Diplomat author Marcy Kuo regularly interacts with subject matter experts, policy practitioners, and strategic thinkers around the world to gain diverse insights on U.S. Asia policy.Conversation with Jonathan Persson – Technology executive He is the author of Wireless Warfare: China’s Dangerous Domination of 5G and Our Counterattack (2021), number 378 in The Trans-Pacific View Insight Series.
Explain the factors behind China’s 5G dominance and its impact on the global communications industry.
In the communications equipment business, scale is always important. Innovation is certainly important, but for customers, and therefore service providers, the value comes from economies of scale more than great ideas. In wireless networking, Chinese telecommunications vendors do not develop breakthrough innovations because the best technology is generally adopted as the industry standard, which means everyone must have access to that technology at a reasonable price. This does not mean you will be disqualified.
Second, the reasons why customers choose vendors like Huawei are related to product readiness, cost, after-sales support, and the ability to quickly deploy and get networks functioning. All of this can be achieved with significant investment and a large deployment base. In other words, with good execution and significant investment, inferior innovation can be overcome.
As a result, one company suddenly rises from nowhere to the number one spot, and in about a decade becomes larger than all the previous leaders combined. That’s what Huawei did.
Assessing the effectiveness of the U.S. response to Chinese domination.
Huawei didn’t expect this to happen, and neither did anyone else. For a long time, he believed, the free nations of the world believed that China’s rise meant two things. One is that more consumers want homegrown goods, and the other is that there are better and cheaper suppliers to help produce raw materials. As a result, no one is holding China accountable for its violations, including theft of intellectual property, use of government programs to help win international projects, and general bullying of other companies around the world. Ta.
So when the US led a basic blacklist of China’s national champions Huawei and ZTE, this surprised the US and the US government. Although experts did not expect Europe to follow suit, U.S. intelligence experts and representatives of the U.S. Department of Commerce have done a great job of making the case for isolating and avoiding large Chinese vendors.
I think this has done much more damage to them than we know. After Huawei suddenly suffered a nearly 30% sales decline, the following year saw an increase in R&D, significant hiring, and a sustained positive net profit and profit, official figures show. The numbers are hard for me to believe. That doesn’t happen to a manufacturing company like Huawei, when sales suddenly plummet. I think they’re being crushed by these sanctions for now and living on Chinese Communist Party dollars, but they’re too big to fail for too many reasons.
Analyze the role of the Chinese government in wireless innovation.
According to many sources, the Chinese government has given out tens of billions of dollars in subsidies, which has allowed Huawei to invest heavily in research and development – inventing great solutions. Instead, find ways to reduce power consumption, improve reliability, develop multiple product lines, and downsize. Footprints. All the little things that actually lead to sales.
Furthermore, governments have contributed in many ways to the use of national intelligence agencies to secure access to other companies’ technologies, especially innovations that do not require a license. This has been adopted by Chinese products and helps them quickly gain market share without spending the years required to develop the technology in-house.
How are the industry’s leading players forming a new wireless ecosystem and competing with Huawei?
Huawei’s major competitors include established incumbents Nokia and Ericsson, as well as companies increasingly connected to wireless infrastructure. Samsung is probably the biggest player here, but other companies like Cisco, Dell, Fujitsu, and NEC have all been able to step up and play a role in places where they were previously excluded. As open RAN systems become more widespread, startups like Mavenir could become important, and Rakuten has had early success there. Giants like Google, Microsoft, and Apple may eventually disintermediate them all with new business models and technology approaches.
For incumbents Nokia and Ericsson, although they remain the last vendors capable of offering complete wireless communication systems, there is an inevitable transition away from the moribund model on which they were built and towards new architectures and technology approaches. must be accepted.
Assess the geopolitical risks of wireless wars and the consequences for the United States and like-minded countries if we lose these wars.
If Huawei had been able to deploy 5G solutions throughout developed countries instead of monopolizing developing countries as it currently does, it would have thoroughly compromised the national security of these countries and become a huge dominant force. He would have put himself in a position of power. When a nation relies on vendors for communications network structures, port operations, city safety and services, factory operations, etc., it becomes subject to the dictates of those who control the communications companies. In a typical situation, no company wants to be seen as a strategic threat to its customers. It would kill the company’s commercial operations. But everything changes when it’s not about commerce, or when commerce is just a means to an end.
Losing the war by relying on China to provide communications would be a fatal development, as China’s communications industry is more about geopolitical pressures and compromises than business. However, it is not enough to exclude Chinese companies from this important sector. If free countries cannot develop better solutions to what China offers to its companies and institutions, they will fall behind China in terms of productivity, security, and general health and welfare. I would probably take it. Finding better solutions to the wireless challenges facing the world is essential.
