by Jack Watchmaker, with Dan Mandell | 08/19/2024

 

The IoT and embedded systems landscape is undergoing a revolutionary transformation. With 5G connectivity’s unparalleled speeds, ultra-low latency, and ability to connect a massive number of devices simultaneously, industry computing solutions and services are enduring rapid growths and innovations. At the heart of this metamorphosis lies new hardware systems and software architectures that construct the backbone of these high-speed networks. However, in a time where it is essential for nations to adopt the most advanced and capable technologies to remain competitive, several Chinese manufacturers are facing significant challenges in Europe. Looking forward, we anticipate that these challenges will severely hinder Chinese technology providers’ ability to maintain their existing market share in the area, ultimately paving inroads for more domestic suppliers to capture the mounting 5G market opportunity in Europe.

Specifically, at the behest of the European Commission, many European countries are increasingly moving towards banning Chinese manufacturers Huawei and ZTE’s wireless hardware from their 5G networks due to national security concerns. One such country that has already taken measures towards removing Huawei and ZTE from their 5G networks is Germany, which has announced its plan to heavily restrict Chinese hardware manufacturers from their 5G networks by 2026, and outright ban them by 2029. Germany’s Federal Minister of the Interior, Nancy Faeser, cites this decision as a necessary security precaution against the “dangers of sabotage and espionage.” This comes with the support of domestic mobile network operators Deutsche Telekom, Telefonica, and Vodafone, serving to further impair relations between Germany and China for cellular-based solutions. However, despite its public condemning of Huawei and ZTE’s hardware, as of August 2024, Germany’s 5G network infrastructure still features Huawei hardware with migrations set to still take place.

Although Germany may be the largest European economy to initiate a ban on Huawei and ZTE hardware, Sweden was the first European nation to officially ban Huawei from its 5G networks. This occurred in 2020, with Sweden banning all telecom equipment from both Huawei and ZTE in its 5G network. This legislation was subsequently upheld following Huawei’s appeals in June 2022 and entails the complete removal of all Huawei and ZTE hardware from its 5G networks by January 1, 2025. These actions provide a lucrative opportunity for European embedded wireless technology platform providers, such as Eurotech and Kontron, working with telecommunications equipment manufacturers to expand their market shares over the next couple of years.

Exhibit 1: Most Important Selection Criteria When Considering Suppliers
for Embedded and Edge Hardware Components, Systems and/or Entire Solutions
(Percentage of European Communications & Networking Respondents)

The United Kingdom has also remained strong in its stance against China, banning Huawei and ZTE hardware from its mobile core 5G network by the end of 2023, and all other 5G networks by the end of 2027. Notably, this ban comes with significant financial repercussions for the United Kingdom, with one cellular provider, BT, reporting an estimated $612 million USD in costs associated with removing Huawei equipment from its network. This underscores the priority the United Kingdom is placing on migrating to new hardware architectures and suppliers.

However, this increasing anti-Huawei and ZTE sentiment may not spell the end for their existence in European markets. Some European countries, such as Greece and Norway, have yet to take any action against Huawei and ZTE. This reluctance to impose restrictions on these manufacturers indicates a higher value on the affordability and access to Chinese wireless hardware technologies in some areas.

As the global race for 5G deployments intensifies, the European stance against Chinese manufacturers, particularly Huawei and ZTE, marks a pivotal moment for the telecommunication industries in several countries. While the transition away from Chinese hardware presents immediate challenges and costs, it also opens the door for European and other international players to fill the void. As European nations continue to step away from Chinese wireless hardware, the future of 5G networks in Europe will likely be characterized by increased industry diversification, stringent security protocols, and a renewed focus on domestic and allied technologies.

VDC’s 2024 Voice of the IoT Engineer: Dataset & Analysis, from which Exhibit 1 is sourced, will be publishing soon!