era of 5G connectivity. There is already dissent amongst the ranks in the House of Commons, though whether this trans-Atlantic communique has any catalyst impact remains to be seen.

“We write to express our significant concern with the Government of the United Kingdom’s recent decision to allow Huawei Technologies into its 5G network infrastructure,” the letter states.

“Given the significant security, privacy, and economic threats posed by Huawei, we strongly urge the United Kingdom to revisit its recent decision, take steps to mitigate the risks of Huawei, and work in close partnership with the U.S. on such efforts going forward.”

Led by Senators Ben Sasse and Chuck Schumer, the cross-aisle communication to influence decision making outside its borders is another attempt from the US to stamp its authority on the global landscape.

In the letter, the Senators have asked the UK to take a sterner stance against Huawei, but also enter into a partnership with the US to drive forward innovation and competition in this sparse segment of the telco industry. US politicians have already allocated funds to accelerate the development of OpenRAN technologies, touted as a challenge to the RAN status quo, to open-up the field of options.

Interestingly enough, this seems to be the carrot approach to influence, seeing as the stick wielded by Secretary of State Mike Pompeo has been as effective as a chocolate tea pot. Or has it?

The US might not have gained the outright ban which it has been chasing, but arguably lobby efforts have influenced UK policy. Would the UK introduced have restrictions on the telcos for ‘high-risk vendors’ if it was not at least partially listening to the trans-Atlantic drone? The UK Government does not want to place financial burdens on its telcos, but it has effectively done so with the Supply Chain Review. BT/EE, Vodafone and Three have all been forced into a rethink on how to deploy 5G, with Three facing significant disruptions.

With the conclusion of the Telecoms Supply Chain Review, UK telcos are free to work with ‘high-risk vendors’, a category which includes Huawei, though there are restrictions. The share of infrastructure equipment in a telcos inventory must not exceed 35% from a high-risk vendor, while no more than 35% of the total internet traffic for a telco can cross equipment from these suppliers. High-risk vendors are banned from contributing equipment to the network core.

The argument from the US is that the individual components of the network cannot be separated, therefore the risk cannot be mitigated. This same rationale has been put forward in objections from a group of UK politicians in opposition of the Telecoms Supply Chain Reivew.

Led by Sir Iain Duncan Smith, a few dozen MPs met to criticise the outcome of the Review. While some of the claims were mind-boggling and some of the statements quite inaccurate, the resounding message from this small group was an outright ban for Huawei and any other equipment vendors who would be deemed ‘high-risk’.

This is another area where the US lobby has seemingly gained traction, as none of the MPs present were particularly vocal during the Supply Chain Review. In fact, few politicians outside of the Department of Digital, Media, Culture and Sport paid much attention, occasionally posing questions when the topic was raised in the House of Commons. Only a small handful campaigned against Huawei, though now there are plenty who are seizing the opportunity to criticise the Review.

The conclusion of the Supply Chain Review was supposed to put this matter to bed, but it seems this is an argument which refuses to defuse. Secretary of State Mike Pompeo has already suggested his lobby mission would continue, and perhaps this is evidence the US is having more of an influence on UK policy than previously believed.

US Senators demand answers from Pentagon for alleged Huawei reprieve

The US Department of Defense has reportedly vetoed plans to further disrupt the Huawei supply chain, seemingly paying attention to the ‘rule of unintended consequence’.

Over the course of the last 18 months, the US Government has effectively been using the economist version of guerrilla warfare to dilute the influence of Huawei and China on the global technology industry. Success has been debatable, though the plan certainly worked on ZTE, and now three US Senators are questioning why the Pentagon has reportedly blocked plans to ramp efforts.

“We write regarding recent public reports that the Defense Department objected to a proposed change to Commerce Department regulations that would have made it more difficult for U.S. companies to sell to Huawei from their overseas facilities,” the Senators wrote.

“Given the national security risks surrounding Huawei’s technology and operations, concerns which resulted in the addition of Huawei and its affiliates to the Department of Commerce’s Entity List in May 2019, we respectfully ask for a member-level briefing on the Department’s rationale for its reported objection.”

Senators Ben Sasse of Nebraska, Tom Cotton of Arkansas and Marco Rubio of Florida, the authors of the letter, are all incredibly vocal leaders of the US aggression towards China. Sasse has been particularly active surrounding the on-going conflict in Hong Kong, while Cotton authored the Bill which would ban US intelligence sharing with Huawei friendlies, and Rubio has attempted to use legislation to extinguish the hope of any exemptions to the Entity List.

The latest twist in this saga concerns efforts from the US Commerce Department to further impact the Huawei supply chain. As it stands, US suppliers can work with other Huawei suppliers, as long as US components do not make up more than 25% of the product. The new rules would see this number reduced to 10%, potentially spelling disaster for the Huawei supply chain.

But it seems the Department of Defense are taking a much wider view of the move than the Department of Commerce. The Pentagon is worried about how this ban would impact sales for US businesses, potential job losses and the sums which can be redirected towards R&D to ensure the US technology industry remains cutting edge.

This is potentially the ‘law of unintended consequence’ in action. Although there is no official confirmation from the Pentagon that it did indeed block the Department of Commerce, the Senators are attempting to bring the saga into the public domain.

What has largely been ignored to date is the impact of the Huawei offensive on the fortunes of US businesses. In the immediate aftermath of Huawei entry onto the Entity List, the share price of several companies was hit hard. Micron Technologies was one such firm, and in a recent earnings call, quarterly revenue were reported down 43% year-on-year. Qualcomm, Xilinx, Skyworks Solutions, Qorvo and Neophotonics are only a few of the companies who have skin in the game.

The US strategy to combat Huawei is seemingly having more of an impact on US firms than it is the intended target. It might seem like an unpopular move to block increased aggression against the Chinese vendor, but it might will be the most logical decision.

There are a couple of points worth considering. Firstly, what impact is the strategy having on US companies. Secondly, what impact is the strategy having on Huawei. And, what are the potential secondary and tertiary consequences of the initial impacts.

Firstly, several US technology companies are suffering due to the ban. Secondly, Huawei is continuing to report year-on-year financial growth, therefore negative impacts are arguably limited. But the most interesting element of this story are the consequences because of the action to date.

In being unable to work with US suppliers, Huawei has been forced to look elsewhere, in most cases to Chinese suppliers, or create its own alternative. HiSilicon, the Huawei-owned semiconductor company, has likely been offered greater importance, while the firm is also creating an in-house alternative to the Android mobile operating system. Where Huawei can’t replicate products on its own, the Chinese ecosystem will benefit.

Not only are revenues being deprived from US suppliers, Huawei is removing reliance on an international supply chain while also driving more R&D funds to Chinese companies. China’s technology industry could be viewed as getting a boost, while the US influence is diluted. Arguably this is only because of US aggression towards Huawei.

This is all a very theoretical argument of course, and the chances of success or failure depend on the ability of Huawei to replicate the performance and efficiency of the US components of its supply chain. But it is a potential outcome which few have seemingly been paying attention to.