China’s aggressive 5G push is likely to slow as the country’s telcos wait for Huawei after an executive order issued by the Trump Administration Wednesday effectively imposed a U.S. export ban on the Chinese tech giant, according to Jeffries analysts.
“Assuming the US export ban on Huawei remains unresolved for the next 12-24 months, we highly doubt if China would stick to its timetable of building 5G aggressively,” wrote Edison Lee, equity analyst for Jeffries Hong Kong, in a Thursday note to investors.
Huawei and affiliates would be required to obtain U.S. government approval to buy American tech components, something unlikely to happen and therefore “a big” setback to Huawei’s supply chain in both the U.S. and China, according to the analysts at the Wall Street firm.
Lee indicated the most important components from U.S. companies to Huawei are baseband chipsets for handsets form Qualcomm and Intel, semi-conductor for base stations, RF/power amplifier chipsets from Skyworks, Quorvo, Avago, and Macom, and optical components from Lumentum/Finisar.
When it comes to China’s 5G buildout, the analysts noted that Huawei has roughly 45 to 50 percent of the country’s telecom equipment market, and Chinese operators have also been heavily involved with Huawei in 5G trials and trial network builds.
The analysts expect don’t expect Chinese companies to abandon Huawei and instead rely on ZTE (which was subject to U.S export ban last year) and Datang Telecom for 5G buildout — the firm also ruled out reliance on telecom equipment vendors Nokia and Ericsson.
“Therefore, assuming that China can eventually negotiate with the US to help Huawei get out of ‘jail,’ China will very likely slow down its 5G push,” Lee wrote.
Huawei had previously been deemed a national security risk by the U.S. and the government has been urging allies to keep Huawei equipment out of 5G networks. Some have followed suit, but many in Europe have resisted a complete shutout of Huawei in next-generation networks. This in ability to convince allies not to use Huawei is one of the reasons Jeffries analysts believe the export ban decision was made, as well as the lack of progress in trade talks between the U.S. and China and the “potentially long time for its legal charges against Huawei to reach a final verdict.”
More about the executive order here.