Huawei could be about to find itself at the center of an intense political rift between Britain and the United States.
London is expected to grant the Chinese tech giant some access to its 5G network, according to a Financial Times report. Citing people close to the discussions, the FT reported that U.K. Prime Minister Boris Johnson is looking at imposing a cap on Huawei's share of the market.
It's believed that Huawei, the world's largest telecommunications equipment maker, could be allowed to provide non-core telecom gear like the antennas and base stations seen on rooftops, rather than the key infrastructure used for processing customer information. But the U.S. has demanded an outright ban, like the one implemented in Australia.
Johnson said he believed it was possible to achieve a resolution that ensures technological progress without compromising national security.
"We're going to come up with a solution that enables us to achieve both of those objectives," the U.K. leader said Monday. "There's no reason why we shouldn't have technological progress here in the U.K.," he added, but Britain would also need to "protect our security interests and protect our key partnerships with other security powers around the world."
'Three is better than two'
Competition is a primary concern in the row over Huawei. Washington wants allies to block it on national security grounds, but doing so in a market like the U.K. would narrow the competitive landscape for 5G equipment providers down to Sweden's Ericsson and Finland's Nokia.
"Huawei has become the poster child of the U.S.-China tech battle," Dexter Thillien, a senior TMT analyst at Fitch Solutions, told CNBC over the phone. "It's almost being seen to the outside world as the only player."
Thillien said there was a concern that the major mobile network operators would be restricted in choice if Huawei is blocked from the country's 5G rollout. Three out of four of the U.K.'s big carriers — EE, Vodafone and Three — already use Huawei equipment in their networks.
"Three is better than two," he said. "If you ban Huawei, you have a choice between Ericsson and Nokia. You lack competition."
Vodafone stressed that it doesn't use Huawei in its "core," and has "multiple layers of security and encryption" between Huawei and Vodafone's masts. Three said it remained in "close contact" with the government and would "abide by any directions given by them." EE was not immediately available for comment.
'Momentous decision'
The U.S. has made no secret of its position on Huawei. Over the weekend, Secretary of State Mike Pompeo made a warning to Britain via President Donald Trump's communication channel of choice — Twitter.
"The U.K. has a momentous decision ahead on 5G," Pompeo tweeted, agreeing with an opinion article from British Conservative lawmaker Tom Tugendhat, who said: "The truth is that only nations able to protect their data will be sovereign."
U.S. officials are concerned that the use of Huawei's 5G gear would put intelligence sharing with the U.K. at risk. Collaboration on intelligence has been a key part of the longstanding "special relationship" between the two countries.
The main contention Washington has raised is with the possibility that Huawei provides Beijing with a "back door" to sensitive network information. Huawei has consistently denied such claims, stating it's a private company and would never spy for China.
Experts have however been skeptical, pointing to Chinese laws that mean domestic companies are required to assist Beijing with intelligence collection.
The U.K. is expected to make a decision on whether to let Huawei build out its fifth-generation mobile networks on Tuesday. A minister for the government has previously told CNBC security will be the "top priority" ahead of the decision.
It's not the only technology-related issue to prove a potential sticking point in U.K.-US relations. Proposals to implement a so-called digital sales tax in the U.K. have led to warnings from Treasury Secretary Steven Mnuchin that the country could be faced with reprisals.