Heading into MWC Barcelona this year, Chinese equipment vendors Huawei and ZTE have a lot to prove after months of accusations and speculations that have escalated all the way up to some countries moving to ban the use of equipment from those vendors due to security concerns. And as operators from around the globe gather in Barcelona, Spain, next week, will the vendors reconcile these negative images or will it spell further trouble?
Mere weeks ahead of the conference, reports surfaced that the GSMA, which puts on the annual mega-show, was considering setting a crisis meeting with its members tied to the brewing issues, and as potential bans of its equipment threatened to set back operator’s 5G network rollouts by years.
However, in an email to SDxCentral, Gareth Davies, communications director for the GSMA, said that these reports were “not strictly true.” Davies noted that the meeting in question is regularly scheduled.
“Ahead of every MWC event the GSMA board members meet to discuss topics pertinent to the industry such as its industry programs, etc.,” Davies wrote, adding that he couldn’t yet share the agenda for the meeting as it hadn’t been finalized at the time of the response.
This report followed months of continued drama for both Huawei and ZTE. For Huawei it was fending off and denying concerns that the company’s telecommunications equipment could be used as a tool for spying by the Chinese government. It has also been accused by T-Mobile U.S. of IT theft, and of breaking sanctions by selling telecom equipment to Iran — something that ZTE was found guilty of.
For breaking those sanctions the U.S. government fined ZTE $900 million in 2017, which the vendor spent last year recovering from. Due to the fines and subsequent ban from selling its equipment in the U.S., ZTE slashed its bottom line by $1 billion during its mid-year 2018 earnings. And also similar to Huawei, ZTE has been accused of using its equipment for espionage.
“The geopolitics have not been kind to these Chinese infrastructure companies,” said Will Townsend, senior analyst at Moor Insights and Strategy.
Speculating About ZTE
In the weeks leading up to MWC Barcelona, ZTE appeared to be doing some damage control and image building surrounding 5G. Namely, the vendor published a number letters and interviews from its C-Suite executives.
In one, ZTE CTO Wang Xiyu refers to the vendor’s “leading position in 5G,” calling attention to its awareness of the market, customer requirements, and its technology leadership. He noted in another release that ZTE “expects to achieve win-win scenarios with its partners backed up with its leadership in 5G innovations.”
In another, ZTE Chief Legal Office Spencer Shen detailed ZTE’s position on compliance. Shen said, “ ZTE’s strategic path will be divided into recovery period, development period, and transcendence period. ZTE remains committed to abiding by compliance operations, creating value through compliance, and adhering to the principle of ‘respecting rules, keeping an open mind, and doing things professionally.’” He also noted that the company has strengthened and changed its compliance system since receiving the fine in 2018.
Some analysts, however, remain unsure if ZTE will actually be able to recover and take a 5G leadership role. “It’s going to be very tough for them to recover: they mainly focus on infrastructure, they do some devices, they don’t really have the velocity and the momentum that Huawei has,” said Townsend. “ZTE, they paid the penalty, they are gonna do the best they can do to survive, but I think it is going to be very tough for them given the increased competition that we’re seeing from Samsung now.”
Townsend noted that unless the vendor unveils a device that is “earth-shattering” at MWC, he doesn’t see a lot of potential for recovery.
Daryl Schoolar, practice leader of service provider technology at Ovum, was more positive on ZTE’s chances of survival. He said that it, as well as Huawei, will focus on the technical achievements of their mobile solutions. This includes progress by both vendors on massive multiple-input, multiple-output (MIMO), 5G core networks, and standalone 5G New Radio (NR).
ZTE’s involvement at the show is set to be much smaller than Huawei’s, with only one stand (to Huawei’s twelve). In addition, Jeff Ye, vice president of product marketing and strategy for ZTE, will also be participating in a 5G Summit event. There have been no hints as to what ZTE will announce at the show.
Speculating About Huawei
While one can only speculate what’s in store for Huawei at MWC, there are a few things known for certain.
One, Huawei will have large physical presence. Similar to past years, the vendor will have stands in nearly every hall, and is a sponsor of the GSMA Innovation City. Huawei is also a sponsor of the MWC Barcelona show itself and is up for 25 Global Mobile Awards.
Two, Huawei is set to make a number of announcements. Huawei Chairman Guo Ping will lead a keynote on Tuesday at the show discussing how technology is creating a connected world. According to the official show preview from the GSMA, this session will feature “a huge unveiling sure to make the international news.”
Third, the vendor is leading two other sessions at the event: one on Industry 4.0 and another on its 5G product launches. Some of the releases listed as part of its launch are a unified 5G transport network; fully-converged and distributed 5G cloud storage; a cloud stack solution; an all-flash storage product; and a WiFi 6 commercial blue book release.
“I think we’ll see some strong innovation from Huawei,” said Townsend, referring largely to 5G infrastructure. He noted that Huawei has a lot of momentum and growth that could lessen the blow of its surrounding issues.
“Huawei, setting the geo-political debate aside — look at their growth. They’ll be over $100 billion this year, they invest significantly in research and development, and they have three business units,” Townsend said, meaning that should the geo-political side impact one of its businesses, it has two other successful businesses with momentum to fall back on. “I don’t think they’re going to fold tomorrow.”
Roger Entner, the founder and lead analyst at Recon Analytics, said that Huawei will continue as normal at the conference. As to what the vendor will focus on at the conference, he said low-price, high-quality 5G gear — including potentially a new handset.
Can MWC Change Anything?
While the conference could be a stepping ground to making amends, it seems unlikely that the event will seismically shift either vendors’ position in the global geopolitical sphere.
Eventually, both companies will have to speak for some of the claims circulating their international presence, but MWC might not be the time nor place.
“I don’t think the conference by itself will change either companies image,” said Schoolar. “The conference can give both companies a chance to take better control of the conversation and defend themselves.”
Schoolar added that the conference will be a good opportunity to appeal directly to government officials; lobby decision makers, press, and analysts; as well as reassure their existing operator partners to stick with the vendors. “It is important they get those operators to advocate on the behalf of the two vendors,” Schoolar said.
Entner doesn’t think that either of the vendors will, or even should, address the security concerns surrounding them at MWC. “There’s no upside,” he said. “They will continue down their march of providing now-a-days high quality products at very low prices.”
The reason being that both vendors are “extremely successful everywhere besides the United States,” according to Entner. “Mobile World Congress is for the world. The U.S. is only a very small part and not very well represented. And so they will continue to operate.”
Under this premise, innovation, not their speculated threat to society, will be at the center of both companies’ MWC Barcelona presence.
“I don’t think they’re all the sudden going to be proactive and reveal anything to earth shattering at the show. I think it will be very product-focused and they’re going to keep their heads down,” said Townsend of the vendors. “I don’t think the show is going to be a venue or a pulpit for them to comment on this.” “This” referring to the claims of espionage and other concerns.