Donald Trump’s administration is considering issuing requirements that would mandate all 5G telecommunications equipment installed in the U.S. be manufactured outside China, according to a Sunday report in the Wall Street Journal.
That would be a significant step above and beyond moves already taken by the White House which is locked in a trade war with China and has begun imposing sanctions on Chinese tech companies on allegations that they pose a security risk (most notably Huawei, the world’s largest manufacturer of telecom equipment). While the U.S. has already effectively banned the use of Chinese telecom gear by American carriers, the Journal writes that U.S. officials have begun inquiring whether other suppliers based outside of China can move their production chains for U.S.-bound gear totally outside the country. That’s a process that could take “months or years” to kick in, writes the Journal:
A White House executive order last month to restrict some foreign-made networking gear and services due to cybersecurity concerns started a 150-day review of the U.S. telecommunications supply chain. As part of that review, U.S. officials are asking telecom-equipment manufacturers whether they can make and develop U.S.-bound hardware, which includes cellular-tower electronics as well as routers and switches, and software outside of China, the people said.
The conversations are in early and informal stages, they said. The executive order calls for a list of proposed rules and regulations by the 150-day deadline, in October; so, any proposals may take months or years to adopt.
As the Journal noted, such a requirement would force European companies Nokia Corp. and Ericsson, which currently dominate the sales of equipment to U.S. wireless carriers, to move their operations out of China or potentially lose access to the American market. That could potentially have a bigger impact on the market than any deal to end the ongoing trade standoff, as it may permanently alter the global technology markets—though both Nokia and Ericsson have already started working on plans to pull out of China due to the Trump administration’s escalating trade war tariffs.
Members of the “Five Eyes” anglophone intelligence alliance (including Australia, Canada, New Zealand, the U.K. and the U.S.) reportedly agreed last year to collectively work to rein in Huawei, which has been seen as an industry leader in 5G technology and the U.S. has been asserting has ties to Chinese military and state intelligence agencies. U.S. penalties on the company, which are also related to other accusations of trade theft, fraud, and violations of Iran sanctions, have included sweeping measures that effectively prevent it from purchasing any American technology. That’s hit the company hard, with CEO and founder Ren Zhengfei recently stating that it expects to lose $30 billion in revenue this year and next.
Other details in the Journal’s report include that administration sources expect China to be placed on the “foreign adversaries” list created in the original order, as well as that the White House has been in “informal discussions” with tech firms and other Asian countries over where U.S. companies should relocate. Additionally, the Journal mentioned that there is currently debate over whether to “allow benign parts” in 5G telecom gear “such as power converters and protective cases” to be made in China, as well as whether to allow open source code contributed by Chinese programmers.