As Huawei faces trouble in the West, it could find solace in India

Key Points
  • As Huawei faces problems selling its 5G equipment in the West, it may be welcome in developing countries that are price-sensitive, according to analysts.
  • India invited Huawei to participate in its 5G field trials in December, even as the U.S., the U.K., Canada, Australia, New Zealand and Japan sought to block the Chinese company.
  • Washington may now pressure New Delhi to ban Huawei's 5G services after the U.S. Justice Department pressed criminal charges against the company's chief financial officer.
Visitors crowd the Huawei stand at the 2016 CeBIT digital technology trade fair on the fair's opening day.
Sean Gallup | Getty Images

As Huawei comes under pressure in the West over allegations of technology theft and espionage, it may be able to find solace in developing countries where its pricing appeal could trump security concerns.

India is the world's largest smartphone market after China, and remains open to the prospect of using Huawei technology to build ultra-high wireless mobile networks known as 5G. In December, Prime Minister Narendra Modi's government invited the Chinese tech giant to participate in 5G field trials alongside other foreign telecoms companies such as Nokia, Samsung and Ericsson.

The move was significant since the United States, the United Kingdom, Canada, Australia, New Zealand and Japan had blocked Huawei from their respective 5G networks at the time.

The Shenzhen-based firm may be mired in international controversy over charges that its equipment facilitates surveillance, but it still has a chance of selling 5G equipment in developing countries such as India that are price-sensitive, experts say.

Huawei's 5G equipment strategically benefits India by increasing the range of options for domestic cellular operators, according to Amitendu Palit, a senior fellow specializing in trade and economic policy at the National University of Singapore. Indian telecoms will welcome Huawei's competitive prices, which should be cheaper than the other foreign players, Palit told CNBC.

"Indian companies have found that Chinese-made equipment is the key to their ability to provide the services they do at the prices that are, perhaps, the lowest in the world," echoed Manoj Joshi, distinguished fellow at Indian think tank Observer Research Foundation, in a note earlier this month.

Modi's government plans to replace the current 4G network with fifth generation technology — 5G for short — by 2020. New Delhi plans to auction 5G spectrum to telcos in the second half of 2019 but domestic carriers such as Vodafone Idea and Bharti Airtel want the government to delay auctions until 2020.

If other emerging markets open their doors to Huawei's 5G equipment while more Western nations close theirs, there could be a scenario where the developing and developed world have different 5G standards, according to Joshi. That means the world would effectively be re-bordered into two technological spheres, he said.

Potential US pressure on India

Washington could put pressure on New Delhi to block Huawei's services after the U.S. Department of Justice pressed criminal charges against its CFO Meng Wanzhou on Monday. The move is widely believed to be a part of U.S. President Donald Trump's broader trade and economic offense against China.

Over the past year, the Trump administration has pressured American allies such as Britain and Germany to bar Huawei and other Chinese tech firms from building 5G infrastructure, the New York Times reported last week.

Huawei is in an 'incredibly vulnerable' position: Professor
Huawei is in an 'incredibly vulnerable' position: Professor

"India will not be unaffected by the technology war between America and China," C. Raja Mohan, nonresident senior fellow at Carnegie India, said in a recent note. "As Washington goes after Huawei, the crown jewel of China's technology companies, Delhi's own exposure to the company will come under scrutiny."

India is a major U.S. security ally as well as a crucial player in Washington's Indo-Pacific blueprint, which many political analysts interpret as Trump's way of containing Chinese dominance in Asia. The U.S. has defined Indo-Pacific as the region "from the United States to India, from Japan to Australia, and everywhere in between."

Palit believes the Indian government is "best placed to make its own choices" on matters of domestic economic development "regardless of what it might mean for some other countries."

But New Delhi also has its own concerns regarding Huawei, which has been operating in the South Asian state since 1999.

In 2014, India launched an investigation into allegations that Huawei was hacking into state-run telecoms carrier Bharat Sanchar Nigam — claims that Huawei India denied. That came after New Delhi in 2010 blocked domestic carriers from importing Chinese telecoms equipment on fears that spying technology was embedded into hardware from China.

"Amidst the new global pushback against Huawei and India's own plans to introduce 5G mobile technology, Delhi might have to revisit the old arguments and take a fresh look at its relationship with the Chinese tech giant," said Mohan.

Watch: What is 5G?

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