January 22, 2020

Europe feels the squeeze over Huawei

European countries are caught in the middle of dueling pressure campaigns from the U.S. and China over whether to let equipment made by Chinese manufacturer Huawei into their 5G networks.

Why it matters: It's a "damned if you do, damned if you don't" choice that could leave Europe alienating a major trading partner either way.

Driving the news:

● Germany is equivocating, with China threatening to close off a key market for German auto exports if the country blocks out Huawei, while the U.S. is exerting pressure of its own. A German decision is expected soon, but for now, Germany and others in Europe are offering highly ambiguous statements.

● Rep. Jim Banks (R-Ind.) on Tuesday introduced a bill that would prevent U.S. intelligence-sharing with any country that uses Huawei gear to help build its 5G network.

● Huawei CEO Ren Zhengfei spoke in Davos on Tuesday, aiming to downplay the threat his company poses and, at the same time, insist that the company is fully prepared to withstand any further U.S. "attacks" on its business.

● The company is already largely prohibited from doing new business in the U.S. and faces severe limits on using U.S. components and services.

Background: Huawei is in the spotlight for a variety of reasons.

● First, security insiders and industry experts are concerned that Huawei equipment might be compromised by the Chinese government.

● Second, Huawei has become a flashpoint in the broader U.S.-China trade talks, as both sides seek a favorable deal.

● Huawei executives have urged the U.S. not to conflate the two issues and to mitigate any security risks through a set of rules.

What they're saying: Even as it's been drawn into broader political battles, Huawei has made considerable technical progress, according to one tech executive.

● Siemens CEO Joe Kaeser said at a Davos panel this week that his company had tested gear from all the 5G equipment vendors and found Huawei had a technological edge: "Whether we like it or not, they are a year or two ahead."

● That's a bold finding. Historically, Huawei's strength has been offering telecom gear at a lower cost than comparable rivals.

● But Ericsson CTO Erik Ekudden in an interview with Axios touted his own company as far ahead of the competition when it comes to pure 5G technology.

Yes, but: Ekudden said that, regardless of who's winning the tech race on 5G, uncertainty over the rules of the 5G road has harmed business.

● "One thing people may not realize is that, in some cases, the geopolitics are just slowing down 5G development as a whole, unfortunately," he said.

The big picture: U.S.-China tensions and the emergence of 5G have been key topics at this week's World Economic Forum. Both issues affect nearly every country and company.

Meanwhile: A key court hearing is taking place this week in Canada, from which the U.S. is seeking to have Huawei CFO Meng Wanzhou (the daughter of CEO Zhengfei) extradited to face charges.