Huawei 5G removal to cost £2bn

14 July 2020

The UK has committed to remove all Huawei equipment from its 5G network by 2027 following new advice from the National Cyber Security Centre, culture secretary Oliver Dowden has told MPs.

Telecoms operators will be banned from buying any new 5G equipment from Chinese firm Huawei from 31 December 2020, following on from sanctions imposed by the US government.

Dowden said the move would mean a “cumulative delay of 5G rollout by two to three years and costs of up to £2bn”. 

“Today’s decision to ban the procurement of new Huawei 5G equipment from the end of this year will delay rollout by a further year and will add up to half a billion to the costs,” Dowden said.

“Requiring operators, in addition, to remove Huawei equipment from their 5G networks by 2027 will add hundreds of millions to the cost and further delay rollout.”

The move comes after the UK announced high-risk vendors such as Huawei would be restricted and their use in non-sensitive parts of the network capped at 35% earlier this year. 

Countries around the world had become “dangerously reliant” on too few vendors, Dowden said, adding the UK government’s diversification strategy would focus on three core elements to drive competition and innovation, and deliver greater resilience across the UK’s networks.

The strategy will focus on securing the supply chains of the UK’s incumbent, non-high-risk suppliers, bringing new scale vendors into the UK market and building partnerships between operators and vendors so operators using multiple vendors in a single network will become the standard across the industry.

Huawei said the move was “bad news for anyone in the UK with a mobile phone” and “threatens to move Britain into the digital slow lane, push up bills and deepen the digital divide”. 

Earlier this year, BT estimated the UK government’s decision to restrict the use of high-risk vendors” in the 5G network would cost it around £500m over the next five years. 

Meanwhile, consultancy Verisk Maplecroft said supply vulnerability during Covid-19 has accelerated firms efforts to diversify their supply chains outside China.

Analysts said the lockdown in China in the first quarter of the year highlighted the problem with inflexibility in the global supply chain, and in quarter two China continued to feel the pressure of the global slowdown as consumers were spending less than before. 

“It is doubtful whether the Chinese manufacturing sector can orchestrate a recovery purely on its terms. Multinational companies are facing a challenging choice between self-preservation and supplier solvency,” it said. 

Countries with lower operational costs such as Vietnam, Thailand, India and Mexico are set to be the key beneficiaries.

However, analysts do not expect “a mad rush out of China” as many manufacturers are “in China for China” and the country will remain a key production base for domestic consumers.

“The increasing need for supply chain diversification does not necessarily mean relocating the entire business outside China at once. Instead, it is more about adopting a “China plus one” strategy to structurally reduce over-reliance on China and to move part of the supply chain outside of the country,” Verisk Maplecroft said.

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