US Ready to Bankroll Huawei’s EU Rivals at 5G War Heats Up

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The US is considering a subsidy package for Huawei's chief European competitors, Nokia (HEL:NOKIA) and Ericsson (NASDAQ:ERIC), in order to make them more competitive against the Chinese telecom giant in the 5G war, according to a new report from the Financial Times.

The report says that US officials have discussed internally setting up a subsidy package for Nokia and Ericsson which could include lines of credit so that they are able to match the generous terms Huawei offers to its clients around the world. Also on the table is creating a pool of subsidies to incentivize firms like Cisco (NASDAQ:CSCO) to create 5G radio towers and other products that would compete against Huawei's portfolio.

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"We gave up our superiority in making telecoms equipment decades ago, and now we are realising that this might not have been the best choice for national security reasons. Almost every department and agency is desperately looking right now for ways to get back into this game,” the FT quotes one official as saying. “If we don’t, Huawei could soon be the only option for anyone wanting to roll out 5G networks.”

This proposed plan, should it make it off the drawing board, would be in addition to the $1 billion allocated to rural telecoms and ISP to replace Huawei equipment with alternatives.

Taking Cues from Huawei in the 5G War

It isn't without a tinge of irony that a subsidy package is being proposed in order to fight Huawei.

Huawei's loudest critics in the US, such as the Global Cyber Policy Watch, point out that Huawei receives substantial subsidies from Beijing as a reason why it should be restricted from the US market. While Huawei's competitors already get some subsidies, increasing it is only going to further nullify this argument.

But it isn't much of an argument to begin with: subsidies are simply a fact of life in the corporate world and it's a tad hypocritical to criticize a competing firm for getting it from its respective government while you're also on the receiving end. Boeing, though of a different scale than these companies, has received tens of billions in government cash yet still criticizes Airbus for getting the same from the European Union.

What needs to be criticized, however, is that the EU seems to be rather complacent on this matter. Although there's no definite case that presents Huawei as a key part of China's electronic eavesdropping machinery, the fact that it's the US, and not the EU, stepping in to match Huawei's subsidies in this market says a lot about the EU's complacency on the topic of China.

News Source: Financial Times