Taiwan blocks core telecoms gear from Huawei

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Taiwan blocks core telecoms gear from Huawei

Regulator cites security concerns, despite increased cooperation with China, and Huawei's plans to establish a Taipei subsidiary

By CAROLINE GABRIEL

Published: 5 July, 2011

READ MORE: Taiwan | Huawei Technologies | Regulator

Relations between China and Taiwan have been thawing recently, at least in the wireless industry, but now the island state has barred Huawei from supplying core telecoms equipment, threatening new tensions. This is despite deepening cooperation between operators from both countries, especially in TD-LTE, and a commitment from China's largest supplier to increase its purchasing from Taiwanese suppliers.

According to Taiwan's Taipei Times, the island's telecoms regulator, the NCC, has imposed a ban on wireless or wireline operators using core network equipment supplied by Huawei. The agency cites national security concerns, a common reason given by countries for restricting purchases from the vendor, which is accused of having over-close ties to the Chinese government and military. It denies these accusations and has offered to open up details of its structure and ownership, and use local supply chains, in order to smooth its path, while arguing that the real motive behind the bans is protectionism. Nonetheless, it has encountered major obstacles to large contracts in India, the US and other places and last year saw its Indian revenues fall by over 23% year-on-year when purchases of its kit were blocked for several months.

In Taiwan, the NCC said that the island's government, the Executive Yuan, had requested that the regulator handle the matter in a "lawful and cautious manner" especially as several operators have made recent purchases from Huawei, including Vibo, Taiwan Mobile, FarEasTone and APT. The Times says that some of these products are being held by customs until the issue can be resolved.

Under new rules, any telco wanting to use Huawei kit must apply for approval to the NCC and the national security agency, the Investigation Bureau. However, sanctions appear to go further, with the website of the Ministry of Economic Affairs displaying a list of Chinese telecoms products that are barred altogether, and with the NCC suggesting that companies should consider alternative suppliers. Some fear that the argument will jeopardize the success of the breakthrough Economic Cooperation Framework Agreement (ECFA), signed a year ago to lower trade barriers between the two states, with a longer term aim of achieving free trade.

All this comes despite significant plans by Huawei to invest in Taiwan. In May it requested permission from the government to set up a new subsidiary in Taiwan, the first mainland Chinese telecoms supplier to make such a move, and it also plans to establish an R&D center on the island to tap into its extensive electronics ecosystem. This would join a network of R&D bases in China, the US, Russia and Sweden. Huawei also said recently that it would increase its purchases from Taiwanese suppliers to total about NT$100bn this year. That pledge was mainly related to components for handsets and tablets, with the supplier targeting sales of 60m units this year, twice its 2010 figure.