A UK government review into the impact of new US sanctions on Huawei will report back within weeks, officials have said, as they warned the curbs could have “very, very serious” implications for the Chinese company’s planned role in supplying 5G networks in Britain.
The emergency review — which started just days after the US announced new export controls on Huawei last month — is being undertaken by the National Cyber Security Centre, a branch of UK signals intelligence agency GCHQ.
The US sanctions and the UK review gives British prime minister Boris Johnson the opportunity to execute a U-turn on his contentious decision in January to grant Huawei a limited role as a supplier of telecoms equipment for the country’s 5G mobile phone networks.
But the review has brought fresh uncertainty for UK mobile network operators — EE, Three and Vodafone — which have used Huawei kit in their nascent 5G networks.
Even though Mr Johnson confined Huawei to a 5G market share of 35 per cent in Britain, and excluded the company from providing equipment for the sensitive “core” of the networks, his decision has come under heavy fire from rebel Conservative MPs and the US government. They have argued the deal gives Beijing a backdoor to spy on UK communications.
Some at Westminster suggested the British government review into the impact of US sanctions on Huawei highlights a hardening of the UK’s attitude towards China, following Beijing’s mishandling of the coronavirus pandemic.
“The virus has clarified the choice,” said Tom Tugendhat, chair of the House of Commons foreign affairs select committee and co-founder of a new Conservative campaign group on China. “The cost of doing business with autocratic regimes is that you don’t just import their technology, you also import their values and make yourself dependent on their politics.”
Whitehall insiders acknowledged that geopolitical considerations may now weigh more heavily on the government than they did in January.
But UK officials said the new American sanctions — Washington’s latest effort to cut Huawei off from access to semiconductors made with US equipment and used in products including networks and smartphones — represented a “material change” in the Chinese company’s risk profile.
This is partly because it will be harder for the UK to vet any Chinese-made semiconductors used by Huawei, especially given the likely speed and scale of a new production line.
“If the Chinese state mobilises to support rapid manufacturing of alternatives . . . our longstanding understanding of how the [Huawei] supply chain works just disappears,” said one Whitehall insider.
The insider also suggested it was “not completely implausible” that the US export controls due to take effect in September could imperil Huawei’s ability to stay in business.
Guo Ping, Huawei’s rotating chair, last month admitted that Washington’s latest export controls dealt the Chinese company a significant blow. “We will work hard to figure out how to survive,” he said. “Survival is the key word for us now.”
UK officials, who met telecoms industry executives last week to discuss the state of play, have privately made their anxieties about the impact of the new US sanctions clear. “It’s a very, very serious situation,” said one official.
The British government is expected to report back to mobile phone operators by the end of July with a decision on whether Huawei can remain a 5G kit supplier.
The US sanctions are far more targeted than those imposed by Washington on Huawei a year ago, and have prompted concern among British mobile operators. “They’re choking them off,” said one UK industry executive of the US moves against Huawei.
Rebel Conservative MPs are pushing for Huawei kit to be stripped out of all UK telecoms infrastructure by 2023.
The British telecoms industry has warned that an immediate ban on using Huawei’s 5G kit would cause a two-year delay in the full rollout of networks, since mobile operators would have to reconfigure their plans and sign new supplier deals.
But there is a growing sense within the sector that ministers could seek to gradually reduce Huawei’s presence in Britain’s telecoms infrastructure to zero after 2023. “We seem to be moving towards a phase out,” said one industry executive.
If the government does reverse its January decision on Huawei’s 5G role, the question remains how to remedy the market failure that led to the UK’s reliance on the Chinese company.
One option is to invest jointly with allies such as the US in building up Huawei’s rivals, including Ericsson and Nokia, or championing start-up players in America and Europe.
Mr Johnson discussed the issue of telecoms security with US president Donald Trump during a phone call on Friday — raising the prospect that the new American sanctions may have pushed this issue much higher up the agenda.
Huawei has always insisted it is a private company and denied accusations that it would be drawn into espionage on behalf of the Chinese state.
“The US is leveraging its own technological strengths to crush companies outside its own borders,” it said in a statement released after the US export controls were announced.
Victor Zhang, a Huawei vice-president, said last week the company’s priority was to roll out “reliable and secure” 5G networks in Britain.
He added Huawei was happy to discuss with the National Cyber Security Centre “any concerns they may have and hope to continue the close working relationship we have enjoyed for the last ten years”.
Experts warned that the Chinese Communist party will not let any UK U-turn on Huawei go unpunished — especially since Britain’s verdict on this issue will be closely watched in other European capitals that are weighing decisions on their own 5G networks.
“I suspect that we will be in a certain amount of trouble,” said Charles Parton, a former British diplomat and Beijing specialist, adding that economic reprisals were likely. “It’s a game they play with quite a lot of skill, and touch the pressure points, but if you have got the nerve to hold out then actually, the bark is far worse than the bite.”