What happens if India bans Huawei from 5G trials?

Huawei's 5G troubles in India — Explained

huawei-logo-Reuters Huawei's logo at the IFA consumer tech fair in Berlin, Germany | Reuters

As pressure mounts on India to ban Huawei from 5G trials in India, there are two important stakeholders to consider – security and cost.

As far as Huawei is concerned, a ban from offering its 5G services in India would dent a huge hole in its future prospects. It is already facing the threat of being denied Android services in its smartphones as pressure from the US increases amidst security concerns. India is a huge market for Huawei, where it enjoys the top position in terms of market share and it also has significant exposure with companies such as Airtel and Vodafone for 4G services. As far as India is concerned, a blanket ban on Huawei could lead to a knee-jerk reaction from China as well as a rise in the cost of deploying 5G services. Here are some of the factors at play.

What's at stake for Huawei?

The increasing clampdown against Huawei in the US and the negative sentiments against the company could hamper its future prospects in India. India is a huge market for Huawei, where it recorded 55 per cent revenue growth in FY19. Indian telecom players such as Bharti Airtel, Vodafone Idea and Reliance Jio are all considering giving a pass to Huawei from their 'core' elements of their 5G networks. Both Airtel and Vodafone use Huawei equipment for their 2G, 3G and 4G networks in certain areas. Jio meanwhile has tied up with Samsung for its 4G operations and is likely to stick to them for 5G operations too. It will be a risky move for Indian telecom carriers to go ahead with Huawei when talks of a ban on its services are looming large.

Huawei's India growth

Huawei has had a stellar year in 2019. The Chinese telecom behemoth recorded revenue growth of 55 per cent in FY19. Its revenue stood at Rs 12,884 crore with profits jumping as much as 213 per cent in 2019. Xiaomi captured the top spot among smartphone manufacturers in India with a 28 per cent share, with its shipments growing 6 per cent year-on-year (YoY). In contrast, Samsung's shipments declined 7 per cent YoY and Oppo’s by 3 per cent YoY. As per the latest smartphone market share in India, Xiaomi holds the top spot with 28 per cent, Samsung second with 25 per cent, Vivo next at 12 per cent, Realme at 9 per cent and Oppo at 8 per cent.

What India gains from Huawei

Cost. That is what at stake for India when it comes to any potential ban on Huawei. Huawei's services are much better priced than any of its rivals and that has been its strongest selling point from the beginning. A ban on Huawei equipment would lead to an increase in the cost of deployment of 5G services in India. Airtel and Vodafone, both of whom currently use Huawei, will have to look to Nokia and Ericsson for their equipment. Huawei has also said that a ban on it from participating in the 5G trials would delay the deployment of 5G services in India by at least three years.

The safe option

Indian telecom operators could adopt the UK model wherein they eliminate Huawei from their non 'core' network. To put it simply, in 5G, all forms of communication are encrypted with keys and these are stored on servers in the 'core' or the 'brain' of the network. This means that the base stations cannot read the data, thereby reducing any risk to security. Sceptics, however, argue that base stations can still read some elements of the information stored.

Huawei currently has secured 50 5G contracts around the world. Among these, 28 are in Europe, 11 in the Middle East, six in the Asia-Pacific region, four in South America and one in Africa.

Huawei has agreed to sign a 'no-back door' pact with the Indian government to assuage security concerns, but the matter is yet to reach an agreement. While Huawei is eyeing a huge piece of the global smartphone segment in India, India will have to look at potential security concerns surrounding Huawei while ensuring a ban on the Chinese company does not raise the cost for deploying 5G significantly.