Did you know that China is the world’s largest market in the $250 billion-a-year global telecom industry? With such a robust role in the global industry, you’d think doing business with a force like China would be an ideal way to foster positive relations and participate fully in the growth opportunity… right?
Well, the U.S. would no longer agree.
Potential Cybersecurity Concerns
Although having China supply telecom equipment may be convenient from a business perspective, the U.S. has determined this could open doors to a potential security crisis. This fear has stemmed from a concern that the government could order Chinese engineers to place security holes within technology products manufactured in China. These security holes could be exploited for spying, remotely controlling or disabling devices.
Huawei Technologies Co., the world’s most massive cellular-equipment maker, have dismissed these concerns as baseless. However, Michael Wessel, a member of the U.S.-China Economic and Security Review Commission, says, “While the primary national-security concerns center on Chinese-owned firms, the equipment produced by any firm operating in China is at greater risk for vulnerabilities because of access to personnel and facilities.”
The White House’s order for the telecom supply-chain review said the U.S. may blacklist certain countries considered “foreign adversaries.” And China is expected to be listed as one.
What Does the White House Say?
These concerns motivated the White House to issue an executive order last month to restrict foreign-made networking hardware, which led to a 150-day review of the U.S. telecommunications supply chain. The U.S. is now asking telecom-equipment manufacturers if developing U.S.-bound hardware would be possible outside of China. Although conversations are in their early stages, the executive order demands a list of proposed rules and regulations by the 150-day deadline, in October.
These proposals could have a major impact on the wireless industry, as they would force the supply chain inside of China to slow down. As a result, some aspects of the supply chain would need to be transferred to locations that are not being targeted by the United States due to IP theft.
U.S. officials have stressed the urgency of the matter, as wireless carriers are beginning to upgrade to 5G – an advancement designed to shatter the limits of our current technology.
What sobers the excitement, however, is the concern these devices will become vulnerable to cyberattacks.
A Trump administration official commented as such: “The fourth industrial revolution will be built on the telecommunications networks being constructed today. It is critical that those networks be trusted.”
The Larger Issue.
Keeping this in mind, a significant question remains: “Are cyber-security threats the only reason the U.S. is pulling out of China?”
Although spying has remained a long-standing concern for the U.S., the escalating trade war between the U.S. and China has certainly raised tensions. Google has limited Huawei’s access to its Android services, while chipmakers such as Intel, Qualcomm and Broadcom have ceased supplying goods to Huawei.
The U.S. has also launched an active campaign to further identify threats within the telecom industry. At the request of the U.S. Justice Department, Canadian authorities had arrested Meng Wanzhou, Huawei’s chief financial officer and daughter of the company’s founder, late last year. In January, Wanzhou faced 23 indictments for alleged crimes – these crimes included conspiracy to defraud the U.S., stealing trade secrets, and bank and wire fraud.
The trade war continues to escalate as the U.S. clamps down on one of its largest foreign suppliers.
What This Means for You…
A devastating wave threatens to submerge manufacturers, distributors, and consumers across the industry. While the U.S. considers dispersing the supply effort to different outlets, a concern is that some countries may not have enough developers or workers who are properly skilled to match the demand. Another concern is a lack of suitable land area to match China’s sophisticated system – not to mention the transition from Chinese labor to various alternatives – can result in a massive lack of sales.
According to Huawei and some analysts, the U.S. is dependent on Huawei for 5G buildout. “Restricting Huawei from doing business in the US will not make the US more secure or stronger; instead, this will only serve to limit the US to inferior yet more expensive alternatives, leaving the US lagging behind in 5G deployment,” Huawei mentioned in a statement on Thursday.
And according to Charlie Dai, an analyst with research firm Forrester, “Huawei is one of the leading players in 5G, and the US market needs Huawei. The ban will slow down 5G adoption and eventually will be harmful to [telecom] carriers and consumers around the world.”
A Caveat to Put You at Ease.
Despite these concerns, Tessco remains vigilant in providing the value, security and benefits needed to keep your business, and our industry, protected – now and in the years to come. As leaders in the industry, we are dedicated to removing complexity for your business on a grand scale. To learn more about the future of 5G communication, or to explore how Tessco can optimize your business, visit tessco.com today!
References:
Woo, S., & Volz, D. (2019, June 23). U.S. Considers Requiring 5G Equipment for Domestic Use Be Made Outside China. Retrieved June 27, 2019, from wsj.com/articles/u-s-considers-requiring-5g-equipment-for-domestic-use-be-made-outside-china-11561313072
Stewart, E. (2019, May 21). The US government’s battle with Chinese telecom giant Huawei, explained. Retrieved June 27, 2019, from vox.com/technology/2018/12/11/18134440/huawei-executive-order-entity-list-china-trump
Pham, S. (2019, May 16). US move against Huawei could slow the global rollout of 5G. Retrieved June 28, 2019, from cnn.com/2019/05/16/tech/huawei-us-5g-rollout/index.html