America has limited options on 5G to fend off China’s Huawei challenge

A Huawei logo on display at MWC Shanghai in June 2019.

Arjun Kharpal | CNBC

Recent suggestions from Washington have veered from the need to take controlling stakes in Ericsson and Nokia, Huawei’s only two major rivals, to trying to back rival 5G architecture.

It’s not true that the U.S. doesn’t have a dog in the 5G fight. Companies like Qualcomm and Intel will be a key part of chips in 5G, for example. But it is true that the U.S. doesn’t have a player that can offer an end-to-end 5G setup like Huawei can.

Any attempt to try to set up a Huawei rival in 5G is just too late.

Telecommunications companies, particularly in Europe, are still working out the business case for 5G, a massive network upgrade that won’t be cheap.

One of the advantages that Huawei has reportedly had is on cost, which experts have said comes from Chinese state help. Reports of Chinese banks offering favorable financing deals for Huawei have also been used to back up this claim. On top of this, Huawei holds key patents for 5G and has been one of the biggest players in helping to set the so-called technical standards over the past decade. That means it will play a huge role in how 5G looks across the world moving forward — whether Washington likes it or not.

In light of this, the U.S. options are limited when it comes to competing with Huawei and getting countries not to use the Chinese firm’s gear. Its best bet right now is likely to earmark a lot of money that can be used to bring together companies that already exist — some of which won’t be American — and then offer nations a package that can compete with Huawei.

For example, it could try to create an alliance between key U.S. entities like Qualcomm and Cisco, some other foreign vendors like Samsung, Nokia and Ericsson, and then backed by U.S. state funding, offer a country a complete 5G package that excludes Huawei.

That may be a near-term fix for the 5G era, but fundamentally the U.S. will need to figure out what role it wants to play in whatever technology comes next.

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