The EU wants to rip Chinese companies out of their telecom networks. But they can't.

Added: 2026-05-22

[00:00:01]Good morning.

[00:00:04]The European Union is making headlines on their plans to get Chinese-built electronics gear out of their telecommunications networks.

[00:00:14]Earlier in the month, a key legal advisor said that member states are allowed to ban Huawei equipment on national security grounds.

[00:00:22]Policy makers in the EU are ready to crack down on countries in the EU that still allow China to sell 5G network equipment.

[00:00:33]A new law will restrict Chinese companies from building equipment for European telecom and also for the energy security and transportation industries.

[00:00:45]Here is the problem as they see it. For most countries in the EU, Huawei and ZTE are over 40% of the telecom hardware market.

[00:00:57]Sweden is one of the light pink countries on that map with less than 20% of its networks relying on Chinese vendors.

[00:01:07]Back in 2020, Swedish regulators banned the use of telecom equipment from Huawei and ZTE in its 5G systems and said that they would rely on Ericson, which is headquartered in Sweden and Nokia from Next Door to provide the continent with 5G.

[00:01:29]The new installations must be carried out without Huawei or ZTE.

[00:01:35]Immediately after that announcement, Ericson was basically put out of business here in China. Ericson had won contracts to build 5G for the three biggest mobile phone carriers in China.

[00:01:49]Then in the year immediately following the Swedish ban on Chinese companies, Ericson's revenues fell by half.

[00:02:02]Fast forward to now and getting Chinese vendors out of networks Europewide would cost between three and four billion euro and we will circle back to that shortly.

[00:02:13]Huawei and ZTE are deeply entrenched in European systems and the new law there would compel European telecom companies to buy more equipment from Nokia and Ericson.

[00:02:25]Countries who complain about replacing the lowcost Chinese equipment with higherpriced Europeanmade gear will just have to pay for everything themselves instead of asking for funds from the EU general budgets to cover it.

[00:02:43]Problem with that idea is when we go deeper into these numbers, it is a fantasy that the unionwide cost will come in at 4 billion euro. KPMG and industry groups did their research and estimated that it would cost over 100 times that 430 billion euro.

[00:03:03]Just the part of removing Chinese components and replacing them with European equipment would cost 146 billion plus costs from downtime and employment problems.

[00:03:16]The researchers went on to include other costs that push annual losses to be 39 billion euro for this year and growing to about 90 billion annually in three years.

[00:03:33]We've seen this movie before. The United States did their own version of the same thing.

[00:03:39]This is a congressional report from 2022. The United States has raised national and economic security concerns about Huawei for two decades.

[00:03:49]In 2017, the US government started imposing sanctions on Huawei, restricting the use of Huawei equipment in the Department of Defense and prohibited federal funds from being used to buy Huawei gear.

[00:04:06]Conclusion: The US government has taken steps to remove Huawei from American networks.

[00:04:12]and restrict Huawei from having the tools a company needs to grow and expand across the world.

[00:04:20]The Federal Communications Commission followed up with rules to rip and replace equipment from Huawei and ZTE from telecom systems in the US and set up a $ 1.9 billion fund to compensate companies for the cost of replacing Chinese equipment.

[00:04:38]President Trump and then Biden later was also pushing US allies to also ban Huawei.

[00:04:46]Mike Pompeo was Trump's Secretary of State and before that was director of CIA. He says that Huawei and other Chinese tech firms are Trojan horses for Chinese intelligence services.

[00:04:59]Later they realized that $1.9 billion wasn't nearly enough. So Congress kicked in $3 billion more.

[00:05:08]But two years after that law was passed, only 12% of American companies had replaced their Chinese equipment.

[00:05:17]And it was obvious by then that the wheels were coming off the whole thing.

[00:05:21]And the assassination attempt on Huawei was backfiring.

[00:05:26]Huawei sales grew.

[00:05:34]So this is civilian companies. The problem with the rip and replace idea is the replace part. There is not enough money in the United States or in the EU or in the Milky Way to replace Chinese telecom equipment because there are no replacements.

[00:05:51]The Pentagon is in the national security business and nobody has more money than the people there in that building. And ever since 2019, the Pentagon has been barred from doing business with anyone who uses Huawei equipment.

[00:06:08]But every year since, the Pentagon begged for a waiver so they could continue doing so.

[00:06:14]Huawei is so deeply entrenched across the world that setting up alternative vendors is impossible.

[00:06:23]They're saying here that if the Pentagon followed American law, they couldn't buy medical supplies, drugs, clothing, fuel, parts, transportation, resupply missions.

[00:06:37]In most of the world, you may as well say, the Indo-Pacific, Europe, and Africa, without those waiverss, nothing moves. The Pentagon literally cannot get away from Huawei.

[00:06:49]American allies in the Middle East and South America literally cannot get away from Huawei.

[00:06:56]US troops stationed outside the US themselves use Huawei gear and literally they cannot get away from Huawei.

[00:07:06]So here again we see a huge disconnect between the rhetoric of policy makers in the United States and in Europe compared to the real world of supply chains and manufacturing.

[00:07:19]This is a nice summary of all the laws and executive orders and rulings from US government agencies.

[00:07:26]But despite US actions against Huawei and the other Chinese firms, they're stronger than ever.

[00:07:33]Their market share is higher today than when this all started.

[00:07:37]And now they're developing new markets and doing so without the help anymore of companies like Ericson or American firms.

[00:07:47]Good example of that is something we see almost every day. Private 5G networks for mines and factories.

[00:07:55]Localized networks are driving factory automations, local logistics and robotics.

[00:08:03]Almost all the growth in that industry comes from places outside North America and Europe.

[00:08:12]Huawei is still the most prevalent provider of 5G infrastructure in the world and especially in the parts of the world where most of the people live, the places that are growing the fastest and where this technology is going to make the biggest difference.

[00:08:28]All the orange countries on that map use Huawei.

[00:08:32]And think of this problem another way.

[00:08:34]Using Huawei means that these countries can develop faster at a lower cost.

[00:08:40]Local 5G networks can be built using Chinese equipment and serve areas that national carriers have not yet reached.

[00:08:48]There are hundreds of thousands of warehouses and mines and industrial parks across that part of the world and they can get 5G right now without waiting for Ericson or Nikia to show up someday and bid on the job.

[00:09:05]Chinese telecom company's dominance comes from mastery of the supply chain and research and development.

[00:09:13]5G networks rely on gallium to make them go. Gallium nitride enables faster data transfer.

[00:09:21]It allows hardware companies to build lighter and smaller systems that are more energy efficient.

[00:09:27]It's used in amplifiers and power supply.

[00:09:33]Those are the advantages to using gallium. And China has all the gallium.

[00:09:38]Last year, China produced 95% of the world's total supply of gallium.

[00:09:44]And Huawei has over 2,000 patents related to gallium nitride.

[00:09:51]Nokia and Ericson also have filed a lot of patents for gallium, but Nokia and Ericson don't have any gallium.

[00:10:00]Erikson's website admits as much. They don't have it.

[00:10:05]Gallium is a byproduct of aluminum mining. Gallium increased their aluminum production by 10 times in 20 years and today supplies over half of all the aluminum in the world.

[00:10:20]There's Chinese production of aluminum compared to everyone else and gallium compared to everyone else.

[00:10:28]And that Chinese monopoly on gallium means that Chinese companies can build better communication systems and nobody else can.

[00:10:39]This is Ching down. Be good.

[00:10:51]Jesus name.