 Welcome to NewsClick. Today we're going to be talking about what in many quarters is being called the assault by the United States and the West against the Chinese tech company Huawei. Now the immediate reason for this is because France has also announced that it will enact measures by which Huawei's 5G equipment will soon be out of its systems. And this follows the United Kingdom, which last week announced a very similar measure. And we know that in May, the United States announced strict measures against companies supplying equipment to Huawei. So we have Prabir Prakash to talk more about this. Prabir, thank you so much for joining us. So first of all, the move by France indicates that the UK's decision was not a one-off thing. There is clearly a concerted effort being made with all the Western countries as far as China and Huawei are concerned. So could you first maybe talk a bit about the kind of alignment that is developing on these lines? I think what you said is very clear that the NATO allies are slowly under pressure of the United States, moving in the direction that they will stop using Huawei's equipment. Of course, there is a lot of Huawei equipment already in the network. So they probably have a time frame that by 27, 28, they will phase it out, unless of course there are radical changes in the world at that time. So nothing, of course, can be considered as sacrosanct in terms of time in international politics. But given today, the direction seems to be the European Union is going to follow, or at least the NATO countries are going to follow the lead of the United States, keeping Huawei out of their telecom network, and probably working with the US to build an alliance of suppliers like Ericsson, Nokia, as well as Qualcomm in the United States for creating a global opposition or a global alternative to Huawei. Of course, what is the role Samsung is going to play and this is not clear. Samsung is also a player in this space. So the 5G issue then has been thrown wide open, and Huawei's technical lead, which is very clear in this area, there are at least 12 to 18 months ahead of the others, is being challenged, not technologically, but to sanctions and by various trade measures. So it also makes clear, if you think back on it, that WTO, which would have been a platform where the sanctions could have been challenged, it has been rendered virtually defunct by the actions of the United States by not having tribunal members chosen and without tribunal members being available, that if they're not enough members of the tribunal, dispute settlement tribunal, that means WTO effectively ceases to act as a trade body. It can say what it wants, but there is no way to resolve disputes. The dispute settlement process was the key one which made WTO different from all other trade earlier agreements. So I think now it also falls into place that this was planned for some time. Therefore, WTO dispute settlement body was made defunct by the United States and now we are seeing a set of sanctions which I do not remember ever having seen earlier. This nature of sanctions, that if I give you an equipment and I'm the United States, I give you an equipment, if you machine anything on it, then that also comes under sanctions because it's touched my equipment. So this touch business of sanctions that if you machine anything with my equipment, it also automatically comes under my sanctions. This kind of legal extension of law far beyond the borders of the country is something that I do not remember seeing and I do not think that it has any international legal provenance in terms of international law. So this it would seem to indicate this was quite sometimes with the coughing, but the US had problems convincing its allies, but slowly either by threat, cajoling or by promise of money to their companies, slowly there is a move away from Huawei. And I think that is not going to get resolved unless the larger picture falls in place, which is what is the role of the European Union going to be in this trade war. So that I think is the big up issue. It's very clear that the United Kingdom after Brexit, the European Union is going to march in tandem with the United States. But will the European Union follow suit? That was a key question. And France, if the indications are true, then France is giving the indication that it is also going to follow suit. Absolutely. So Praveer, in this context, the key question really is what are the challenges before Huawei and what are the options before Huawei? So in an earlier conversation, we did talk about some of the technical aspects regarding the processors, regarding the semiconductors itself, and how the kind of challenges Huawei would face. So could you maybe elaborate a bit more on this in terms of, especially in the 5G sector, what are the most important constraints Huawei is going to face and what are the options it has in terms of overcoming them? Let's look at the other side of it, that if you look at the Huawei's range of goods, the mobile phones, of course, is a key element of that. And the second is the 5G network technology. It is one of the world's leaders in terms of telecom equipment. It supplies networks, it supplies a whole range of equipment. And ZTE is the sort of the laggard in the market, not as big or as advanced as Huawei, but it's also a cost-effective, lower-end supplier of network equipment. Whatever happens to Huawei, I think also will happen to ZTE also. So this is where these two companies operate. So earlier, the ARM processor, which is the key core processor, ARM is a British company, which has been bought by Softbank in Japan. Now that operates out of the United Kingdom, but nevertheless, a lot of its intellectual property or designs, et cetera, come from the United States, from its offices. There are also some from the it links with other universities. So the US has earlier said, the more than 25% of your ARM processors comes with our intellectual property. Therefore, that also comes under our sanctions. And ARM, based on that, had stopped supplying Huawei equipment or the core processors from May onwards. It had said, after May, we will not supply you any new designs. The ARM doesn't manufacture anything. It really supplies the design as software. And then of course, it is converted into processors by companies. They also use the core process to construct the larger processors. They can have four to eight cores that go into such processors. And these are then fabricated in what are called FABs. The FABs in this particular case, which we are talking about is a Taiwanese FAB company. It's a leading FAB company in the world. It has the largest income and the largest throughput, as well as the largest revenue. That has seven nanometer technology. So it's really the most advanced in terms of FAB technology. And I think the only other comparable FAB that exists is probably Samsung's, which also have the capability of seven nanometer technology. So the Taiwanese supplies to Huawei are now going to get hit because they will not be able to fabricate the Korean processor, for example, which is built on the ARM core processors. That Korean processor cannot be fabricated in the Taiwanese FAB company. So that though officially they haven't declared anything, what we understand that whatever it is said publicly, they've stopped taking orders from Huawei. So they will probably still supply what they have well made. And it is possible that Huawei has about 12 to 18 months of inventory of the processors they're looking for. So they're not going to be hit today. But down the line, at some point, the core processors on which a number of technologies are built, it's not just the cell phone, which of course uses the Korean processor, at least the more advanced ones do. But also a lot of the network computation that takes place, what I call in the base stations, they are also processor based. So these Korean processors would have been there also. So there is going to be a range of things that are going to be hit if they cannot access the seven nanometer technology. So this is the problem that Huawei is going to face. Now is this problem really unsolved? There are two ways of looking at it. One is the immediate solution. That means in China, they have the fifth largest foundry in the world, which is capable of making 14 nanometer technology processors, chips. And that would of course be coarser than what the Taiwan is camp company is offering or what Samsung can do. Therefore it would be less efficient, it would be consuming more power, it would be more expensive in terms of computation because you need more equipment in order to reach the same computational speed. So to say our computational effort. So yes, they would then have to balance it against the loss but in a processor cost is not the major component of the cost. That's not going to be the major issue. But yes, the loss of efficiency and the larger computational power it would drop, larger power it would drop would be in some sense restrictions. But don't forget that the competition largely in the 5G are based on processes which are Intel processors and they're not as efficient as the ARM processors. So in that sense, that may not be an immediate issue, but long-term yes, that they get frozen out of this market is something to worry about because Qualcomm, who also manufactures processors and Samsung who also manufacture processors, they are also on ARM processors unlike Nokia and Ericsson, who are at the moment the main European competitor. So in the long-term sense, who are they being hamstrung like this will have an effect unless they're able to develop seven nanometer technology quickly. And for doing that, and this would really, if they don't do it, this would also really affect their cell phone market as well because the Kirin processor is the one which they're banking on for the high-end cell phone market. So the question is within 12 to 18 months, can they do it? So now they're importing EUV technology, they're importing high-end lithographic equipment and they're trying to develop based on that, the ability to bring the fab level from at least 14 to 10 or seven. Now, can they do it in 12 to 18 months? We don't know. They can also import equipment which are not under sanctions because they are manufactured not in the United States but by some certain European companies, I think by also one Japanese company. Will they be able to do so? Not clear at this stage. Will they be willing to supply the Chinese market given the trade war? We don't know. But the Chinese have options over there but it's not that this is the only deciding issue on the issue on the question of 5G network. The other issue that's going to be there is that the major reason Huawei has an advantage over others is not because of the processor but because of the gallium nitride material they have used extensively as opposed to silicon. And that has certain advantages because it actually takes less power. It consumes less power for the same amount of computation it does. And gallium nitride as opposed to silicon seems to be giving them an advantage to the extent. For instance, this massive antennas which are called MIMO antennas that are there, those antennas are way a lot. So if they have to be lifted, put on a structure and you require a huge number of them because as you know, the network distances have to be small. So the 5G networks really have not like the cell towers. They're not as dispersed in cell towers. They have to be much closer together which means also that you need many more antennas than you do for cell towers. So if you need those antennas which are, as I said a very large number of them that needs to be deployed have higher consumption for power for instance and way more that is going to be economically something that goes against those suppliers. So that's one bottleneck they're going to have and some indications are that the other company's antennas were at least 60% more than the Huawei antennas. So they have a certain advantage over there. And the second part of it is of course that the efficiency of the radio network still seems to be better than their competition. Ericsson, Nokia are not in the same range. Qualcomm has good processors, has got certain things but they don't, I don't think they provide the same range of equipment that Huawei does. They make a lot of the components of the 5G network. Samsung is another player. None of them have the reach and the breadth that Huawei has. And they're in that sense the only competition of Huawei was Ericsson and Nokia. So these two were the major competition who relatively are at least 18 to 24 months behind them. And they're not switching to stadium nitride as yet. So again, Huawei has a lead on that. And let's not forget the patents. Huawei has more patents than Qualcomm or Ericsson or Nokia. And if you take the patent as an indicator of what kind of strength tech strength the company has, then Huawei has a huge tech strength in terms of know-how. And a lot of them are based on Gaelian nitride. And let's not forget 95% of the Gaelian instead of a rare earth material is from China. So they are also sitting on the source material over there. So as of now, the technology balance is still even. Yes, they have been hit but as far as the 5G market is concerned, I don't think they have taken a decisive hit. So the real issue is therefore the political one. How to keep Huawei out of markets, particularly of the countries like the European Union, UK, the United States, Australia. But let's not forget, this is not the big market in the world today. The big market is China. The big market is India. The big market is rest of the world. So therefore, in trying to bring Huawei down, keeping them out of the market, there is the converse part that is also there. They are essentially hamstringing their own networks, making it slower because Huawei could make those networks much faster. That means they're imposing a tax or cost on the consumers in terms of speed and throughput. So this is one part of it. And therefore it is going to slow down a whole range of technology applications which are planning to ride on top of the 5G network, for instance, advanced vehicle, maneuvering, using IoT devices. A whole range of things have been planned with the 5G network speeds in mind. So that would be ham. And secondly, they are giving an incentive for China to switch. That means whatever market China loses, they also, conversely, the American equipment manufacturers also lose a market because they can't supply those equipment to China. And a number of companies who want to also export to China then will think American equipment is poison by the fact that anytime they can put sanctions on me for doing my normal commercial activities, and therefore should I be buying equipment for them? So this is forcing China to become self-reliant. That's one part of it. Weakening the 5G speeds in part of the world that the US still dominates. And C also could harm the future fab equipment, manufacturing equipment in which the US still has a lead. So all in all, it's a mixed bag that is there. And I'm not sure that which way in the long-term things will pan out. But China's basic strength is a huge internal network it has. It's 5G plans, and they are already going ahead with that, are far larger than what the US is going to deploy. So in terms of market, it's about seven to 10 times the size of the American market. And if that is so, then automatically, the size of the market that Huawei has gives them an advantage because the whole market itself is so large. So I think things are still very much out there, but India and reliance has been a joker in the pack. Where they have got, they're getting the technology. What is the 5G technology Geo is proposing? We don't know. They have a 5G, they have a 4G network was entirely built by Samsung. And Samsung has a 10-year clause that Geo cannot enter networks, network technology areas for, I think for 10 years. So I think that will expire in about two to three years. So what do they have in place of that is completely opaque at the moment. Qualcomm has made some investments in reliance, but it's a very small one, it's only $97 million. So whether it's a Qualcomm Geo lineup, is there some other things in the offering that we don't know? Is it Samsung is considering itself to be a partner of Geo? We don't really know any of these things, but we do remember that when the reliance chairman, Mukesh Ambani in a conclave stood up and said to Trump that I have a network in which there is no Chinese equipment. He thought he was only doing some grandstanding. But now it appears that there is a intention to switch sides or aligned with the United States. There is an intention to actually align with the United States, bring Geo as a partner, not just as a recipient of other people's equipment, but as a partner and maybe possibly enter the network, erection, commissioning, deployment market with other people's components. We don't really know what the Geo game is, but it is certainly emerging as a player, at least in terms of intent. And this of course means that the Indian market will also not be available to Huawei. It's very clear after the kind of bands and technology and kinds of bands they have put on Chinese investments. So I think that is the other part that we have also to see. Thank you so much for talking to us. That's all we have time for today. Keep watching.