Moving production from China will hamper rollout, hike costs
Chinese officials and industry representatives on Monday slammed the U.S. government's plan to demand that vendors produce 5G devices outside of China, in an apparent move to force companies like Ericsson and Nokia to pick a side amid the China-U.S. technology war that will break up the global supply chain.
The Trump administration is looking into whether it is feasible to demand that major vendors of 5G equipment to be deployed in the U.S. move their production out of China, the Wall Street Journal reported on Sunday, citing anonymous sources.
Such a move would reshape the global manufacturing sector, as major vendors in the U.S. market like Ericsson and Nokia may face tremendous pressure if they are required to move out of China - a market with huge growth potential where these companies are active in not only network deployment but also core technological research and development.
At a routine press conference on Monday, a spokesperson for China's Foreign Ministry did not mince words in criticizing what he called "a fool's errand" for one country to seek so-called absolute security through isolation in such a globalized era.
"Some U.S. officials are living in self-created panic and are extremely nervous for no reason, which has reached the state of abnormality," Geng Shuang, spokesperson for the foreign ministry, told the press conference in Beijing on Monday.
The proposals came after the White House issued an executive order restricting some foreign-made telecoms equipment and services from being sold in the U.S. market, citing security concerns, according to media reports.
If these proposals become reality, there could be wide-ranging implications for most well-known 5G device makers, and it could severely hamper the rollout of 5G services in the U.S., Ben Wood, a UK-based mobile and wireless industry analyst at CCS Insight, told the Global Times on Monday.
"Almost every 5G-capable device announced to date has been manufactured in China. Even a 5G variant of the iPhone, expected in 2020, would likely come from there," Wood said, noting that though some companies have diversified their manufacturing, there is still a high dependence on China for production.
Ericsson has been making major components for telecoms equipment at its factories in Sweden, Estonia and China, according to the company's website. Nokia warned in a statement to the U.S. Federal Communications Commission last year that the company procures a wide range of components from China for its 5G rollout.
Ericsson is a global supplier of mobile network infrastructure and the company aims to produce equipment close to its customers to provide the best services, the company said.
"China is one of our biggest markets in the world and Ericsson will continue to dedicate itself to and invest in China's 5G development," it noted.
The Swedish firm said in an earlier interview with the Global Times that China remains one of its major production hubs. It also set up new radio wave testing lab in Beijing this year, showing that it highly values the Chinese market, which is set to become the world's largest 5G market in coming years.
Core components, technologies
China's telecoms industry has been developing at a very fast pace in the past few decades, with many components manufactured in the country, analysts said.
"The Chinese market accounts for an increasing share of production and sales, which can't be ignored," Li Zhen, an industry expert at Beijing-based CCID Consulting, told the Global Times on Monday.
Foreign companies like Qorvo, which makes radio frequency devices, have major assembly facilities in China, according to its annual financial report of 2018. The U.S.-based technology company also collaborates closely with local designers for technologies such as baseband in China.
"Forcing manufacturers to shift their production lines out of China will surely delay the overall 5G rollout in the U.S., making its consumers pay more as the costs will go up after factory relocation," Jiang Junmu, chief writer at telecom industry news website c114.com.cn, told the Global Times on Monday.