US ban unlikely to impact Huawei’s India telecom business; India may allow it for 5G field trials

US ban unlikely to impact Huawei’s India telecom business; India may allow it for 5G field trials

NEW DELHI: Chinese telecom gear maker Huawei’s India telecom operator business may not see any major impact due to the recent US ban as it has already stockpiled enough inventory o keep its 4G equipment supplies to local mobile phone companies going around a year, people familiar with the matter said, adding the US ban though will slow down business for the Chinese company.

“India business may not see any impact as stockpiling was already done for telcos here. At the global level, there is a strategy in place to avoid any impact on the supply chain for telecom equipment,” a person familiar with the matter said. “All Huawei account directors are in touch with telco partners…it’s business as usual.”

Both Vodafone Idea and Bharti Airtel use Huawei’s 4G gear in several circles, besides those from Sweden’s Ericsson, Finland’s Nokia and China’s ZTE. Mukesh Ambani-led Reliance Jio uses 4G equipment from Samsung. In fact, Huawei had recently bagged a contract from Vodafone Idea to provide 4G gear for network modernisation and expansion in seven circles. It is currently competing for VIL’s core and transport network contracts.

Back in China, the company had anticipated the move and started to work on a backup strategy eighth months back to reduce the impact of the US ban. The U.S. Commerce Department had last week added Huawei Technologies and 70 affiliates to its so-called “Entity List”. The move effectively bans Huawei from buying parts and components from U.S. companies without U.S. government approval.

The person added that the company’s backup strategy comprises stockpiling of components, using third-party vendors and in-house development of components and chips. “The strategy will allow Huawei to buy time and keep the supply chain running. However, this will slow down Huawei’s business to some extent,” he added.

Huawei is heavily dependent on semiconductor products from a number of US companies, for its telecom equipment, but the Trump administration ban means the Chinese company can’t source components from these firms for both wireless and wireline networks.

For example, Intel, Qualcomm, and Broadcom, three of the world’s leading chip designers and suppliers, are reported to have suspended shipments to Huawei, so have memory chip makers Micron Technology and Western Digital.

Huawei though says it had anticipated the move and started to work on a backup strategy eight months back to reduce the impact of the US ban, which was imposed on last Thursday.

Huawei founder and CEO Ren Zhengfei told media that the company would continue to develop its own components to reduce its dependence on outside suppliers. “We have already been preparing for this,” he was quoted as saying by Reuters.

A second person said that while telcos will continue their 4G expansion, the recent developments will force Indian telcos to start their risk assessment on Chinese gear makers.

Huawei, VIL and Airtel didn’t respond to ET’s queries.

Through their industry body COAI, the Indian telecom operators have already sought clarity from the Department of Telecommunications (DoT) on whether they should order 5G equipment from Chinese company Huawei or not, as millions of dollars will be at stake, ET last week reported.

“This is not a burning issue for us as DoT hasn’t given any directions to Indian carriers,” said Rajan Mathew, director general, COAI had told ET last week.

While the Department of Telecommunications (DoT) is yet to take a formal call on allowing Chinese vendors — Huawei and ZTE — for deploying 5G technology in India, it is likely that Huawei will be allowed to participate in the upcoming 5G field trials, a government official said.

A DoT official separately told ET that the upcoming 5G trials are vendor neutral and there’s no question of blocking or keeping any vendor away.

“A lot of testing needs to be done and India needs to test various use cases. It’s very different from 4G which was a matured technology when India started to adopt it. Involvement of all vendors is very much required for trials,” the DoT official said.

Early this week, a group headed by IIT Kanpur director professor Abhay Karandikar submitted its views on kickstarting the 5G-based field trials in India. The DoT official said that the recommendations are currently being evaluated by the department.