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Focus: GS-II International Relations

Why in news?

  • The US Federal Communications Commission (FCC) formally designated Chinese telecom vendors Huawei Technologies Company and ZTE Corporation, all their parent and subsidiaries, as well as affiliate firms, as “national security threats” to the United States of America.
  • The move is expected to put additional pressure on Huawei and ZTE, which have been accused of being close to the Chinese government and spying for them by sharing data of US citizens.

Why has the US banned Huawei and ZTE?

  • The US government has been accusing Huawei and ZTE of working in ways that were contrary to “national security or foreign policy interests.”
  • Both companies have close ties to the Chinese Communist Party and China’s military apparatus, and both companies are broadly subject to Chinese law obligating them to cooperate with the country’s intelligence services, according to FCC.

Why is the ban on Huawei and ZTE important?

  • Huawei is the world’s largest maker of telecom equipment and the second largest maker of mobile phone parts.
  • On the other hand, ZTE, another Chinese vendor, has tied up with several big corporations to manufacture their patented equipment in China at very low costs.
  • A ban on both Huawei and ZTE could mean an increase of up to 30 per cent in cost of telecom equipment across the board, especially when countries all over the world are gearing up to launch 5G services.

Does the Huawei ban impact India?

  • The US FCC’s decision to classify Huawei and ZTE as “national security threats” could put pressure on friendly allies, such as India, to take similar, if not the same action.
  • With the reserve price for 8,300 MHz spectrum, including the 5G band kept unchanged low-cost equipment from Huawei or ZTE could have provided some relief to domestic telcos in India.
  • The Chinese vendor was a major equipment supplier to companies like Vodafone Idea and Bharti Airtel during the initial roll-out of the 4G services in India.
  • Huawei has made inroads into nearly 25 per cent of the total telecom equipment market in India.

Change in India’s Stance

  • Following a skirmish at Galwan Valley in Ladakh there have been reports that 4G network expansion tenders floated by Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) would be reworked to bar global vendors such as Huawei and ZTE from participating.
  • So far, private telecom operators have neither been officially told nor unofficially nudged to discontinue using Chinese telecom equipment.
  • One of the most important implications, they said, could be the loss of their cost arbitrage, as barring Huawei and ZTE from even bidding in the 5G auctions could mean equipment as much as 30 per cent costlier.

-Source: Indian Express

February 2024