Huawei’s Troubles Are A Big Opportunity For Ericsson And Nokia
The Chinese supplier’s supremacy is being challenged by its Nordic rivals.
Over the past two decades, China’s Huawei Technologies Co. has come to dominate the global telecom equipment market, winning contracts with a mix of sophisticated technology and attractive prices. Its rise squeezed Europe’s Nokia Oyj and Ericsson AB, which responded by cutting jobs and making acquisitions. Now, with Huawei at the center of a U.S.-China trade war, the tide is turning.
Nokia and Ericsson—fierce rivals themselves—have recently wrested notable long-term deals from Huawei to build 5G wireless networks, to enable everything from autonomous cars to robot surgery. Analysts say more could come their way as Huawei grapples with a U.S. export ban and restrictions from other governments concerned that its equipment could enable Chinese espionage.
“Huawei will, for the foreseeable future, face a broader cloud of suspicion,” said John Butler, an analyst at Bloomberg Intelligence in New York. “Nokia and Ericsson are well positioned to benefit.”
In May, the European companies both won 5G contracts from SoftBank Group Corp.’s Japanese telecom unit, replacing Huawei and Chinese peer ZTE Corp. Ericsson signed a similar pact in March with Denmark’s biggest phone company, TDC A/S, which had worked with Huawei since 2013 to modernize and manage its network.
Other carriers, expecting government curbs on Huawei, have started removing its equipment from sensitive parts of their systems. BT Group Plc is taking Huawei out of its network core, and Vodafone Group Plc has suspended core equipment purchases from Huawei for its European networks. Deutsche Telekom AG, which has Huawei throughout its 4G system, is re-evaluating its purchasing strategy.
As dozens of phone companies—including those in Canada, Germany and France—plan to choose 5G suppliers in the coming months, Cisco Systems Inc. and Samsung Electronics Co. are also vying for deals. But the key beneficiaries of Huawei’s difficulties are likely to be the two Europeans, which compete directly with the Chinese company in supplying radio-access network equipment.
Since last year, the Trump administration has pushed allies to bar Huawei from 5G, citing risks about state spying—allegations the company has denied. The move in May to block Huawei’s access to U.S. suppliers escalated the campaign. The company’s founder, Ren Zhengfei, now predicts the U.S. sanctions will cut its revenue by $30 billion over the coming two years.
Outside the U.S., security concerns have led Australia, Japan and Taiwan to bar Huawei from 5G systems. The Chinese company also risks losing meaningful work in Europe and emerging markets where countries could follow with their own limits, according to Bloomberg Intelligence.