The UK's Decision to Use Huawei in its 5G Plan is All About Money

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Chinese technology mega-company Huawei will be one of the suppliers building the U.K.’s 5G networks. The decision follows lengthy delays, much indecision, and considerable pressure on Britain from the U.S. government to not use the firm’s telecom equipment at all.

Contents

5G is here, and it’s early!
If you’re not 5G-capable in 2020, do you even exist?
5G makes the money go round
Bad timing in the U.K.
What about using other suppliers, and what about the security?
Not security, but money

The decision is hardly a shock, and neither is the middle-ground stance the government has taken. Huawei is the world leader in 5G infrastructure, and has worked with the U.K. on its networks for 15 years. But what about the supposed security implications of using Huawei’s equipment, and the risk of angering U.S. President Donald Trump, who claims Huawei is a conduit for the Chinese government, and that including its equipment opens the door to spying and potentially even cyberattacks?

Well, what else exactly was the U.K. to do? 5G has become such a bloated, over-hyped money pit that to get left behind at this juncture would be costly in the long-term. The U.K.’s decision to use Huawei to build parts of its 5G networks is not only technologically sound, but also the result of massive financial pressure from all sides.

Huawei, 5G, the U.S., and the U.K.’s story here isn’t so much about tech or security as it is about money — a lot of money.

5G is here, and it’s early!

Have you heard about 5G? Of course you have — it’s everywhere. At CES the past three years, 5G was heralded as a transformative technology that will bind the world together in multiple, exciting ways. If you saw a new connected product, it was almost guaranteed that an eager executive would add, “and it’ll get even better/more exciting/have greater potential when 5G arrives,” before the end of the pitch.

You can buy 5G phones right now, if you really want to — at Mobile World Congress in February, we expect almost all manufacturers to announce 5G phones at even cheaper prices than ever before. Throughout 2019, cities around the world turned on a basic 5G connection for these phones, something that happened much earlier than anticipated. China activated its own 5G networks at the end of 2019 too, well ahead of the previous target of early 2020.

5G has arrived, whether or not you — or it are is really ready.

If you’re not 5G-capable in 2020, do you even exist?

Everyone is talking about 5G, so most every mobile company and government has to be involved in the latest generation of cellular internet or face becoming irrelevant (or bankrupt) in the biggest and most over-hyped tech race since, well, 4G. Processor manufacturer MediaTek is the perfect example of this. By its own admission, it missed out on 4G, and has no intention of doing the same with 5G. It has several 5G products already on its books, and is pushing hard into new markets, striking fresh deals with manufacturers. Qualcomm is similarly invested, and will evangelize 5G to the point where you assume a cult-like brainwashing has taken place.

It’s not surprising though, as all those 5G phones need MediaTek and Qualcomm’s chips. But for the chip and phone makers to be successful with 5G, there needs to be a network to support them, not just a patchy connection in select cities. At the same time, companies and governments need to convince the regular phone buyer that 5G matters, otherwise it’ll all be for nothing. We need to be persuaded it’s worth buying 5G products, and for that to start happening, a 5G network has to be in working order.

It’s estimated that 5G technology will generate $13.2 trillion in related sales globally by 2035, according to IHS Market’s research — a trillion more than forecast in 2017 due to the earlier than expected completion of the first consumer 5G networks. A delay in the rollout of 5G now, a report from Oxford Economics says, could cost the U.S. alone $21.9 billion in 2035, a bottom line that all governments are keeping in mind.

5G makes the money go round

The IHS Market report, while generated by IHS, was actually commissioned by Qualcomm, a company that most definitely wants everyone to know the earnings potential in 5G. Qualcomm spent $5.4 billion on research and development in 2019 alone, says database company Statista, and you can bet plenty of that was on 5G.

It’s not the only one spending big either. In 2018, Samsung committed to spending $22 billion over three years on 5G and artificial intelligence (A.I.). Ericsson has spent around $4 billion annually on R&D over the past years, and recently opened an R&D center with 300 employees in France that’s dedicated to 5G. Nokia spent $4.9 billion on R&D in 2017, and at the end of 2018, took out loans totaling $851 million to further push 5G R&D in Europe. ZTE spent $450 million in 5G R&D during the first three months of 2019 alone.

These are all massive numbers. But to generate that $13 trillion in revenue, it’s us who will need to go into our local carrier store and sign up for a 5G phone contract. CCS Insight predicts there will be a billion 5G connections in the world by 2023, and half of that number will be in China. With this amount of money invested and the cash at stake, is it any wonder nations and corporations are fighting so hard for a nugget of the purest 5G gold?

Bad timing in the U.K.

The Huawei situation couldn’t have come at a worse time in the U.K. In 2016, then-Chancellor Phillip Hammond said during the national budget announcement that the plan was to make the U.K. a world leader in 5G, and pledged to spend $1 billion in doing so. By not using Huawei equipment — the acknowledged leader in 5G network tech — the U.K.’s opportunity to be part of the stampede toward a 5G world grinds to a halt, and it would be another failed promise at a time when the newly elected government is asserting its power.

Research firm GlobalData said if the U.K. had forgone Huawei’s hardware, it would have set the U.K,’s 5G plans back years. We don’t need more years on pause, and the government certainly doesn’t need a 5G money loss on the books. It has dealt with Brexit for four years already, and recently faced a particularly turbulent election phase, meaning more delays to building its next-generation network would only worsen attempts to regain much-needed momentum.

Add in the fact that Huawei’s 5G equipment is usually more reasonably priced than equipment from the less advanced competition, and the choice was no choice at all.

What about using other suppliers, and what about the security?

The U.K. will, and does, use other suppliers. There are several companies producing 5G hardware for carriers to build networks. Huawei is the largest, and the most technologically advanced, but it’s also joined by Nokia, Ericsson, and a collection of others. All will be involved in the U.K.’s 5G infrastructure, with Huawei’s involvement capped at controlling 35% of the U.K.’s network market.

What about security? Malcolm Taylor, who previously worked as an intelligence officer at the Government Communications Headquarters (GCHQ) and is now director of cybersecurity at ITC Secure, explained in an editorial for GlobalData’s The Verdict site why security wasn’t as large a concern as it’s made out to be.

“Firstly, the U.K.’s security apparatus – quite possibly the most conservative and risk-averse of all the machineries of government – reported that the Huawei risk was manageable. Second, the mitigations used to enable that risk management must make Huawei one of the most scrutinized companies in the world. Third, there is no hard evidence of any espionage using Huawei technology globally, and Huawei senior figures have made this point again, and again, and again. I hear you, this is no surprise, but go back to number one; the U.K.’s security apparatus believes the risk can be managed. What more do we need?”

Network operators BT and Vodafone also say they have no evidence of a security risk — something Huawei has repeatedly said itself — and the respective CEOs sent a letter to the prime minister saying a ban was unnecessary. Naturally, a ban would financially affect the networks too, and not in a positive way.

Not security, but money

Security is always a concern, but the fuss over Huawei, China, and 5G is really about money and economic success. Former U.S. Congressman Mike Rogers wrote the following for CNN,:“It is crucial that the Trump administration and members of Congress work together to surpass China in the 5G race.” He now chairs the 5G lobby group 5G Action Now because he wants to “stress the importance of 5G for America’s security and economic future.” This piece by TechDirt tells you all you need to know about 5G Action Now, and how it fits into the scramble for 5G profits.

The Guardian’s Jeremy Warner sums up the motivations of the U.S. more bluntly than Rogers, writing: “Donald Trump’s America has no viable alternative to Huawei. Its position is entirely driven by fear of Chinese technological catch-up, which it has determined to thwart.”

In the U.K., according to sources quoted by Politico, Prime Minister Boris Johnson and top adviser Dominic Cummings say privately that “modern tech infrastructure is much more important to the pair’s vision for the U.K.’s future economy than trade with the U.S.,” referring to upcoming trade negotiations post-Brexit, and the decision to add Huawei to its 5G infrastructure plans. In the political space, succeeding in 5G now is of prime financial importance.

Billions and billions have been spent, and trillions are apparently at stake. Businesses and governments therefore need to ensure we are buying, and to do that, we need 5G phones and they need 5G networks. It appears everything that happens around 5G, especially when it sparks controversy, is entirely motivated by economic gain. The amount of money flowing into making 5G work, and the amount at stake, has made this a rather ruthless endeavor.

5G might change the world, but like all seismic events, there’s going to be a lot of shaking and screaming first.

All about the money: The U.K. had no choice but to use Huawei in its 5G networks