• United States

Can Huawei survive, and what should customers do?

News Analysis
Jun 06, 20193 mins

Cut off from most western technology, Huawei might not be able to make a go outside of China, which could be trouble for western customers.

mwc huawei
Credit: Peter Sayer/IDG

Chinese IT hardware giant Huawei is in a very tough position now, cut off from most western technology partners following the Trump administration’s declaration of the firm as a national security risk. The question now becomes what do its customers do.

The Trump administration issued an order that effectively bars American firms from selling components and software to the company, and very quickly Huawei was cut off from Intel, ARM, Infineon, Samsung, and Google. The SD Association and Wi-Fi Alliance have also cut ties with Huawei.

However, Huawei got a temporary break last month when the Commerce Department gave the company a reprieve after it added Huawei to a list of companies it considered a national security risk. Instead, the department posted a notice to the Federal Register that it would grant 90-day permissions for transactions necessary to maintain and support existing cellular networks and handsets.

Charles King, principal analyst with Pund-IT, said the company can survive for now, but not if the rest of the world follows the U.S.’s lead.

“The bigger danger is whether President Trump and other members of his cabinet can convince U.S. allies and trading partners to participate in the ban. That’s reportedly been a subject of discussions during the President’s state visit to England this week. If Trump succeeds in persuading allies to participate in the ban, it would leave Huawei a shell of its former self,” King told me.

Rural telcos affected

Huawei primarily competes in the handset market and has come on very strong in recent years. But it also has a significant backend business and is especially popular with more rural telcos because its equipment is cheap (and some say it achieves that by being subsidized by the Chinese government).

As Zero Hedge noted, in the early 2000s, smaller, rural customers in states such as Nebraska, Wyoming, Montana, South Dakota, and Colorado were overlooked by networking equipment giants such as Cisco. Huawei was happy to step in and sell its cheaper routers, switches, and other telephone and internet infrastructure.

Today, up to 25% of rural wireless carriers use the company’s equipment, with Montana highly dependent upon it and Wyoming almost not at all.

And that can be problematic. If those carriers can no longer get access to firmware upgrades, or worse, are ordered to get rid of the hardware gear, things could get expensive for them.

“If they’re ordered to rip and replace their Huawei gear, the cost could run into hundreds of thousands of dollars for organizations that aren’t always well capitalized. Even if they were reimbursed by the U.S. government, it would likely impact other services and projects, including rolling out better broadband services,” said King.

What are the chances of a rip-and-replace? Well, Zero Hedge notes that Huawei equipment sits adjacent to fiber carrying nuclear and highly sensitive defense data to launch command sites and defense facilities located throughout those states. So, if the Trump administration truly believes Huawei is spying, they won’t want its gear anywhere near NORAD.

All of this begs the question of what Cisco will do because this is an opportunity to pick up customers it overlooked. In that regard, I have no answer. For now.

Andy Patrizio is a freelance journalist based in southern California who has covered the computer industry for 20 years and has built every x86 PC he’s ever owned, laptops not included.

The opinions expressed in this blog are those of the author and do not necessarily represent those of ITworld, Network World, its parent, subsidiary or affiliated companies.

More from this author