NATO members are divided in their response to EU warnings about Chinese vendors, while Germany’s fix has come in for new criticism.
As China’s invasion fleet charges into the seas of the Taiwan Strait, and the US is sucked into its long-dreaded Asian conflict, NATO comes under immediate pressure to lend support. China moves preemptively, ordering Huawei, its biggest 5G kit vendor, to activate sleeper bugs implanted deep within basestation software still used by networks in Germany and other NATO countries. A devastating communications blackout follows, taking millions of Europeans and critical systems instantly offline.
This sort of doomsday scenario effectively explains NATO’s own aversion to Huawei, despite the Chinese company’s insistence it is employee owned, not a government stooge, and that sabotaging customer networks would be commercial suicide. “We need to do more, we need to develop guidelines, we have some resilience guidelines, we need to improve them, we need to coordinate, we need to share information to ensure that we don’t see once again what we have now seen with Russian gas,” said Jens Stoltenberg, NATO’s secretary general, in a November 2022 speech about the “huge security consequences” of using Huawei.
After Russia’s invasion of Ukraine, Vladimir Putin’s denial of gas to countries dependent on it helpfully serves Stoltenberg as a cautionary tale about security risks. Yet most European countries, many of them NATO members, have done little or nothing to restrict Huawei, despite being admonished for their inaction more than a year ago by Thierry Breton, the European commissioner for the internal market.
During a speech in June last year, he complained that “only ten” countries had implemented EU recommendations about “high-risk vendors,” a euphemism for Huawei and ZTE, China’s best-known 5G kit makers. “This is too slow, and it poses a major security risk and exposes the Union’s collective security, since it creates a major dependency for the EU and serious vulnerabilities,” he said.
It has also led to potentially serious division within NATO’s ranks between countries that have effectively banned Huawei and countries that have not. Earl Lum, the president of analyst company EJL Wireless Research, says that only nine NATO countries outside North America now fall into the first category. “What about the other 21?” he said. “Because if we’re all going against the Russians, and the Russians are aligned with the Chinese, then at some point I would imagine the NATO members would have to be in alignment in terms of a security situation. Is there no correlation between the Huawei ban and NATO?”
Huawei’s continued presence in some of Europe’s largest economies has been highlighted in recent weeks by the bosses of both Ericsson and Nokia, the Nordic vendors that represent the only sizable 5G alternatives for radio access network (RAN) equipment. “We are seeing sharply increased competition from Chinese vendors in Europe and Latin America,” said Bƶrje Ekholm, Ericsson’s CEO, on a call with analysts this month about recent second-quarter results.
Those remarks were echoed by Pekka Lundmark, Ekholm’s counterpart at Nokia, just a few days later. “I would note that this continues to be a highly competitive market,” he told analysts. “And we see intense competition in regions that Chinese vendors are still able to compete in.”
German fudge?
Neither executive, moreover, sounds confident that recent moves by German authorities will create openings for them. Five years after the initial launch of 5G services over Huawei’s network products, Germany this month ordered its telcos to strip Huawei out of their “cores,” the network control systems, by the end of 2026. They must also remove its products from the management systems for the RAN and transport infrastructure by the end of 2029.
But all three big telcos ā Deutsche Telekom, TelefĆ³nica Deutschland and Vodafone Germany ā already appear to operate Huawei-free core networks. And if telcos can pair alternative management systems with Huawei’s products, Germany could avoid the pain and hassle of replacing Huawei’s RAN products, now used across 50% to 60% of the country’s 5G networks, according to estimates from Barclays, a bank, and Strand Consult, a Danish analyst company. Those management systems account for a minuscule fraction of RAN spending, said one expert source.
The uncertainty for Ekholm and Lundmark is whether EU authorities, not to mention Huawei’s political opponents in Germany, will deem this fix both workable and secure. On the first, it would require Huawei to open the proprietary interfaces between its RAN and management system before another provider could be a substitute. The need for close collaboration between Huawei and that provider would probably eliminate Ericsson and Nokia as candidates, while Huawei has never shown much inclination to be technically open. Vodafone described the pairing of one company’s management system with another’s RAN as “technically challenging.”
Yet the bigger concern is whether it addresses the problem. Software is a feature of not just the management systems but also the baseband units that process mobile signals and are usually found at the bottom of a mobile mast. Even if Huawei was evicted from the management system, it could still introduce malicious code into the baseband software, said one industry source on condition of anonymity. Lum agrees. “The baseband unit is a security issue,” he said.
Huawei maintains that its software has undergone more rigorous scrutiny than that of any other vendor. The UK even established a dedicated facility, the Huawei Cyber Security Evaluation Centre, that puts the Chinese vendor’s source code under a microscope. No other vendor is subject to the same examination. And despite this, no one has produced conclusive evidence of any wrongdoing by Huawei.
So far, the EU has maintained public silence about Germany’s move and is probably picking over the details, just like the experts at Ericsson and Nokia. But there is a possibility that German telcos are urged to go a lot further, removing Huawei’s baseband units as well as its management systems. And that would demand Huawei’s full accommodation with the concept of open RAN.
“You’d have to get Huawei to open up the APIs for the fronthaul,” said Lum. “You wouldn’t get all the bells and whistles of the capability of the radio, but it would allow you to keep them as a vendor. Unless they’re only supplying the radio, and nothing else, there is still a security risk.”
Limp-wristed slap
If radios do account for about half the RAN “wallet share,” as one industry source reckons, then such an alternative fix might conceivably slash the cost of replacing Huawei, which Barclays estimates at ā¬2.5 billion (US$2.7 billion) across all three major networks. But unless the government deadline is brought forward, the actual swap-out costs could be far lower. By the end of 2029, much of the 5G equipment may be due for replacement and fully depreciated on the telcos’ balance sheets.
Yet the replacement cycle may be lengthening. As they struggle to generate a satisfactory return on investment, telcos are in no mood for spending on new equipment. That makes them likelier to sweat assets. Huawei, meanwhile, helps to maintain pricing pressure on the Nordic vendors in the absence of dependable alternatives.
In addition, while Huawei has undoubtedly been hurt by US sanctions, some of its technologies are still held in high regard, including the power amplifiers in its radios. “For this component, we are leading the industry one generation ahead of our competitors, and that is why, according to third parties who report, we keep leading market share,” Huawei’s Philip Song, the chief marketing officer for carrier networks, said during a press briefing at this year’s Mobile World Congress in Barcelona.
For Ericsson and Nokia, sadly, the European backlash against Chinese vendors has been more of a limp-wristed slap than a vigorous ejection. And it has coincided with the worst slump in RAN investment for about 20 years. Amid concern about the long-term wellbeing of the Nordic vendors, and the usual security worries that surround Huawei, Europe’s 5G networks seem to be on very unstable ground.
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