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Thursday, June 25, 2020 12:09:45 PM
The pandemic has complicated an already knotty planning process. The White House postponed a planned April 1 meeting on 5G technology with Mr. Trump and executives from U.S. wireless carriers, equipment makers and major tech companies including Dell Technologies Inc., Intel Corp., and Microsoft Corp. after the virus shut down most travel.
Administration officials have touted progress over the past year in spurring the rollout of faster 5G networks in the U.S., by speeding up auctions of airwave licenses and enacting regulatory changes to make it easier to install equipment.
"Our governmentwide project here in the Trump administration is very, very strong," National Economic Council Director Larry Kudlow said, adding that a spate of major 5G contracts awarded to European suppliers in recent weeks shows that the market tide is turning against China.
Huawei is the world's top seller of telecommunications gear, with equipment in cellphone networks from Asia to Germany. The Chinese company captured 28% of global spending on telecom equipment in the first quarter of this year, according to market researcher Dell'Oro Group. Huawei is able to offer its products at lower prices than rivals with support from the Chinese government, The Wall Street Journal has reported.
U.S. suppliers are still too small to compete with Huawei, which means large wireless carriers unwilling to buy Chinese equipment remain reliant on three international suppliers: Ericsson, Nokia and Samsung Electronics Co.
"For the first time in modern history, the United States has not been the leader in an emerging wave of critical technology," warns a paper that circulated in the White House, written late last year by telecom experts including former National Aeronautics and Space Administration boss Daniel Goldin and former Nokia technology executive Hossein Moiin.
The group aims to create a "US-flagged" supplier that could fill the gap left open by U.S. champions that years ago were acquired, like Lucent Technologies, or disappeared.
Earlier this year, a pro-buyout group pitched the idea of a government-supported consortium investing directly in Nokia or Ericsson to administration and congressional officials, according to people familiar with the matter. The proposal had support from a group of private-equity investors led by Cerberus Capital Management LP but stalled in recent weeks as the equipment makers' stock prices rose, the people said. A Cerberus spokesman didn't respond to requests for comment.
Attorney General William Barr endorsed the idea of American public or private-sector ownership of the European suppliers in a February speech, saying it would create "a more formidable competitor and eliminate concerns over its staying power."
The attorney general later promoted the idea of "integrated open networks," a concept that allows cellphone companies to mix and match network components from different companies. Today's carriers generally buy bundles of software and equipment from one supplier for specific cities, stunting competition.
A Justice Department spokeswoman declined to comment further.
Other companies have closed ranks behind the Open RAN Policy Coalition, a new group that advocates for competition in cell-tower equipment. The group, led by wireless carrier AT&T, includes several U.S. software companies seeking a foothold in wireless networks, as well as more established players, including Nokia.
"Some see this as an opportunity to facilitate the creation of an industrial base inside the United States," said Brian Hendricks, Nokia's(NOK) policy chief for the Americas. "The U.S. has been out of the game for a while."
Mr. Hendricks said the Finnish company's U.S. research and manufacturing assets will play a role in the future supply chain but acknowledged more competition is inevitable.
Ericsson executives have said they don't expect to join the policy coalition. The Swedish supplier's technology chief, Erik Ekudden, said governments shouldn't interfere with technical work that the private sector is well equipped to handle.
Samsung strategy executive Alok Shah said the South Korean technology giant already manufactures some 5G components in the U.S., including cellular base station chips made at an Austin, Texas, factory.
An AT&T spokeswoman said a more diverse and secure supply chain is a company priority.
Large U.S. wireless carriers have been dissuaded from buying Huawei equipment since a House committee in 2012 named the company a national-security threat. At the time, the panel said equipment from Huawei and Chinese rival ZTE Corp. could be used to spy or disrupt U.S. communications, allegations the companies deny.
That has channeled almost all U.S. wireless business to Nokia, Ericsson and Samsung. Still, many wireless executives are concerned about the long-term health of Nokia and Ericsson, which have spent years trying to restructure their operations. Nokia halted its dividend last year and in March said its CEO is stepping down. Ericsson has returned to profitability after years of restructuring.
Without adequate competition, some China hawks and U.S. telecom executives fear Huawei's reach within global telecom networks would become irreversible.
Huawei executive Vincent Pang said in a February interview that starting a new cellular-equipment maker from scratch is easier said than done. "In 5G, you don't just invest $6 billion and you're there," he said. "It would take years. So maybe the fastest way would be to buy from existing suppliers."
Cisco Chief Executive Chuck Robbins discussed a potential deal to buy all or part of a European equipment firm last year with Mr. Kudlow, the White House economic adviser, though the talks were "more patriotism-driven" than a reflection of Cisco's merger interest, a person familiar with the meeting said.
Mr. Robbins "didn't want the U.S. to fall behind," the person said, but the company, which makes computer networking gear, was unwilling to invest in a less profitable business like Nokia or Ericsson without some sort of financial incentives, the person added. A Cisco spokeswoman declined to comment.
Mr. Kudlow said that talk of a U.S. company buying overseas suppliers has since cooled. "Nokia, Samsung and Ericsson, they're still very much in the game and they're adding to their presence in the U.S." he said. "We want them to move here and we might help them out" through tax policy. "We might pay some moving expenses, but that's different than actual ownership," he said.
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