The U.S. Attorney General reveals that a U.S. Consortium may take a Controlling Stake in Nokia and/or Ericsson for 5G
U.S. Attorney General William Barr said on Thursday the United States and its allies should consider taking a "controlling stake" in Finland’s Nokia and Sweden’s Ericsson to blunt China-based Huawei’s dominance in next-generation 5G wireless technology.
U.S. Attorney General, William Bar at Center for Strategic and International Studies Event
In a remarkable statement underscoring how far the United States may be willing to go to counter Huawei Technologies, Barr disclosed in a speech at a conference on Chinese economic espionage that there had been proposals to meet the concerns "by the United States aligning itself with Nokia and/or Ericsson."
Barr said the alignment could take place "through American ownership of a controlling stake, either directly or through a consortium of private American and allied companies."
"Putting our large market and financial muscle behind one or both of these firms would make it a far more formidable competitor and eliminate concerns over its staying power, or their staying power," Barr said.
"We and our closest allies certainly need to be actively considering this approach," he added at the event hosted by Washington’s Center for Strategic and International Studies (CSIS).
U.S. officials have criticized Huawei for its close ties to the Chinese government and they added the company to an economic blacklist last year, saying it was involved in activities contrary to U.S. national security. The Trump administration has pressed nations not to grant Huawei access to 5G networks and alleged Huawei’s equipment could be used by Beijing for spying, which the Chinese company has repeatedly denied.
FBI Director, Christopher Wray
At the same CSIS event, FBI Director Christopher Wray said Beijing was seeking to steal American technology by "any means necessary."
He said the bureau currently had about 1,000 open investigations of Chinese technology theft across its 56 regional offices, while FBI counterintelligence chief John Brown said it had arrested 24 people last year in China-related cases and another 19 already in 2020.
William Evanina, director of the National Counterintelligence and Security Center, said that among China’s priorities was stealing U.S. aircraft and electric vehicle technology.
As far as electric vehicle technology is concerned, look no further that the two Chinese Nationals caught for stealing Apple technology that is related to Project Titan, a Special Group project related to vehicle technologies of all kinds including electric cars. You could check out Apple's many patents on such technologies here. Patently Apple covered the story of the Chinese Nationals in three reports in 2019 that you could review here: 01, 02 & 03.
Wray also pointed to one campaign wherein charges were laid against a leading American academic at one of the top U.S. universities.
Last month, prosecutors charged Charles Lieber, chair of Harvard University’s Department of Chemistry and Chemical Biology, with lying about participating in China’s Thousand Talents Plan, which aims to attract research specialists working overseas. For more on this, read the full Reuters report.
The video presented to you below covers over four hours of speeches on the Chinese threat to the U.S. on many levels. We've set the video to begin exactly when the FBI Director's segment begins. Early on Wray stated that "The first thing we need to understand about the threat from China is just how diverse and multilayered it is. I say that in terms of its techniques, its actors and in its targets. China is using a wide range of methods and techniques, and I'm talking about everything from cyber intrusions, to corrupting trusted insiders.
They've even engaged in outright physical theft. And they've pioneered and expansive approach to stealing innovation through a wide range of actors including not just Chinese intelligence services but State owned enterprises extensively private companies, certain types of graduate students, researchers and a whole variety of other actors all working on their behalf. Play the video to hear more of Wray's brief presentation.
William Barr on the 5G War with Huawei
After the segment from Wray ends, you can advance the video to the 2:14:10 mark to follow along and hear the U.S. Attorney General William Barr begin his segment. Barr revealed that he spent 6 years at Columbia getting a BA and MA focusing on Chinese studies. Barr also spent 14 years as the Executive Vice President and General Counsel of the telecommunications company GTE Corporation. So he thoroughly understands the telecommunications industry and it's need to act quickly to compete with Huawei in the 5G revolution.
While I found Barr's speech interesting overall, the focus on the challenge of 5G from China begins around the 2:26:20 mark. It's here where Barr talks about the next wave of the internet known as the Industrial Internet. It represents a 23 trillion dollar market by 2025. One that the U.S. can't afford to miss out on. This is a serious topic but one that was enjoyable to listen to.
The U.S. dominated the 4G market and it helped the U.S. to economically benefit from this development. It allowed Apple, Google, Facebook and Amazon to thrive. However, 5G is a whole new ballgame. It's a quantum leap forward.
Barr talked about going from 4G smartphones and smart homes to 5G based smart farms, smart factories, smart heavy construction, smart transportation systems and so forth. Barr lists out what the 5G era will bring about far beyond just AI, which Google's CEO recently claimed at Davos 2020 as being more profound than the introduction of fire or electricity.
5G is an infrastructure business and China has taken an early lead. Huawei and ZTE have captured 40% of the market. Currently Nokia has a 17% share and Ericsson has 14% market share. The Chinese government offers governments around the world with deals that offer zero down to own a Huawei 5G network. The Chinese know that winning 5G means beating the US economically.
In order for the U.S. to not lose in this all-important shift to 5G, the U.S. has blocked Huawei and ZTE from building 5G networks in the U.S. While the U.S. fell asleep at the wheel on 5G, they now must move quickly and enter this race at full speed.
While the U.S. is asking their allies to not choose Huawei, Barr says that they currently can't offer their allies a sound alternative. This is why there's a tremendous push to being able to offer their allies an alternative over the next 18-24 months.
The only alternative comes by way of Nokia and Ericsson. But these two companies don't have Huawei's scale nor a large country base like China.
Barr added "There are some proposals that these concerns can be met by the United States aligning itself with Nokia and/or Ericsson through American ownership of a controlling stake either directly or through a consortium of private American and allied companies. Putting our large market and financial muscle behind one or both of these firms would make it a far more formidable competitor and eliminate concerns over its staying power. We and our closest allies certainly need to be actively considering this approach."
Barr sees the proposal he just explained as the only way to blunt Huawei's advance. The stakes are extremely high and this will be the race to keep an eye on over the next two years.
Update Feb. 7, 2020:
The day after Barr's surprising statement about the U.S. possibly taking a stake in owning Nokia and/or Ericsson or through a consortium of private American and Allied Companies, CNBC reported on Friday that Larry Kudlow, the White House economic adviser, stated that the United States was working closely with Nokia and Ericsson because the companies’ equipment was essential to the buildout of 5G infrastructure. However, he added that the "U.S. government is not in the business of buying companies, whether they’re domestic or foreign," but that "there’s nothing to prohibit American tech companies from acquiring" them.