The Paper Threat: Huawei

Sorry Donald. Angela is not listening.

Instead of bowing to pressure, Germany’s Angela Merkel is not blocking Huawei equipment from their 5G rollout.

Huawei won’t be bidding. The bidding for bandwidth spectrum is already underway by companies like Deutsche Telekom, Vodafone Group and Telefonica.

But Merkel has said nothing about the equipment the above companies need to use. And since Huawei provides cheap, easy to install equipment, theirs is bound to wind up somewhere in the German 5G network.

But China uses hardware to spy on Americans, Trump says. Not only that, China tells exchange students to gather whatever information they can and bring it back to Xi Jinping, according to some US intelligence officials.

Merkel is not fazed, though.

There are two things I don’t believe in,’ she said. ‘First, to discuss these very sensitive security questions publicly, and second, to exclude a company simply because it’s from a certain country.

Not surprising, coming from one of the most accepting and inclusive leaders of today.

In response, Trump’s team said they might scale back the information they share with Germany. They have to look like they’re taking this Huawei threat seriously, after all.

But is Merkel making a huge mistake? Is there something in this Huawei threat the Donald speaks of?

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Who would you like handling your data?

You’ve probably heard a lot about the ‘Ban Huawei’ movement Trump is pushing.

It was enough to get us Aussies on board. New Zealand is toeing the line. But countries in Europe are less obliging.

Various security experts have said Huawei tech poses risks. But couldn’t you say the same about any kind of tech?

Google and Facebook watch where you go. Amazon, if you use it, knows what you like and what you buy. If you’re the suspicious type, then this kind of data harvesting probably doesn’t sit well with you.

But it’s all in the name of harmless ads really.

I guess things get a little different when lawmakers and governments start looking into private information.

So maybe your heart should beat a little faster knowing that the Chinese want a bit of your information. But remember, the US government wants the same thing.

In fact, they’ve passed laws to make it easier to spy on the American populace. Ask questions about it and officials will say it’s for your own good. They’re trying to weed out the ‘bad people’ from the ‘good people’.

Yet who’s deciding on these subjective definitions?

I’d argue it’d be better to give a bit of information to private companies rather than direct government institutions. The latter are the ones with the guns, after all. They’re the ones always threatening violence or imprisonment if you make them upset.

But let’s say Germany does heed Trump’s word and blocks Huawei. Well, you’ve just set back Germany’s 5G ambitions, maybe for a few years.

South China Morning Post (SCMP) writes:

Jochen Homann, chairman of the German Federal Network Agency (BNA), said excluding Huawei’s equipment would present significant problems for the auction winners.

“Huawei is an important supplier, already present in our previous networks – it will be difficult to do without such companies and this is not at all what we want,” Homann told German public broadcaster ARD.

What I think is more likely though, is that this is just another cooked up ‘crisis’ used to further political power.

Trump says Huawei is a threat. And the security community says ‘Yeah…maybe…it’s possible’. He uses this threat against the American people to push some legislation and keep China under the US trade thumb.

Then, if all goes according to plan, he can say, ‘See! I saved you all from the great Panda threat. Now vote me in for a second term.’

FOMO for Germany

This is not to say Merkel is taking no precautions at all. Again, from SCMP:

5G technology is harder to police, and that is why Germany is tightening requirements for companies that want to supply the technology – whether they are from China or elsewhere, Merkel said.

“So far, lots of countries have used Huawei technology,” she said at the conference. “That’s why the federal government has not taken the approach of simply ruling out any contractor or stakeholder, but we have set standards for those bidding for 5G technology.

“We will also write these standards legally into our telecommunications laws … We will give everyone a chance, but shouldn’t be naive; instead we see that there are very different laws in China.”

“Of course we’re in a systemic competition with China,’’ Merkel said in a separate speech at the same event. “But the answer can’t be that we fight those who are economically strong, we must stand up for fair, reciprocal rules and not give up on multilateralism.”

They just don’t want to be left behind, either.

And to make sure they build out this new connectivity infrastructure as quickly as possible, telecoms like Deutsche Telekom, Vodafone Group and Telefonica are going to need Huawei equipment.

Without it, you push back so many other kinds of futuristic technologies. You also restrict the population to live with the current lack of data speeds and capacity.

Germany is already uncompetitive as it is. Merkel doesn’t want to miss the boat on what could be the next technology revolution…

Your incognito friend,

Harje Ronngard,
Editor, Money Morning

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Harje Ronngard is the lead Editor at Money Morning. He’s also the Editor of Wealth Eruption and Gold & Commodities Stock Trader, and co-Editor of the Third Wave Portfolio.

The aim of both Wealth Eruption and the Third Wave Portfolio is to find misunderstood opportunities. These are the type of investments that multiply small amounts of money five- to 10-times in size.

Harje has an academic background in investments and valuation. He’s had experience across a range of asset classes, from futures to equities.

For any investment, Harje believes you only need to ask two questions. What is it worth? And how much does it cost? These two questions alone open up a world of opportunities, which Harje shares with Money Morning readers five days a week.


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