Three aspects of Beijing’s playbook are particularly important: firms-until it effectively counters Beijing’s market distortions. The United States cannot succeed in bringing new competition to this market-and new opportunities for U.S.
Huawei certainly made good decisions along the way, but it owes its rise to Chinese industrial policies that have suppressed global competition for nearly two decades. observers appear to assume Huawei is a naturally strong competitor that gained its dominant position through good business strategy. Congress is already taking steps to support the shift toward a more diverse and interoperable equipment market, the United States has not yet taken on China’s market-distorting industrial policies. firms will have new opportunities to enter the market, and it will be much harder for Beijing to suppress competition and maintain Huawei’s dominant position. If the mobile network equipment market becomes truly interoperable, it will no longer be an oligopoly. Mobile telecom operators should be able to do the same, and pressure is growing to move the market in this direction. For example, in the personal computing market, buyers previously had to buy their desktop, monitor, and printer from the same vendor, but today they can mix and match. This market is overdue for a shift to interoperability. Network equipment is a single-vendor market: When an operator purchases equipment from one vendor, it cannot mix in technology from other companies. The shift from fourth- to fifth-generation mobile telecommunications creates an opportunity for the United States not only to tackle China’s market-distorting industrial policies but also to help U.S. If the United States can successfully counter those policies to make this market more competitive, that will make the security side of the 5G challenge much easier to solve.
Thus far, the United States has largely overlooked the market-distorting industrial policies that Beijing uses to make Huawei the global front-runner. But the cost associated with choosing an alternative vendor (Ericsson, Nokia, or Samsung) and forgoing the lucrative incentives Beijing offers to Huawei’s customers are immediate and measurable.
Second, Beijing deploys powerful industrial policies to make Huawei equipment cheaper to deploy than the three alternatives.įor the telecom companies making network equipment purchases-and the national governments who regulate them-the security risks associated with Huawei equipment are theoretical and hard to quantify. First, the mobile network equipment market is an oligopoly with just four major vendors to choose from-none of which is a U.S.