Despite the quite though international scenario and challenges posed by U.S. sanctions, major Chinese vendors have further strengthened their leading role in the TLC field, increasing their market share by 41% in 2023, compared to 39% in 2022. This growth occurred in a context where global revenues for TLC equipment across the six traditional fields – including Broadband Access, Microwave and Optical Transport, Mobile Core Network (MCN), Radio Access Network (RAN), and SP Router & Switch – recorded a 5% year-on-year decline. Considering each TLC operator, Huawei stands out significantly for its performance: Nokia maintained a stable market share at 15%, while Ericsson has seen its own share decreasing from 14% to 13%.
They are followed by ZTE, with a market share at 11% and Cisco, which showed a relatively significant increase from 5% to 6%. It is noteworthy how Chinese groups’ performance occurred following U.S. and Europe’s decision to set some restrictions on Huawei and ZTE regarding the supply of TLC network’s equipment to secure infrastructures. Over the last years, the United States has urged its EU economic partners to refrain from using Huawei and ZTE devices fearing that Chinese government might use them either for cyber espionage or to sabotage crucial communications infrastructures – allegations that Huawei has always denied. The plea was successful and, few weeks ago, the German government decided to ban Chinese components and technologies from 5G networks.
Germany position
According to what’s been reported by the German government, every single technology and components from Huawei and ZTE will no longer be used for “core networks” by the end of 2026 and will be replaced by “access and transfer” 5G systems by the end of 2029. As stated by the Minster of the Interior, Nancy Faeser “we need to act this way to lower security risks and to avoid unilateral dependencies on foreign suppliers.” This decision has been highly criticized by the Chinese Government which claims that “Germany’s position on the matter reflects a clear political discrimination which seriously threatens the mutual trust between the two parties and also impact future cooperation between China and Europe in related fields.”
According to the Chinese government “Huawei and ZTE have always been compliant with German’s rules and regulations, and they have made a positive contribution to country’s digital transformation” highlighting that Beijing wants to take all necessary measures to safeguard the legitimate interests of Chinese companies.
With the exclusion of Huawei and ZTE solutions from German infrastructure, to expand and enhance 5G services, operators across the country will necessarily have to rely on different suppliers like Nokia and Ericsson.
Still lots of Made in China technologies in European networks
Despite measures taken in various countries, the presence of Huawei and ZTE equipment and installations in Europe is still very widespread. Based on 2022 figures from the Danish consulting company, Strand Consult, in many European countries the share of ‘Made in China’ technology for 5G networks exceeds 50%. In 8 countries out of 31, more than 50% of 5G RAN devices are made in China. In 2020, 16 countries out of 31 were resorting to Chinese 4G RAN devices and, nowadays, only 11 European countries out of 31 can provide their users with a proper access to non-Chinese services. Moreover, 41% of mobile users in Europe can access 5G RAN technology networks with technology from Chinese suppliers; both in 2020 and in 2022 59% of Germany’s 4G RAN and 59% of Germany’s 5G RAN came from Chinese suppliers. Another significant data is that Huawei currently has a larger market share in Berlin than in Beijing, where it shares the market with ZTE and other technology providers.
Europe: a small and contracting market for network infrastructures
The European market represents a small and decreasing portion of the global Radio Access Network (RAN) infrastructure market; despite Europe being under political spotlight, it holds a small share in the infrastructures’ market. More specifically, European share has significantly decreased since 2000 and now accounts for only 10-15%, with an estimated value of around $2.9 billion. Huawei and ZTE hold 40% of market share in Europe resulting in just 6% of the global market share for the RAN segment. But how Huawei ban from EU market will impact other countries and economies?
European operators will benefit from the ban on Chinese companies in the EU market
According to the Danish consulting company, Strand Consult, banning Chinese technology from the European market will significantly impact the competitiveness, prices and availability of network’s infrastructures. Concerning benefits for the major European competitors, the Danish company estimates that Ericsson and Nokia will most likely going to see an increase in their revenues share of 3.5% for each operators. Furthermore, some other operators might benefit from the withdrawal of Chinese vendors from EU market: this is the case for Samsung, whose participation could affect the actual distribution of increased revenues among Western vendors.
Huawei limitations won’t determine an increase in prices
One of the most discussed topics regarding Huawei limitations concerns the potential increase in devices’ price. But two recent cases seem to rule out this possibility: both U.S. and Australia, the first country to put limitations on Chinese vendors, have never experienced price’s increase. More specifically, the U.S. market was further consolidated and implemented in 2016 when Nokia acquired Alcatel-Lucent. At that time, Ericsson was managing more than 40% of the U.S. RAN market with the remaining shared divided among Nokia, Alcatel-Lucent, and Samsung. Despite the shift from a market with three major suppliers to a market with two major suppliers and a smaller one, prices in the United States have mostly decreased. Most importantly, U.S. has gained a leading role in 5G even without Huawei devices. Ericsson and Nokia hold the most part of market shares in the States while Samsung is rapidly growing. Considering the States and Australia’s experience, there is no clear evidence that the above-mentioned limitations would increase prices or reduce supply across Europe.
Limitations won’t influence market competition
Another discussed topic concerns how a second European ban might impact business and market competition. Even if the standard economic theory suggests that competition is mostly determined by the number of companies in the market, in the case of network infrastructures’ segment it is highly unlikely that such limitation to a single operator, regardless of its size, might impact global market competition. Europe, indeed, represents a small segment of network infrastructures’ global market. If on the one hand Huawei and ZTE are the major suppliers in Europe, the Old Continent represents only 15% of the global market and almost 40% is controlled by Chinese companies. It is, then, likely that if a ban were applied against Huawei, it would not be difficult for other companies, including Ericsson, Nokia, Samsung, and others, to fill the gap without significant impacts on global competition.”
Chinese major players strive for 6G technologies
While struggling against the bans imposed by Western economies, major Chinese companies aim to empower the future of digital communication with 6G technologies. Even if it is highly unlikely that the new standard is available before 2030, almost every company is trying to reach a leading and dominant position in the new technological field. China considers telecommunication as a key and strategic field for its geopolitical goals; Numerous strategic documents, such as the 14th Five-Year Plan for National Informatization, place 6G among the government’s top priorities. Beijing aims to implement 6G infrastructures, as it did for 5G ones, where Chinese companies hold 70% of the world’s radio base stations and 80% of connected 5G devices.” China’s approach to 6G technologies mirrors its approach to 5G ones. The Chinese government is leveraging subsidies, credit facilities, tax incentives, and other forms of state support to increase devices’ domestic productivity and allow Chinese companies to benefit from 6G technologies.
Moreover, the Government is investing into the backbone technologies of 6G, like chip legacy and AI tools, to reduce dependence from foreign providers and guarantee a competitive advantage. This strategy is producing concrete results: according to the most recent and updated figures, China is the first world country asking for 6G patents (40.3%) while the States rank second (35.2%). Last February, China Mobile, the world’s major TLC operator by number of subscribers, stated to have successfully launched what it believes to be the first satellite capable of testing 6G technology. European countries, on the other hand, are struggling to keep up with it: there are funding programs embedded in the European legislation, such as the Smart Networks and Services Joint Undertaking (SNS JU), which should allocate 1.8 billion euros between 2021 and 2027.
Despite resources’ availability, we are witnessing a chaotic system where funds risk to be allocated for small projects which risk failing to reach the primary and final goal: gaining a competitive advantage over the world’s major players, such as China and the States. Big European companies, like Ericsson and Nokia, are currently focusing their attention on research. That’s the case of 6G Ericsson BU which has been opened in the UK: last year, the Swedish group started investing in “dozens of millions of pounds” to enhance its capacity for research and development in future communications and 6G standardizations. Nokia, as well, is committed to further implementing 6G technologies as leading company in the Hexa-X European project; moreover, at the beginning of this year, it announced an investment amounting to 391 million dollars in the frame of a project financed by Germany and UE to implement its software, hardware and 5G/6G chip’s availability.
Final thoughts
Both 5G and 6G represent a technological, but also geopolitical though scenario and this is particularly true for those countries which are still facing it: China, the States and, to the lesser extent, some European countries. Bans, duties and trade restrictions represent the strategic measures used by these players to gain competitive advantages or limit those of others. The ban of Chinese producers from 5G architecture, later adopted by many other countries, came as a result of U.S. pressure. It seems that Asian countries are leading the technological scenario, with China leading the way. It’s been the same for 5G technologies and it seems that there are necessary requirements so that the same dynamic can be applied to 6G technologies. Alongside China, some other Asian countries, like South Korea and Japan, are playing a vital role praising research advantages and impressive results in the application of 6G technologies. Europe seems to be, once again, far behind: even in the development of 6G, an overview suggests that Europe is trailing behind the major streams of innovation coming from the East, with China, and from the West, with the U.S.
Therefore, European countries concretely risk to be marginalized and it is up to public institutions and major stakeholders avoid it from happening.
