SoftBank Mulls Abandoning Some Huawei Equipment Over 'Cybersecurity Concerns'

The White House has spoken, and apparently, the US's allies are listening.

Less than one month after WSJ reported on an "extraordinary outreach campaign" launched by the US government to lobby private companies and allied governments to abandon Huawei equipment (citing concerns that Huawei's tech might be vulnerable to Chinese spies), the paper reported Tuesday that several of Huawei's customers are reportedly examining the pros and cons of ditching at least some equipment manufactured by the Chinese telecom giant.

Softbank

SoftBank, the only firm cited by name in the latest WSJ story and Huawei's largest customer in Japan, is reportedly assessing the impact of eliminating some less-expensive Huawei gear. Of course, it's extremely probable that SoftBank might decide that the costs of moving away from some of Huawei's equipment are too steep; the telecoms conglomerate, which operates Japan's third-largest mobile phone network, relies on Huawei's equipment to offer rates that are competitive against its two larger rivals, who together control about three-quarters of Japan's mobile market and are reportedly planning to cut rates as much as 40%. Also, SoftBank could be fearful of damaging its relationship with Huawei as the two companies have already partnered on trials of new 5G technology.

The study is preliminary, yet it remains the first indication that SoftBank is beginning to doubt the security of Huawei's equipment. Until very recently, SoftBank had insisted that Huawei's equipment was safe.

Until recently, SoftBank had said it believed equipment from Huawei and Chinese telecom-equipment maker ZTE Corp. was safe. But a company official involved in SoftBank’s discussions said Tuesday the company was assessing whether it could source equipment from other makers, and if so how that would affect network quality, cost and the timeline for introducing 5G. The official said the study was preliminary and no decision has been made.

Meanwhile, Huawei has insisted that its equipment is safe, and a government spokesman in Beijing told WSJ that nobody has produced even a shred of evidence to suggest otherwise.

In Beijing, Foreign Ministry spokesman Lu Kang said Huawei’s critics "haven’t provided one piece of evidence that Huawei threatens their national security. Any action based on such speculations is ridiculous." Mr. Lu said Huawei has signed 5G contracts with companies in more than 20 countries and is "gaining greater trust from its international partners."

The US has already banned government agencies from sourcing Huawei equipment, and on Monday, Japanese government revised its guidelines for buying telecoms equipment to help improve its defenses against cybersurveillance - a change Huawei decried as a "backdoor" ban. SoftBank is in discussions with regulators about how it should comply with these guidelines. Meanwhile, accusations that Huawei violated US and EU sanctions against Iran (Canada triggered a mini diplomatic crisis when it arrested Huawei's CFO more than a week ago) could grant the US additional leverage as it seeks to hamstring the Chinese telecom giant.

Setting aside cyber security concerns, the US only stands to benefit if its allies shun Huawei. Because US firms are working on their own 5G equipment as they struggle to regain lost ground in the battle over who will dominate in 5G.