Huawei and 5G: a test for Southeast Asia’s digital transformation

Policymakers have had their eyes opened by the coronavirus pandemic to the urgent need to digitally transform their economies and embrace 5G
Yet there has been much debate, amid national security and cyber-surveillance concerns, over whether Chinese companies should be included

Melinda Martinus

Published: 8:00am, 18 Nov 2020

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5G adoption is continuing apace across Southeast Asia, even amid the significant economic downturn caused by the coronavirus pandemic. In fact, the unprecedented use of such technologies and digital services as telemedicine, video conferencing and online marketplaces this year has put 5G solidly at the forefront of the region’s digital transformation.

Members of the Association of Southeast Asian Nations continue to roll out their 5G masterplans, with Singapore, for example, still on track to achieve nationwide 5G coverage by 2025.

As well as providing consumers with faster connection speeds, lower latency and more bandwidth, 5G has also been touted as a revolutionary upgrade that will enable a wide range of new digital applications such as the internet of things, smart cities, driverless cars, robotic appliances, and augmented reality.

By 2025, the Asean region could gain as much as US$174 billion from 5G, according to global consulting firm AT Kearney, with more than half of that coming from service sectors such as trade, transport, and financial services – all further bolstered by artificial intelligence technologies.

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Yet there has been much debate, amid national security and cyber-surveillance concerns, over whether operators in Southeast Asia should buy equipment from or partner with Chinese telecommunication companies for their 5G development.

Huawei Technologies Co. and ZTE Corporation, for example, are believed to have close ties to China’s authoritarian one-party government – further raising suspicions that Beijing has absolute power to seize corporate data for its own national interests.

This has seen both companies get caught in a broader US-China trade dispute, with US President Donald Trump’s trade embargo on Huawei, in particular, influencing allies Japan, Australia, and Germany to also exclude the company from their national 5G roll-outs.

But within the Asean region, only Vietnam has seen sustained anti-Huawei sentiment – fuelled by disputes Hanoi has with Beijing in the South China Sea. This has propelled many Vietnamese telecoms providers to diverge from the Chinese company, with Vietnam’s largest mobile provider, Viettel, deciding last year to deploy equipment from Sweden’s Ericsson and Finland’s Nokia as well as 5G chipsets from the US-based Qualcomm instead. In an interview, Viettel’s CEO asserted that it was the company’s own security and technology concerns, not geopolitical pressure from the US, that had caused the switch.

Former Malaysian Prime Minister Mahathir Mohamad said in 2019 that he welcomed Huawei. Photo: AFP

Indonesia and Malaysia have generally been more open to collaborating with Chinese telecoms companies, despite the significant resistance to Chinese investment that exists among both countries’ citizens.

Former Malaysian Prime Minister Mahathir Mohamad halted or criticised a swathe of China-backed projects upon winning the 2018 general elections, but when it came to Huawei he was firmly on board – telling a Nikkei conference in May 2019 that he welcomed the company and saying Malaysia would “make use of their technology as much as possible”.

In Indonesia, despite xenophobic messages about China and Chinese companies that have circulated on social media amid the pandemic, the market penetration of Chinese brands is growing and Chinese technology expansion is largely welcomed – in fact, after the US Huawei ban, Telkom Indonesia’s president was quick to assert that Indonesia’s largest telecoms company would collaborate with any vendor, including those from China.

The Philippines, meanwhile, found no evidence of wrongdoing after launching its own investigation into the espionage allegations that had been levelled at Huawei by the US and others. Huawei even went on to leverage its position as a credible telecoms vendor by partnering with the City of Davao and Manila to develop a US$400 million video surveillance system known as “Safe Philippines”.

South Korean company Samsung is often mentioned as a preferred 5G equipment vendor by those in Southeast Asia, despite having no significant presence in supplying the region’s infrastructure. Photo: DPA

In terms of public sentiment, a State of Southeast Asia 2020 survey conducted by the ISEAS – Yusof Ishak Institute found that Huawei, and Chinese telecommunication companies in general, are welcomed across much of the Asean region. A preference for US providers over their Chinese counterparts only existed in the Philippines and Vietnam, the survey found, while Chinese telecoms companies Datang Telcom, Huawei, and ZTE were frequently listed as respondents’ second preference for building 5G infrastructure after South Korea’s Samsung. In Laos, Cambodia, and Malaysia, the preference for Chinese companies was even stronger.

Asean policymakers, seeing the urgent need to digitally transform their economies as exposed by the pandemic, have been prompted to select partners with outstanding track records to build this critical infrastructure. The Trump administration’s espoused security-related restrictions on Chinese digital technologies have also alerted Southeast Asian telecommunication companies to the need to diversify.

Singapore’s largest telecoms provider, Singtel, recently selected Ericsson as the vendor to build the company’s 5G infrastructure network, while fellow providers M1 and Starhub have decided to partner with Nokia.

Singapore’s Communications and Information Minister S. Iswaran said in June that no vendor had been specifically excluded from the city state’s 5G roll-out. Photo: Facebook

In a public hearing in June, Singapore’s Communications and Information Minister S. Iswaran said no vendor had been specifically excluded from the city state’s 5G roll-out, and that the process of selection had been rigorous and competitive. Singapore’s 5G ecosystem “will continue to evolve, and there will be more opportunities for various technologies to participate”, he said.

Diversification away from Huawei has also been explored by Malaysia’s Axiata Group, which recently announced it would select two vendors for its 5G roll-out, and the Philippines’ Globe Telecom, which plans to use companies other than Huawei for one-fifth of its 5G equipment.

The result of all this is a regional market for 5G equipment that is still dominated by Huawei and ZTE, but with European vendors Ericsson and Nokia making significant inroads. Samsung has no significant presence in supplying 5G infrastructure in the region, nor do US telecoms companies Altiostar, Cisco and Qualcomm.

Across Asean, governments and companies have come under increasing pressure to grapple with Huawei’s influence against a backdrop of increased US-China rivalry.

01:17

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When they have decided to reduce their reliance on the Chinese company, it has allowed other prominent vendors such as Nokia and Ericsson to chip away at Huawei’s market share. Yet Huawei remains proactive in developing the region’s digital economy ecosystems, especially through the Asean Smart Cities Network.

In future, there will be more competition involving technology titans which could trigger further geopolitical tensions over cybersecurity. With that in mind, Asean should start exploring mechanisms to standardise compliance and diversify risks.

Competition over 5G equipment in the region provides a case study to explore a more robust compliance system in digital technology. Asean member states should maintain their commitment to open, fair, and competitive markets to remain trustworthy and credible in other technology and innovation sectors.

Melinda Martinus is Lead Researcher (Sociocultural) of the Asean Studies Centre, ISEAS – Yusof Ishak Institute. This article was first published as ISEAS Perspective 2020/130 “The Intricacies of 5G Development in Southeast Asia”.

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