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Wednesday, January 27, 2021

Geopolitics are Strangling the Global Telecoms Supply Chain

Banning Chinese vendors from Western countries’ 5G deployments on the grounds of alleged equipment security concerns will have a detrimental effect on 5G rollouts and technology evolution for years to come, according to research by global tech advisory firm ABI Research.

“Our research shows that banning Huawei and ZTE from 5G deployments and restricting their access to silicon and semiconductor supply chains will have severe implications on economic performances. Furthermore, banning these Chinese vendors will hamper 5G and 6G R&D,” says Leo Gergs, Research Analyst for 5G Markets at ABI Research.

First and foremost, restricting vendors from 5G deployments poses consequential economic implications for network operators. Gergs explains, “Banning Huawei and ZTE not only imposes additional costs for operators having to replace Huawei equipment from existing network deployments but also restricts the vendor landscape, reducing the degree of competition within the market. This imperfect competition inevitably decreases downward pricing pressure, forcing network operators to pay higher costs for network equipment than if they were under perfect competition conditions.”

In addition to imposing higher deployment costs on operators, restricting Huawei’s access to 5G chipsets from U.S. semiconductor companies can be more harmful to the U.S. economy since Huawei plans to start its own chipset production in a Shanghai factory to circumvent the restrictions.

ABI Research also says a Huawei ban will have severe implications on 5G standardization. Huawei and other Chinese telco companies are among the top contributors for 5G related patent declarations to the 3rd Generation Partnership Project (3GPP).

“Regulators need to be very careful and avoid taking a politically motivated decision on economic and technology matters,” warns Gergs. “To ensure that 5G can unveil its true transformative effect to the world, regulators and political bodies need to prevent the 5G rollout from becoming a bargaining chip for geopolitical interests.”

The findings are from ABI Research’s “Impact of Huawei Restrictions on 5G Markets” application analysis report. The report is part of the company’s 5G Markets research service, which includes research, data, and analyst insights.

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