How 5G network builders are competing with Huawei in Asia

Network builders say sales are not just about cost.

Huawei ban: Winners, losers, and what's at stake (a whole lot) ZDNet's Jason Cipriani and Jason Perlow talk with Karen Roby about how the security and trade brouhaha impacts everything from the future of regional carriers and the bottom lines of tech giants to 5G's prospects and consumer's pocketbooks. Read more: https://zd.net/2WzVRbq

Mobile infrastructure firms believe that over the next few years, LTE networks in Asia will be replaced with higher-capacity, lower-latency 5G networks. These 5G networks will be the new backend for applications ranging from mobile e-sports, autonomous vehicle communications, to virtually-controlled robotic surgeries.

But if companies want a piece of Asia's developing markets, Samsung, ZTE, Nokia, Ericsson, and other equipment providers will need to compete with the low-cost offerings of Huawei.

In terms of commercial 5G deals globally, only Finland's Nokia and Sweden's Ericsson come close to the Shenzen-based firm. Huawei has publicly announced 40 deals compared to Nokia's 38 and Ericsson's 18. But Huawei spent about $15 billion on R&D in 2018, significantly more than the combined $9 billion spent by Nokia and Ericsson.

"This massive spending gives Huawei the capacity to make lower cost chips and routers," Subramanian Venkatraman, an analyst at Arizona-based MTN Consulting, told ZDNet in an email conversation.

"This is one of the reasons European operators have been reluctant to completely ban Huawei's kit."

Nokia and Ericsson told ZDNet that their key to competing in Asia would be partnerships with device makers and operators, as well as their proven track records.

Also see: The winner in the war on Huawei is Samsung

Kai Sahala, head of Nokia's Asia Pacific and Japan 5G Sales, told ZDNet that 5G spectrum availability in Asia is delaying development outside of the main Japanese, South Korean and Chinese markets, but that his firm is seeing opportunity in Vietnam, Malaysia, the Philippines, Indonesia, Thailand, and Singapore.

"We are competing with all of the vendors, including Huawei, in many markets, and we have been successful," he said.

"That tells that there's something in our position, and our 5G offering especially."

Sahala says the firm is taking several approaches to market for countries in the Asia region.

"I don't think these things are negotiated solely on price, [but also] quality, reliability, openness of interfaces, things like security and the platforms that we can offer," he said.

Although he admits there have been stumbling blocks, such as the initial spotty performance and delays for the 5G network rollout in South Korea.

"In the big picture, it's really about the long-term performance," he said. "Performance by independent studies [of our 4G networks] is really outstanding".

Erik Kruse, an Internet of Things Ecosystem Partner Manager at Ericsson, told ZDNet his firm was competing on 5G with cost, performance, and reliability.

Some see the recent US restrictions on Huawei, which prevents US firms from collaborating or supplying components to Huawei, as a factor for competition.

Read: Now Arm tells staff to stop working with Huawei

Multiple sources have said the restrictions have forced Huawei to place some projects as "pending" while also "slowing down" others, such as those in its server business. One said Huawei had already ordered a large amount of components in the first quarter of 2019, giving it a temporary buffer from U.S. supply chain availability issues.

But Steve Cheng, Vice President and General Manager of Taiwan's Quanta Computer, told ZDNet that it's difficult to compete with Huawei's low costs, and he believes US restrictions will give other players a better chance to develop the 5G market.

Sahala said Nokia has a "neutral" position on the restrictions, as they are decided by governments, but is continuing to keep an eye on the developing situation. Kruse and a spokesperson for Ericsson, meanwhile, declined to comment on the Huawei restrictions.

Ultimately, will Huawei come out as a front-runner?

Caroline Chan, Data Center Group vice president and 5G infrastructure division general manager at Intel, told ZDNet that the US firm would comply with the US government's order on Huawei -- a "tricky situation" -- but said that there's no clear front-runner for 5G in Asia as yet.

"Everybody is realising there is a huge potential to get there," she said. "The question is investment priority and how aggressive and courageous you are."

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