Why the UK has decided to ban use of Huawei’s 5G kit

Two decades after Huawei entered the British market, the UK government on Tuesday concluded that reliance on the Chinese company’s products posed an unacceptable threat to the security of telecoms infrastructure.

In a major U-turn, Boris Johnson decided that Huawei, a leading telecoms equipment maker, should be banned from supplying kit for Britain’s 5G mobile phone networks.

In January, the prime minister had said Huawei could have a limited role as a 5G supplier, amid claims by rebel Conservative MPs and the Trump administration that Beijing could use the Chinese company’s kit to spy on western countries.

What are the details of the ban?

The government has proposed a two-stage prohibition on the use of Huawei’s 5G equipment.

Britain’s telecoms companies will be barred from buying new Huawei 5G kit from January. They have also been told to remove all of the Huawei 5G kit already installed in their mobile networks by 2027.

However, the government has stopped short of banning the use of Huawei equipment in 4G and 3G networks.

In a further twist, ministers launched a new consultation about transitioning telecoms companies away from using Huawei kit in fixed-line superfast broadband networks based on full fibre.

Schematic chart showing Huawei’s role in UK mobile phone networks

What has prompted the government U-turn?

In January, Mr Johnson said Huawei could have a 35 per cent share of the 5G market, but stressed that the company would not be allowed to supply the core elements of networks, where confidential customer data are stored.

The National Cyber Security Centre, a division of the signals intelligence agency GCHQ that has oversight of Huawei in the UK, was clear in January that it considered the company to be a “high-risk vendor” — but was also confident that it could mitigate any security issues.

However, new US sanctions against Huawei have prompted the government to change its view.

The sanctions, announced in May, are aimed at cutting off Huawei from access to semiconductors made with US equipment and used in products including networks.

The government commissioned a review from the NCSC, and Ian Levy, its technical director, said in a blog post on Tuesday that Huawei products using new chips which are compliant with the US sanctions would be “likely to suffer more security and reliability problems”.

In effect, Huawei has now been deemed too high a risk because of the US sanctions.

Oliver Dowden, culture secretary, said 5G would transform the UK, “but only if we have confidence in the security and resilience of the infrastructure . . . following US sanctions against Huawei and updated technical advice from our cyber experts, the government has decided it is necessary to ban Huawei from our 5G networks”.

Mr Johnson’s new stance on Huawei also follows intense pressure from rebel Conservative MPs and the Trump administration to curb the company’s role in the UK.

What does it mean for Huawei?

Huawei is celebrating 20 years in the UK, which was one of its key breakthrough markets outside of Asia.

A contract with BT was an important milestone for Huawei in becoming a global powerhouse in telecoms equipment, where its main rivals are Ericsson and Nokia.

Line chart of Share of global revenue from telecommunications equipment (%) showing Huawei increases its dominance

Losing the ability to supply 5G kit in the UK is a significant blow to Huawei, which has taken multiple steps to win over the British government. In May, the company unveiled plans to spend £1bn on a new research centre in Cambridgeshire, creating up to 400 jobs.

Huawei has also recruited City of London grandees on to its UK board, although John Browne, the chair, announced on Tuesday that he was stepping down.

However, Huawei is confident that Mr Johnson’s decision will not lead to a broader ban in other markets, such as Germany.

It has long denied being an arm of the Chinese state, saying it is a private company owned by its employees, and Huawei appears in rude health financially.

Where does the government’s decision leave telecoms companies?

Of the UK’s four mobile network operators, BT, Three and Vodafone will be most affected by the ban on using Huawei’s 5G equipment.

BT will also be hit by the government’s move to transition fixed-line broadband operators away from Huawei’s kit.

Ahead of the government’s decision, BT and Vodafone had warned about the dangers of the government requiring a rapid rip-out of Huawei’s equipment from their networks, saying it could cause significant service disruption.

Mr Dowden said the seven-year timetable for removing Huawei 5G kit already in mobile operators’ networks would avoid the threat of service blackouts. Investors were comfortable with the timetable, with shares in BT and Vodafone rising on Tuesday.

However, telecoms companies are concerned about the impact of the Huawei ban because the Chinese manufacturer has been a supplier of cheap and effective kit.

What happens with the rollout of 5G services?

Mr Dowden admitted that there would be a knock-on effect from the move to ban Huawei, almost a year after mobile operators launched 5G services, which provide much faster download speeds on smartphones compared to 4G.

He estimated that the cumulative effect of the ban would delay the full rollout of 5G by up to three years, and add about £2bn to the cost of the upgrade from 4G.

Britain has tried to carve out a role as a world leader in 5G, but now faces the prospect of being in the digital slow lane.

“Obviously we are disappointed because this decision . . . will add delay to the rollout of 5G in the UK and will result in additional network costs,” Vodafone said.