Ever since Huawei became the number one public enemy in the eyes of senior U.S. officials, stories have been circulating about its huge technological lead over its rivals: Eighteen months is a repeated estimate of its lead over other companies developing 5G products. .
It would be a remarkable achievement. Twenty years ago, Huawei was ridiculed as a Chinese imitator snatching Western products and whipping them at massive discounts. A legal battle between Cisco and Huawei has been fought over these allegations. Even many fans have seen it primarily as a low-cost alternative to better quality Western rivals. Since then, he is believed to have gone from a straggler to an invisible leader. It’s like a fellow tennis player becoming a Wimbledon champion – in two sets. And it’s just as unlikely.
No one impartial disputes Huawei’s current reputation as one of the most advanced kit manufacturers in the world. In the developed markets, full of demanding consumers and overflowing with gigabytes, the low prices would only get one supplier so far. Several years ago, Huawei surpassed Ericsson of Sweden to become the world’s largest supplier of communication service providers, with a huge European company. It has kept this lead in the market, injecting billions into research and development and producing products that are admired in the industry.
But the suggestion that it now has an 18-month technological lead over its 5G rivals has been rejected by several industry experts who spoke to Light Reading, including an executive from one of Huawei’s service provider customers. While Huawei may have an advantage in some important areas, Ericsson and Nokia can rightly shout their achievements in others, said one of the experts. Despite reports and even the setbacks of 5G products that Nokia has encountered, the reasonable opinion is that the three providers are on an equal footing.
The alternative offers a compelling story for the friends and enemies of the Chinese seller. Its superiority, whether guaranteed fairly or with state support, means that the only way is Huawei, the story continues. Unless the U.S. urgently supports other vendors and technologies, Huawei and China will dominate the future 5G economy, say lieutenants of Trump. Banning or restricting Huawei and customers who rely on its expertise will stay dry and dry, comes the reply. Both parties have an interest in perpetuating the allegations regarding an 18-month advance.
However, these claims do not stand up to scrutiny. The first clue lies in the classification of 5G as “standard” – essentially, a technology whose foundations were designed and built by a committee of suppliers, rather than by a single actor. No business could reasonably emerge with an unassailable track of a forum that pools intellectual property in this way. China tried to go it alone in the 3G era, but its local TD-SCDMA system fell like a faulty rocket, even though it was eventually added to the 3G family of technologies. This experience convinced China that its initial and external approach was wrong.
What followed was a regime change in the international forum, as Huawei moved other mobile technology developers. There is no doubt that it is a much more influential player today than it has ever been in 3G, bringing a large part of the know-how that is found in the 4G and 5G networks. . But no one has been able to prove that it is a dominant force in 5G intellectual property.
Bird & Bird, a law firm, has done what is perhaps the most robust assessment of patent ownership in 5G. The company’s experts reviewed various studies that have been used to support claims of Huawei’s technological leadership and have concluded that many are “too simplistic”. One of the problems was not distinguishing between an ordinary patent and a patent that matters seriously. Another was how to determine if a patent is really “standards essential”. In the Bird & Bird white paper, the only two rankings that include an “essentiality” filter or weighting identify Ericsson and Samsung as the two best players, Huawei being placed fourth in one and eighth in the other . But the general conclusion of the law firm is that none of the studies are conclusive.
The country ranking also mocks claims of Huawei’s leadership. In a report released in March 2019, respected consulting firm Arthur D. Little ranked Australia, South Korea, and the United States among a small number of 5G leaders, describing most other countries as followers or laggards. If Huawei is 18 months ahead of its competitors, could three countries that use little or no equipment be 5G leaders? “How is it that the two main 5G markets in the world are the United States and South Korea?” asks John Strand, CEO of the Strand Consult advisory group.
One of Huawei’s main European customers is also disputing allegations regarding its 18-month technological lead. Arnaud Vamparys heads the Orange 5G technical program, which currently operates networks across Europe, Africa and the Middle East. By selecting 5G providers, he wanted diversity without compromising Orange’s reputation for network quality established in the 4G era. “We are finished with five suppliers capable of deploying in Europe, namely Ericsson, Huawei, Nokia, Samsung and ZTE,” Vamparys told Light Reading. “I don’t see these 18 months. Sure, you have positive and negative things in our benchmarks, but it’s not that black and white.”
Observers fearful of Awestruck and Huawei have regularly drawn attention to the imbalance in research and development (R&D) spending between the Chinese supplier and its competitors. Last year alone, Huawei injected $ 18 billion into R&D, according to Ryan Ding, CEO of its telecommunications company. Nokia’s budget was only $ 4.8 billion, while Ericsson only managed $ 4 billion. However, this comparison of overall amounts ignores the huge differences between the three companies. “Ericsson is purely mobile and Nokia is mainly mobile and a few other things,” says Strand. “Huawei’s R&D budget covers chipsets, landlines, mobile solutions, cable TV solutions, AI solutions, data centers, mobile phones, laptops and tablets.”
The budget even extends to activities outside of its main addressable market, he says. Besides manufacturing telecommunications equipment, Huawei has also been a major player in the solar power industry, according to Strand. Indeed, in June of last year, the British Financial Times announced that it had closed an American solar company which sold inverters, a type of electric converter. The global importance of this solar activity is not clear because the last annual report of Huawei, for 2018, only makes a quick reference to the products it develops. “There is no transparency in the way they do things,” says Strand.
Annual R&D budget (billion $)
The key figures also do not prove that Huawei allocates and spends more efficiently than its competitors. The company is said to have a more diffuse approach than other suppliers, a greater willingness (and ability) to support initiatives that may ultimately fail. While this risk-taking may increase the likelihood of breakthroughs, companies with much smaller R&D budgets have remained competitive in the 5G era.
Perhaps the most notable example is ZTE, another Chinese supplier whose overall R&D spending was less than $ 1.6 billion in 2018. Despite the gap with its competitors, ZTE increased its share of global telecommunications equipment market by two percentage points last year, at around 10%, according to market research firm Dell’Oro. In 5G, Orange’s Vamparys holds it in high esteem. “It has very good technology and quality, even in standalone mode,” he says. “It is one of our main suppliers.”
If Huawei has a technological advantage, it is probably linked to the size of its product portfolio. No other supplier can supply the full range of high-quality network equipment with consumer gadgets, data center components, and even some cable TV products. This makes Huawei a competitive threat in almost every market segment and a real danger when customers want to buy almost everything from the same supplier. But in specific areas, each of the main suppliers could boast of having assets, according to Stefan Pongratz, analyst at Dell’Oro. Another analyst from another organization largely agrees. Talking about an 18-month advance is “mostly garbage,” he says.
None of this would justify banning the Chinese seller. The arguments regarding the safety of Chinese equipment and the illegal activities of Chinese companies are separate issues to consider. Unfortunately, false claims about Huawei’s technological advance are used to influence this debate in one way or another. Service providers and policymakers are right to worry about the competition and diversity of providers, and Huawei must now be recognized as a formidable technology player – but not a monopoly on 5G expertise.
– Iain Morris, international editor, Light Reading