Huawei Technologies, Huawei’s operating unit in the U.K., reported a 27% drop in revenues to £913M ($1.3B) and a 25% drop in operating profit to £36.4M ($51.3M). The company’s poor performance comes one year after the U.K. agreed to ban the Chinese telecoms company as a supplier of 5G equipment.
- After limiting Huawei’s U.K. market share to only 35% in January 2020, British Prime Minister Boris Johnson entirely banned Huawei from supplying equipment to build 5G phone networks in the U.K last July.
- Then U.S. President Donald Trump welcomed the decision. Trump's administration had pressured Britain to ban Huawei based on domestic and international security concerns.
- Before taking office, Joe Biden said he supported a ban on Chinese corporations from developing key infrastructure in the U.S.
- Huawei responded that its U.K. business had “become politicized” and that the decision was “about U.S. trade policy and not security.”
- The ban was enacted in January 2021 and prohibited British telecom companies from purchasing new Huawei 5G equipment. It also forced them to remove all of the Huawei 5G equipment they had already installed in their networks by 2027.
- The U.K. Government did, however, permit British companies to continue using Huawei 3G and 4G equipment.
- The U.K.’s ban in July 2020 was motivated by new U.S. sanctions against Huawei in May 2020.
- Huawei had been operating in the U.K. for over 20 years. The U.K. was not only a key market for the company outside of Asia but also a core hub for research and operations.
- In May 2020, Huawei announced plans to invest £1B ($1.41B) in a new research center in Cambridge and employ 400 people.
- Liu Xiaoming, Chinese ambassador to the U.K., said the Government had made a “disappointing and wrong decision on Huawei.”
- As a result of the ban, revenues, profits, and dividends from Huawei’s U.K. unit dropped significantly in 2020. However, the full impact of the ban will become evident in the company’s 2021 accounts.
- In response to the ban, companies like Vodafone and BT have signed supply contracts with Huawei’s main competitors, Ericsson and Nokia, and other smaller suppliers to build the U.K.’s 5G phone networks.
- The ban is expected to delay the rollout of 5G networks in the U.K. by two to three years and cost the country an extra £2B ($2.82B).
- Sweden also banned Huawei from its 5G networks due to Huawei’s “extensive intelligence gathering and theft of technology.”
- While Ericsson “heavily” competes with Huawei, the company’s CEO was not supportive of the ban, saying, “for Ericsson and Sweden, we’re built on free trade. We’re built on the opportunity to trade freely.”
- The decision is likely to also delay the overall rollout of 5G in Sweden.
- While the European debate around balancing security concerns with an efficient and effective 5G rollout continues, companies are fiercely competing to fill the gap left by Huawei.
- Today, for example, Vodafone chose Samsung to supply its 5G network equipment in the U.K.
- Japanese companies like Rakuten and Dish Network are also emerging as market entrants.
- Nokia and Ericsson continue to dominate the European market for telecoms equipment, but their leading position looks increasingly uncertain.