Replacing China: The Opportunity of High Risk Vendor Removal

Before 2022, Chinese equipment manufacturers like Huawei and ZTE dominated the global telco equipment provisioning market. As political tensions ratcheted up, the United States announced bans on Chinese network equipment. U.S. allies such as the United Kingdom quickly followed suit with pledges to remove Chinese equipment from their networks, and this sentiment appears to be spreading, with German leaders being among the most recent to announce moves to meet and discuss the security of risk posed by these suppliers, which the United States designates as “High Risk Vendors (HRVs).” The intention is not just to find alternative suppliers for the future, but to rip out and replace existing Chinese-supplied infrastructure. This escalation in policy is overtaking the previous attitude held by countries such as the United Kingdom and Germany that the risks were “manageable,” suggesting more nuanced tactics to tackle the problem.

The massive undertaking of replacing large swaths of telecommunications networks creates a significant opportunity to vendors in the rest of the world, with someone needing to step in to fill the void left by these HRVs. The focus is on security in 5G networks, with a need to ensure strict supply requirements from the outset as 5G adoption ramps up.

These policies often have extremely tight turnarounds, with Canada announcing a ban in 2022 and expecting complete removal of 5G equipment by 2024. New supply and security relationships must be formed quickly to meet deadlines. For vendors already operating in this space with existing expertise, this is good news with the urgent need leading to new growth.

The move to strip out and replace Chinese equipment is an extremely expensive and time-consuming project. Years after the initial policies were made in the United States, funding remains a problem. In May 2024, the government reimbursement program, which was designated to financially support this endeavor, had been allocated just US$1.9 billion, with an expected requirement of US$5 billion. The shortfall severely limits operators’ ability to comply with the Secure and Trusted Communications Network Act, which laid out this exclusion, with almost half of the participants in the replacement program stating that they need government funding to complete the work.

Without proper funding, operators are warning that they may need to shut down networks or withdraw from the replacement program. Exceptions to the policy are already being argued, as operators in rural regions with no alternative networks are unable to comply, but cannot be shut down with no replacement. The time taken to complete the projects has also been critical, with dozens of deadline extensions being issued.

As it stands, the state of this replacement effort is extremely precarious. If countries are to stand by their assessment of HRV equipment as being critically detrimental to national security, they must fund these programs accordingly. For those vendors looking to capitalize on this market opportunity, the terms of competition are clear—their solutions must be optimized for constrained budgets and timelines, and the stilted replacement programs must be accommodated with excellent interoperability to avoid compatibility issues as the changes are rolled out.

For vendors who can position themselves correctly in these conditions, the policies have already been a significant boost to business. As replacement efforts continue, or begin in countries like Germany, it is critical that those looking for a piece of China’s previous market command can flexibly meet the needs of severely strained operators.