Will Huawei go the way of ZTE following US ban?

SINGAPORE (May 24): The ripples from the US ban on Huawei Technologies Co continues to be felt, as distributors and suppliers pull their inventory and halt their shipments.

And some observers have pointed have the similarities – and differences – of this ban with that slapped on telecom equipment provider ZTE Corporation just last year.

“History doesn't repeat: it rhymes. And this certainly rhymes with the ZTE experience,” says William Carter, deputy director and fellow, Technology Policy Programme, Centre for Strategic and International Studies.

“But it is also very different in some ways,” he adds. “Huawei is bigger than ZTE, and has been expecting this move for a long time.”

As news of suppliers and manufacturers cutting shipments and supplies off from the beleaguered Chinese telecom manufacturer, Huawei has come out to say that it has stockpiled enough key components, such as chipsets, to sustain a blockade.

However, whether Huawei would have customers still interested in buying their equipment is another matter.

The equipment Huawei makes ranges from the cutting edge next generation 5G mobile networks to routers and switches for datacentres. Their customers are now adopting a wait and see approach according to Evan Zeng, senior research director at technology research firm Gartner.

“The majority of them may be starting to think about the alternative if Huawei’s new solutions cannot address their requirements. For the new customers who have not yet procured new Huawei equipment, I think most of them will suspend the procurement and look further for choices from other vendors,” says Zeng.

Su Lian Jye, principal analyst at ABI Research, notes that telcos might face disruption as they switch out Huawei equipment or provision for Huawei being unable to deliver scheduled equipment or repair on time.

“However, at the same time, Huawei has been preparing for this eventuality, as the company has stockpiled 12 months of parts ahead of the US ban. So Huawei does have the capability to address any equipment replacement in the next 12 months,” says Su.

For now, the telco players in Singapore appear to have adopted a wait-and-watch stance. For starters, they are advising customers that Huawei devices that have been sold or are currently on sale will not be affected by the ban.

“We carry a comprehensive range of handset brands at our online and retail channels, and will continue to make available a wide range of handsets to cater to our customers’ diverse needs. We are working with Huawei to get more clarity and will continue to keep our customers updated of the latest developments,” M1 says in a statement.

Meanwhile, StarHub says its frontline staff have been trained to assist customers on this matter, adding that it has received “a small number of customer enquiries”.

“We are closely monitoring developments and will provide further updates when they are available,” StarHub says in a statement.

For its part, SingTel says it is working closely with Huawei to assess any potential usage impact moving forward.

“We have confirmation from Huawei that phones that have been sold continue to have access to Google services and the Google Play Store for downloads and updates, and are working fine with no service or usage impact,” Singtel says in a statement.

Telcos here might also face pressure to switch out existing Huawei equipment due to Singapore’s proximity to the US as a defence partner. Currently, M1 and StarHub are using Huawei equipment as part of the telecom infrastructure.

“As mentioned, some of the telcos may consider switching to other vendors, such as Ericsson and Nokia, and may need to incur extra investments to do so. While none of the Asean countries belongs to the Five Eyes Nation, Singapore’s strategic relationship with the US might encourage Singapore telcos to consider other alternatives, if the US continues to mount its pressure,” says ABI’s Su.

While telcos here might not be publicly declaring their intention to abandon Huawei as an equipment supplier, Su notes that telcos are likely waiting for the final word from regulators. “It is likely that the telcos are waiting for the final assessment from regulators such as IMDA and MCMC,” he says.

While Huawei rides out this storm, this ban has greatly impacted its customers’ trust. Such an impact could open up new markets for competitors to replace Huawei’s products, notes Gartner’s Zeng.

“More importantly, Huawei needs to communicate to third parties like the analyst community and the independent testing companies about the performance of the new Huawei product without using the US chipsets,” says Zeng.

“We hold theories about it, but we don’t know the performance of the new equipment. Certainly competitors will leverage this chance to sell their replacement products to Huawei customers,” he adds.

Read more about the US ban on Huawei in the cover story of The Edge Singapore (Issue 883, week of May 27), available at newsstands now.

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