European networks unvoluntary casulties of US-China trade-war
I usually don't comment on our competition but recent events such as new legislation proposal from the government in Sweden has sparked a well-needed debate. I commented on the situation for Swedish city networks last week in this IDG article https://computersweden.idg.se/2.2683/1.722350/konkurrent-varnar-huawei-stadsnat and also wrote a debate article on the topic published by NyTeknik https://www.nyteknik.se/opinion/uppenbara-risker-hotar-svenska-fibernat-6969182
What is said in those articles is equally true for any european operator. So let me repeat the key message here.
It is noteworthy that both Huawei and ZTE recently have ended up in a clash with the U.S to the extent that American companies and component suppliers are forced to stop their deliveries to both companies. The result of such a sudden embargo is substantial delivery delays of network hardware. This puts deployment plans for European fiber networks at risk and may change our industry forever.
What the recent events have shown is that depending on the US government's goodwill towards China where conditions can obviously deteriorate very quickly, is a major risk.
As a vendor we prefer a level playing field, allowing us to compete on the market with known preconditions. I'm sure our customers feel the same way. But big-politics has now become a new volatile factor that impact even the smallest city network or operator in Europe.
Whether the background to U.S actions is based on real security concerns about eavesdropping/backdoors in chinese network products, breach of export control of high technology to banned countries or whether it is in fact only about negotiation tactics on the part of President Trump in the trade war with China may be debateable. It really doesn't matter. The implications are the same.
The short term effects are still unrecoverable delivery delays, limited access to networks and services, loss of revenue and reduced growth in the digital economy and lots of extra work.
The long term repurcussions may change the whole industry.
- China is the world's factory - the majority of electronics equipment is manufactured there, but the current events may force the industry to look for alternatives to avoid potential trouble in the future. Particularly if the U.S-China relations continue to deteriorate and Trump is on the road to re-election. Shifting manufacturing capabilities away from China is doable but will take some time to accomplish.
- Replacing key components in switches and routers to avoid dependency on the U.S government and U.S export laws is not easy - there really aren't any available. We will probably see Chinese alternatives emerge, but will there be intellectual property issues? A lot of know-how has been transferred to China in the recent years as part of tech-industry pursuit of lower costs. All major vendors have offices and manufacturing there. If Chinese companies start to offer compatible components without reasonable development time allowed for, there will be an espionage debate for sure and potential patent disputes that could affect customers.
An industry exit from China - Chexit - may very well be the result forced upon us.
Waystream has also been active in China for many years, and we have good experience both from manufacturing and talented employees. This disruption is therefore unwelcome for us as well. But we need to keep an open mind. I fear that the trade-war we see now is only the first step in a much bigger battle between U.S and China that may impact our industry for decades to come and as a result also affect communications networks all over the world.
In line with the increasing digitalization of our society, the fibre networks are now a critical part of the infrastructure. It is essential that its availability and expansion do not depend on international big politics and the influence of foreign powers. European operators need to be aware of the new situation that is emerging and make contingency plans. It is no longer business as usual.
