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Opinion: U.S. needs aggressive 5G strategy to beat Huawei

Jeff Ferry

Despite the disruption caused by the COVID-19 crisis, Chinese technology company Huawei is having a good spring. In March, the telecom giant announced its 2019 revenue was up 19% to $123 billion — a new company high. Huawei is now the world’s leader in wireless networks and fiber-optics. It’s also a major producer of microchips and is even ahead of Apple in smartphone manufacturing. Despite this success, many in Washington don’t appreciate Huawei’s technological prowess or its lead in wireless technology. They still view the company as a “paper tiger” that makes “cheap, low-profit items.” That’s a mistake, though, since Huawei has attained global market and technology leadership. The United States must move quickly to counter this emerging dominance, particularly in the realm of 5G wireless networks.

There are good reasons to be concerned about Huawei’s rise. The company has been repeatedly accused of intellectual property theft, industrial espionage, and even of implanting spyware in its products. Huawei’s rise now threatens the future of America’s chip industry, since it is determined to follow a ‘Made in China 2025’ policy that would ensure all chip sourcing comes from Chinese companies.

Consumers need a U.S.-based provider of 5G networks so that the world’s telecom companies will be able to stop buying from Chinese vendors, Ferry writes.

Some in Congress are responding to the challenge. Reps. Frank Pallone, D-N.J., and Greg Walden, R-Ore., have introduced bipartisan legislation that would allocate $750 million to develop domestic suppliers of 5G wireless networks. The effort is well-intentioned — but it’s too narrow. The bill requires all federal funding to support one specific technology, Open RAN. That technology is just one segment of a wireless network, and not the most important part. 

The essential need today is to develop an alternative, U.S.-based provider of complete wireless networks so that the world’s telecom companies will have options — and can agree to U.S. requests to stop buying from Chinese vendors. But to do that, the U.S. needs an effort akin to venture capital investment aimed at nurturing startups that can develop into genuine Huawei alternatives.

Three U.S.-based startups are already good candidates for such a role. And $750 million can make a big difference for them. But instead of awarding federal funds to an Open RAN consortium dominated by Microsoft and Dell, it should be disbursed to support the research and development efforts of various startups. An investment or loan of $100 million per company is a good place to start. 

One of these startups, Parallel Wireless, is already working on new technologies that will radically cut the power consumption needed for 5G networks. (Note: This author is Chief Economist at the Coalition for a Prosperous America. Parallel Wireless is one of the Coalition’s members.) High power consumption is a key drawback of today’s 5G networks. 

The U.S. needs many more startups like Parallel, which is why the Pallone-Walden bill is a helpful launching point. Federal money, coupled with non-financial support from the U.S. defense and telecom establishment, will attract more startups — and put America’s best technology brains to work on the problem. 

Pallone-Walden needs improvement. The bill should be augmented to include the establishment of a committee of tech veterans charged with disbursing the funds under one guiding plan: creating strong U.S.-based providers of wireless networks that can serve as alternatives to Huawei for telecom companies worldwide. The strength of Silicon Valley is its ability to create companies focused on a single, achievable goal. The right tech veterans could find and nurture the best startups for this objective. They should be “dollar-a-year” men and women, with no financial interest in the outcome — and do it to serve their country.

It will be a real challenge for the United States to regain its leadership in wireless networks. But the nation has no real choice. That’s why Washington must step in right now — and build a team of the best business, technology, and defense community leaders. Give them a clear goal — and let them have at it. 

Jeff Ferry is chief economist at the Coalition for a Prosperous America. Before joining CPA, he spent 18 years in the networking industry.