How the EU's Potential Ban on Huawei Could Reshape the Telecom Industry

In response to EU member states lack of action against Chinese-sourced hardware in critical infrastructure, the EU is now considering a sweeping ban to protect states against high-risk companies. 

The race to dominate the 5G landscape is more than just a competition for faster internet speeds. It's a global power struggle, with nations vying for control over the next generation of wireless technology that will power everything from smartphones to self-driving cars. In this context, the role of Chinese companies like Huawei becomes even more significant and contentious. 

5G, or fifth-generation technology, promises to revolutionize our world with its unprecedented speed and capacity. It's not just about faster internet; 5G will enable a new era of technological advancements, from autonomous vehicles and smart cities to advanced robotics and artificial intelligence. The stakes are high, and the control over this technology has become a focal point of geopolitical tensions.

What challenges do Huawei and other Chinese companies present, why is the EU having trouble with its member states, and what does this mean for the future of Huawei in the EU?

What challenges do Huawei and other Chinese companies present?

Of all modern infrastructure that exists, mobile networks are arguably the most important due to their ability to support wireless communication between any two connected devices (everything from emergency services to everyday conversations), their widespread coverage, and the ability to support emerging industries such as IoT and IIoT. In fact, it is widely believed that future cellular networks could entirely replace the vast majority of internet connections, eliminating the need for buried cables to every individual household and thereby reducing installation costs. 

The latest mobile technology, 5G, has thus far proven to be a very capable technology, but while it offers significantly greater bandwidth compared to its predecessors, its rollout has been somewhat slow. So far, 5G mostly exists in built-up areas such as city centres, and even then, only devices capable of supporting 5G can utilise the network. 

To help accelerate the implementation of 5G, many nations have turned to technology giants such as Huawei, who not only have proven 5G hardware but is also 20% cheaper compared to its Western counterparts. This has resulted in Chinese hardware becoming predominant in Western cellular networks, something which governments around the world are now actively trying to undo. But why exactly is Chinese hardware in Western nations a danger?

National Security Risks

One of the primary dangers associated with using Chinese equipment lies in the potential compromise of national security. Western governments and intelligence agencies worry that Chinese companies may have close ties with the Chinese government and be subject to its influence and control. This raises concerns about the potential presence of backdoors, vulnerabilities, or malicious codes within the equipment that could be exploited for unauthorised surveillance, cyber espionage, or cyberattacks.

Cybersecurity Threats

Chinese equipment has been accused of being susceptible to cybersecurity threats due to inadequate security protocols or intentional design flaws. The integration of compromised or substandard equipment within Western cellular networks could lead to increased vulnerabilities, making them attractive targets for cybercriminals or state-sponsored hackers. The potential consequences include unauthorised access to personal data, disruption of services, intellectual property theft, or even the compromise of critical infrastructure, such as power grids or transportation systems.

Data Privacy Concerns

Protecting data privacy is of paramount importance, and the use of Chinese equipment raises valid concerns regarding the handling and protection of personal data. Chinese companies are subject to Chinese laws, including the National Intelligence Law, which mandates cooperation with state intelligence agencies. This raises worries about the potential for unauthorised surveillance or data breaches, compromising the privacy rights of individuals and businesses. The vast amount of data transmitted through cellular networks makes them attractive targets, further emphasising the need for stringent privacy safeguards.

Another significant concern is the potential for Chinese companies to be forced to cooperate with Chinese intelligence agencies. According to the 2017 National Intelligence Law in China, Chinese companies must "support, assist, and cooperate with" China's intelligence-gathering authorities. This law could potentially force companies like Huawei to hand over sensitive data to the Chinese government, raising serious security concerns. As reported by the Council on Foreign Relations, this law has raised additional concerns in the United States and other countries about the potential for Chinese companies to be used for espionage. This underscores the need for stringent safeguards to protect the data transmitted through cellular networks 

Lack of Transparency and Accountability

Another danger associated with Chinese equipment is the lack of transparency and accountability in the supply chain. The opaque nature of Chinese companies and their close relationship with the government make it difficult to ascertain the integrity and security of the equipment. Trustworthy supply chains are crucial to ensure that the components and software used in cellular infrastructure are free from tampering or unauthorised access. The absence of transparency increases the difficulty of verifying the equipment’s trustworthiness, potentially exposing Western nations to unknown risks.

EU considering a mandatory ban on Huawei cellular equipment

While major Western nations such as the US and UK have already introduced numerous bans against Chinese equipment in cellular infrastructure, numerous EU member states continue to utilise systems provided by companies such as Huawei. In fact, it is currently estimated that only one-third of EU member states have taken action to eliminate Chinese hardware from critical infrastructure, despite having all member states unanimously agreeing in 2020 that Chinese hardware presents a threat. 

In light of this inaction, the EU is now considering a mandatory ban on Huawei and other Chinese tech giants from being used in critical cellular infrastructure. However, even if a ban is decided tomorrow, it can take years for legislation to be made law, and this will give Chinese suppliers plenty of time to continue integrating systems into EU member states. At the same time, it is possible for individual member states to veto any new legislation that may impact its ability to roll out 5G.

The EU's stance on Huawei is not just a reflection of security concerns but also a manifestation of the broader geopolitical tensions between the West and China. The EU, like many Western entities, is grappling with the challenge of balancing economic opportunities with potential security risks. The decision to ban Huawei is not just about technology; it's a political statement, signalling the EU's alignment with the broader Western concerns about China's growing technological prowess. 

 Vilnius, Lithuania - November 21, 2017: The headquarters of Huawei is located in Vilnius. 

According to a report by Reuters, the EU's consideration of a ban on Huawei stems from concerns about the company's close ties to the Chinese government and the potential for its equipment to be used for espionage. The report cites a lack of transparency in Huawei's operations and the potential for its equipment to be used for cyberattacks as key concerns. 

In response to a potential ban, Huawei stated that it has never been convicted of crimes relating to intellectual property theft, suggesting that it should be allowed to supply critical infrastructure to Western nations. While this may be true, there is plenty of evidence showing how many major Chinese companies work closely with the Chinese government, including the fact that the top ten biggest companies in China are state-owned.

 In a statement to Reuters, a representative from Huawei argued, 'We have always maintained a transparent and open approach to our operations. Our technology is secure and we have never been found guilty of intellectual property theft.' However, critics remain unconvinced. As one cybersecurity expert put it, 'The risks associated with Huawei's involvement in critical infrastructure are too great to ignore. 

As an electronic engineer with years of experience in the field, I've seen firsthand the rapid evolution of mobile technology and the increasing influence of Chinese tech giants like Huawei. The potential ban by the EU could significantly reshape the landscape of the telecom industry, not just in Europe but globally. It's a complex issue that requires careful consideration of both the security risks and the potential impact on the development and deployment of 5G technology. 

What does this mean for the future of Chinese companies in the EU?

If a ban by the EU does come into force, then the number of countries that China can do business with will significantly drop. However, China would not just be losing access to customers but the last of the major Western nations such as Germany, France, and Italy. Given that when such a ban is introduced, older Chinese hardware will eventually be removed, the ability for China to launch cyberattacks and have backdoor access to critical infrastructure will be seriously diminished.

The potential ban could have far-reaching implications. In the short term, it could disrupt the rollout of 5G networks in the EU, given Huawei's significant role in this area. In the long term, it could reshape the global tech landscape, potentially giving rise to new players in the 5G space. It could also escalate tensions between the West and China, potentially leading to a technological 'Cold War'. 

These concerns are not unfounded. A report from the Financial Times highlighted the potential risks associated with using Chinese hardware in Western cellular networks. The report stated, 'There is a significant risk of backdoors and other vulnerabilities being built into the equipment, which could be exploited for cyber espionage or cyberattacks. 

It may be true that some Chinese companies refuse to work with their government, and it may be true that Huawei doesn’t allow the Chinese government to have access to its hardware, but when considering the history of China, this is highly unlikely. As such, governments around the world must bring in legislation and controls to ensure that the future of cellular infrastructure isn’t at the mercy of the Chinese government.