Huawei’s 5G Downfall
and the restructuring of the industry
Country after country has been abandoning Huawei 5G due to either the security risks or U.S. technology restrictions. The U.S. restrictions cutoff semiconductors supplies; thus, crippling Huawei’s ability to deliver 5G [1]. Similar technology restrictions nearly toppled ZTE in 2018 [2]. Huawei is currently the largest global communications equipment supplier and largest 5G integrator. The upset affects the industry, technology, and politics. Significant factors include:
Patents: There are 21,571 declared Standard Essential Patent (SEP) on 5G and Huawei holds the highest number at 3,147 (14.5%) and ZTE holds 2,561 (11.9%) [3]. Anyone who implements 5G will also have to use and implement the SEPs. Patent owners have the right to request royalties for SEPs that implementers pay as a licensing fee for use [4].
There is a debate on the value of some of the patents [5]; however, the overall stakes are high and the political risks are even higher. China names Huawei a “national champion”, a status reserved for firms that bolster China’s strategic aims [6]. China could restrict the technology transfer similar to US sanctions; and, with a third of all declared patents, this could devastate 5G plans. 5G could evolve into a trade war and patent war combined.
Competition to Huawei: Ericsson (Sweden) and Nokia (Finland) have been weak. The EU has not embraced nor supported these companies to the extent that Trump in early 2020 suggested that the U.S. purchase either one or both of the companies as an alternative to Huawei [7].
Conversion Cost and Time: The cost and timeframes for switching 5G vendors is huge. Several industry specialists estimate that Huawei prices are about 30% lower than Ericsson and Nokia [8]. So, there is the cost increase in addition to the cost of ripping out and replacing incompatible existing 4G and 5G equipment. Vodafone estimates five years and BT estimates seven [9]. The cost for EU overall is estimated at $62B [10].
New solutions evolving: High costs and risks motivate the industry to develop or choose alternatives for 5G implementation[11]. The Radio Access Network (RAN) portion can be as much as 70 to 80% of the 5G network cost [12]. Several industry organizations are standardizing or “opening” the RAN (radios, hardware, software, interfaces, protocols) so that networks can be deployed with a more modular design without being dependent upon a single vendor[13]. This open technology avoids the proprietary software/hardware integrated solutions; such as those from Huawei, Ericsson, and Nokia.
These solutions generally consisting of cloud-based virtualization solutions (vRAN). Functions are shifted into the software, allowing the hardware to be more open and generic. The Internet of Things (IoT) requires more flexibility and open interfaces and software defined networks provide more flexibility.
Major new players are evolving: For example, the Japanese internet and e-commerce giant, Rakuten, is implementing Open RAN [14]. Globalization, by partnering with others, such as, Dish Network, is part of the plan [15]. On May 13, 2020, Rakuten announced their acquisition of InnoEye Technologies, a 500-person engineering firm, they use to support the cloud-based deployment. Plans are to market this technology and expertise to telecom companies and other enterprise customers globally [16]. Reliance Jio, the Indian telco with 388M subscribers, is building a virtualized 5G network which would see the current hardware-dependent networks shift to software-centric platforms. Reliance Jio received a huge influx of cash in 1H2020 from Facebook ($5.7B) Google ($4.5B), and eleven others (total of $20B) [17].
Stakes are high and there are obstacles; such as, scale, compatibility to 4G, patent relevance, and performance issues. Both Rakuten and Jio systems are projected to save 40% in capital expenditures and 30% in operational costs as compared to traditional 5G [18],[19].
The Wildcards: Elon Musk SpaceX Starlink program is intending to provide global internet from low orbit satellites. A Starlink pilot, with an initial 600 satellites, is scheduled for late 2020. In early 2019, Amazon (Project Kuiper) filed plans with FCC to launch 3,200 satellites for a similar global internet [20].
Bottom line: Geopolitics turned the table and opened the door for emerging solutions. These solution leaders are eager. Jio, with the ‘Made in India’ open solution, has plans to take it global as well as Rakuten from Japan. And, then there’s Elon Musk and Jeff Bezos with their satellites covering the globe.
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[1] Ernst, R. (01 July 2020). What the U.S. vs Huawei conflict tells us about the Semiconductor Industry. Medium. Retrieved from:
[2] Jiang, S. (09 May 2018). China’s ZTE says main business operations cease due to U.S. ban. Reuters. Retrieved from: https://www.reuters.com/article/us-zte-ban-idUSKBN1IA1XF
[3] IPlytics (January 2020). Fact finding study on patents declared to the 5G standard. IPlytics. Retrieved from: https://www.iplytics.com/wp-content/uploads/2020/02/5G-patent-study_TU-Berlin_IPlytics-2020.pdf
[4] Bloomberg. (09 June 2020). Huawei’s patents on 5G means US will pay despite Trump’s ban. Retrieved from: https://www.scmp.com/tech/big-tech/article/3088129/huaweis-patents-5g-means-us-will-pay-despite-trumps-ban
[5] Lore, M. (09 June 2020). Huawei’s patents won’t save it, says leading analyst. Light Reading. Retrieved from: https://www.lightreading.com/5g/huaweis-patents-wont-save-it-says-leading-analyst/a/d-id/761569
[6] Maizland, L and Chatzky, A. (12 February 2020). Huawei: China’s Controversial Tech Giant. Council on Foreign Relations. Retrieved from: www.cfr.org/backgrounder/huawei-chinas-controversial-tech-giant
[7] Gupta, R. (11 February 2020). Will the US Buy Nokia and Ericsson to Counter Huawei?. Market Realist. Retrieved from: https://marketrealist.com/2020/02/will-us-buy-nokia-ericsson-counter-huawei/
[8] Iwamota, K. (20 July 2020). Huawei 5G dominance threatened in Southeast Asia. Nikkei Asian Review. Retrieved from:
[9] Bloomberg. (09 July 2020). BT, Vodafone need 5 years to replace Huawei without ‘blackouts’. Retrieved from: https://www.scmp.com/tech/gear/article/3092551/bt-vodafone-need-5-years-replace-huawei-without-blackouts
[10] Barzic, G. (07 June 2019). Europe’s 5G to cost $62 billion more if Chinese vendors banned. Reuters. Retrieved from: https://www.reuters.com/article/us-huawei-europe-gsma-idUSKCN1T80Y3
[11] Suruga, T. and Ota, A. (16 July 2020). Huawei purge revives Japan’s 5G hopes, once thought dead. Asian Review. Retrieved from: https://asia.nikkei.com/Spotlight/5G-networks/Huawei-purge-revives-Japan-s-5G-hopes-once-thought-dead
[12] Roy, H. (03 August 2018). Tackling the cost of a 5G build. Accenture. https://www.accenture.com/us-en/insights/strategy/5g-network-build
[13] These organizations include (but not limited to):
a) O-RAN ALLIANCE (O-RAN). Founded by AT&T, China Mobile, Deutsche Telekom, NTT DOCOMO and Orange, the O-RAN Alliance was established as a German entity in August 2018. https://www.o-ran.org/
b) Open RAN Policy Coalition (Open RAN). Promoted by US government; includes 40 [non-Chinese] companies. Formed in May 2020. https://www.openranpolicy.org/about-us/
c) Software Defined Radio Access Network (SD-RAN) project. Create open source software platforms and multi-vendor solutions. Open Networking Foundation (ONF), AT&T, China Mobile, China Unicom, Deutsche Telekom (DT), Facebook, Google, Intel, NTT, Radisys and Sercomm. Formed August 2020.
d) Telecom Infra Project (TIP). Founded 2016. https://telecominfraproject.com/
[14] Morris, I. (19 March 2020). Rakuten turns 5G revolutionary as it nears world’s first open RAN launch. Light Reading. Retrieved from: https://www.lightreading.com/asia/rakuten-turns-5g-revolutionary-as-it-nears-worlds-first-open-ran-launch/d/d-id/758349
[15] Dano, M. (18 March 2020). Rakuten to sell mobile platform globally, likely targeting Dish. Retrieved from: https://www.lightreading.com/ai-automation/rakuten-to-sell-mobile-platform-globally-likely-targeting-dish/d/d-id/758282
[16] Lunden, I. (13 May 2020). Rakuten acquires Innoeye for its push into 5G and communications services.
TechCrunch. Retrieved from: https://techcrunch.com/2020/05/13/rakuten-acquires-innoeye-for-its-push-into-5g-and-communications-services/?guccounter=1
[17] Nuttall, C. (21 July 2020). Why investors jumped for Jio. Financial Times. Retrieved from: https://www.ft.com/content/d179f9a5-5c5f-45eb-9802-00033a1aaf61
[18] Dano, M. (26 February 2020). A year later, Rakuten’s mobile optimism remains undimmed. Retrieved from: https://www.lightreading.com/5g/a-year-later-rakutens-mobile-optimism-remains-undimmed/d/d-id/757773
[19] Das Gupta, S. (23 July 2020). 5G players brace for Reliance Jio challenge. Rediff. Retrieved from: https://www.rediff.com/business/report/tech-global-5g-players-brace-for-reliance-jio-challenge/20200723.htm
[20] Ernst, R. (08 July 2020). SpaceX Starlink, the Global Satellite Internet Program. Medium. Retrieved from: https://medium.com/@raymond.ernst/spacex-starlink-the-global-satellite-internet-program-e09c615f8332
