Telecom vendors planning to supply U.S operators with 5G gear may be required to shift production outside of China, according to a new report from The Wall Street Journal.
The outlet, citing sources familiar with the matter, reported the Trump administration is mulling a ban on China-made 5G equipment amid its 150-day review of the U.S. telecommunications supply chain. This follows last month’s executive order barring certain network equipment and services from foreign suppliers based on national security concerns. Targets of the order include China’s Huawei, which along with affiliates was also added to the U.S. Department of Commerce’s entity list, imposing an effective export ban on U.S. technology for the company.
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Forcing suppliers to design and manufacture wireless equipment meant for U.S. networks, including hardware like routers and switches, and software, outside of China could have implications for major vendors Ericsson and Nokia. According to Citi analysts’ estimates, in 2018 China accounted for 45% of Ericsson’s manufacturing-facility area, while the country represented 10% of Nokia’s, according to the WSJ.
Sources told the WSJ that conversations with companies about their ability to move production of next-generation network gear outside of China are in early and informal stages.
In a statement emailed to FierceWireless, an Ericsson spokeswoman said the company does not comment on any ongoing discussions with the U.S. government. She noted Ericsson’s supply chain is flexible and has production facilities on all continents in countries including the U.S., Brazil, Estonia, India, and China.
“We actively mitigate different types of potential risks related to our supply chain, both in our own manufacturing and in sourcing, to avoid being dependent on one supply site or vendor. All Ericsson’s software is verified, signed and distributed centrally from Sweden, and, when so required, under Swedish export licenses,” the spokeswoman said.
Nokia released the following statement: “Nokia follows a strict ‘design for security’ process and has a long-held commitment to the highest standards in network security. Regardless of geographical location where Nokia’s products and services are manufactured or made, the same criteria are applied to ensure security and integrity, and a central team at our international headquarters verifies security status and compliance. Earlier this month, we further strengthened our commitment to network security by unveiling an enhanced security program and establishing an advanced security testing and verification laboratory at Nokia Bell Labs in Murray Hill, NJ.”
A Nokia spokesperson noted that the vendor has a global manufacturing footprint “designed for optimized global supply, and to mitigate against risks such as local disruptive events, transportation capacity and political risks.”
Ericsson and Nokia both have inked 5G equipment pacts around the world, including with major U.S. carriers. Earlier this month, Nokia claimed it had signed 42 commercial 5G deals so far. Ericsson has 22 publicly announced 5G contracts, and recently disclosed 5G work with Alaska’s GCI.
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The U.S. is considering tighter restrictions the same week that President Donald Trump and People’s Republic of China President Xi Jinping are slated to meet at the G20 Summit in Osaka, Japan, to discuss the countries’ ongoing trade dispute.
Separately this week, Federal Communications Commissioner Geoffrey Starks is holding a workshop to discuss ways to address potential threats from existing telecom equipment already in place in U.S. networks. Speaking at an event last week, Starks said a “rip and replace” method may be necessary, but it won’t be an easy or inexpensive task. Questions remain about who will be responsible for removing equipment that may pose a national security threat, and who will pay for it.
Article updated with comment from Nokia.