Trump Administration May Require All 5G Equipment To Come From Outside China
Amid white hot trade tensions between the world's two economic superpowers, The Trump Administration is mulling over the possibility of requiring all 5G cellular equipment to come from sources outside of China's borders.
Notice the above statement doesn't specify "Huawei". This move, if followed through with, would see ALL equipment, from any manufacturer, be made somewhere outside of China.
The U.S. would be making a big ask of 5G technology vendors such as Ericsson (NASDAQ:ERIC) and Nokia (NYSE:NOK), who would be forced to shift already existing facilities and supply lines from China to elsewhere.
The rumor comes from allegedly strong sources and stems from a Wall Street Journal report from Sunday. Trump has already effectively banned Huawei from selling equipment in the U.S., and this report of the White House allegedly deliberating on a potential requirement for all 5G equipment to be sourced from outside of China is massive news.
In order to satisfy this requirement, suppliers would be looking a multi-year and multiple hundreds of millions of dollars commitment. The immediate cost and supply upsets this would cause would be large indeed. However, the potential longer-term ramifications are greater still. Should Nokia and Ericsson go through with moving to manufacture outside of China, they wouldn't necessarily return if the U.S. ban was lifted. These two companies employ hundreds of other, smaller vendors that supply the firms with parts and technology needed to put everything together.
The U.S. also ordered a 150-day review of the overall U.S. telecom supply chain, which interestingly enough coincides with Apple doing the very same thing with its own Chinese suppliers. The point of both studies is to judge the impact of moving production outside of China for things like telecom routers and switches. For better or for worse, China seems to be at real risk of losing some major companies' business if things continue on this way.
Of course, this is all happening in the context of Trump and Xi battling it out over U.S.-China trade deal negotiations (or lack thereof). Apple is only "asking" its suppliers to study a move out of China, the U.S. is only "considering" banning Chinese-produced telecom equipment. Whether or not the threat of any of this happening comes true, China certainly can't be happy with the prospect of losing billions in GDP.
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