Huawei arrest marks escalation in the U.S.–China fight over 5G

The U.S.-directed arrest of Huawei CFO Meng Wanzhou in Canada sounds an alarm for the increasingly contentious dynamic between China and the U.S.

Why it matters: When it comes to 5G, Huawei is the fastest horse in a thinning race, with potential to gain a monopoly in the next decade. But the U.S. has now launched a global campaign against the company without a serious domestic alternative for 5G infrastructure.

Background: The largest supplier of telecommunications and internet equipment globally, Huawei sells more smartphones than Apple, employs twice as many people as Google, and leads the world in 5G technology development.

● Of the top 4 telecoms equipment brands, 2 are Chinese and none are American.

● Although Huawei is banned from U.S. 5G networks, rural American markets often depend on the company’s equipment.

The arrest comes on the heels of a broader U.S. effort to undermine Huawei's influence, in the form of a lobbying campaign to persuade other governments — including those of Germany, Italy and Japan — to drop the firm, offering potential payment as an incentive. As U.S.-China ties grow increasingly strained, the Trump administration may consider a stricter ban on the company.

● AT&T execs have said Huawei was 70% cheaper than competing suppliers. Excluding the Chinese giant amounts to a tax on domestic telecoms that will cost the biggest players billions.

● For a quarter of rural wireless carriers, dropping Huawei would incur tens of millions in switching costs. And it would take a decade to implement the change.

What's next: The U.S. now has to decide what it's willing to do to prevent a company with tight ties to China's NSA-equivalent from owning the network that delivers 5G to Americans. If Huawei is able to deliver 5G to other nations years before and for a cheaper price than U.S. alternatives, few, if any, countries will wait.

Graham Allison is the former director of Harvard Kennedy School’s Belfer Center for Science and International Affairs.