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Although many people in the Western world remember Huawei as a pioneering smartphone brand, the main business of the company was selling 5G telecommunications equipment before the US government blacklisted Huawei due to national security fears. However, according to a new report from the Asia Times, this decision to ban Huawei from participating in the development of 5G networks could have economic repercussions of over $100 billion to the US and its allies.
Concerns about Huawei first arose in 2019 when the Trump administration banned the company from doing business, citing that Huawei was covertly accessing sensitive information and sending it back to China. While no concrete evidence of espionage activities was shared with the public, the subsequent Biden administration strengthened these sanctions to impede China’s access to advanced technologies, including high-end semiconductors.
However, this ongoing tech war between the two economies is impacting various stakeholders, including network operators, consultants, economists, and governments worldwide. According to a study by the Oxford Institute of Economics, opting for alternatives to Huawei will increase the overall cost of implementing 5G by over 19%. Furthermore, in a median cost scenario, this ban could lead to a $105.5 billion reduction in the GDP of countries like Australia, Canada, France, Germany, Japan, India, the United Kingdom, and the United States by 2035.
Repercussions of the Ban on Sales to Huawei
The recent ban on sales to Huawei will not only constrain the company’s ability to conduct business but also have a ripple effect on the entire supply chain, as companies like Qualcomm would lose one of their biggest customers. Therefore, policymakers will need to balance the economic benefits of utilizing Huawei’s equipment with national security risks, as telecommunication networks are vital for a nation’s development and form the backbone of advanced economies.
Alternatively, the US and its allies can develop their telecom technology, like South Korea and Japan, to reduce reliance on foreign suppliers and establish domestic intellectual property and supply chains.