China curbs use of Nokia and Ericsson in telecoms networks, FT reports

Greater China

Source: ReutersPublished: 10/02/2025, 07:28:00 EDT

Nokia

Ericsson

Telecom Networks

Supply Chain Localization

National Security Review

News Summary

China is reportedly curbing the use of European telecom equipment suppliers Nokia and Ericsson in its networks, according to a Financial Times report. Citing sources familiar with the matter, the report states that contracts for Sweden's Ericsson and Finland's Nokia are subject to "black box" national security reviews by the Cyberspace Administration of China, with the companies not informed of how their gear is assessed. The report also indicated that state buyers of telecom equipment in China would require bidders to provide detailed documentation on every component in their systems and the proportion of local content. Ericsson declined to comment on the report, while Nokia did not immediately respond to Reuters' requests for comment outside regular business hours. The CAC could not be immediately reached for comment.

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Background

This development occurs amidst escalating global geopolitical tensions and intensified technological competition between major economies. Countries, led by the United States under President Donald J. Trump, have long expressed national security concerns regarding Chinese telecom equipment manufacturers like Huawei, actively pushing allies to restrict their involvement in 5G networks. In response, China has been aggressively pursuing its technological self-sufficiency strategy, aiming to reduce reliance on foreign critical technologies and components while elevating its domestic companies within global supply chains. The implementation of "black box" reviews for foreign telecom vendors' equipment and the requirement for local content percentages represent China's latest efforts to assert greater control and promote technological "localization" in critical infrastructure sectors.

In-Depth AI Insights

What are the deeper strategic motivations behind China's restrictions on European telecom suppliers? - National Security and Control: The primary objective is to secure critical telecom infrastructure and reduce reliance on foreign technologies perceived to have potential vulnerabilities. This aligns with a global trend of increasing concern over data sovereignty and cybersecurity. - Technological Self-Sufficiency and Industrial Upgrade: By pushing for local content requirements and technical reviews, China aims to accelerate the technological accumulation and market share expansion of its domestic telecom equipment manufacturers (e.g., Huawei, ZTE), thereby achieving self-reliance in critical tech sectors and reducing dependence on Western suppliers. - Geopolitical Leverage: This move can be seen as a countermeasure against the U.S. and its allies' restrictions on Chinese tech firms, particularly Huawei. By limiting European suppliers, China signals to the EU that market access is not guaranteed and can be used as leverage in other trade or political negotiations, potentially aiming to create divisions between Europe and the U.S. - Protectionism and Local Competitiveness: By creating entry barriers, China can further protect and nurture its indigenous companies, allowing them to dominate the national market and providing a strong foundation for these companies to compete globally. How might European companies like Nokia and Ericsson adapt to the increasing operational risks and restrictions in the Chinese market to maintain global competitiveness? - Enhanced Localized R&D and Manufacturing: To meet local content requirements and mitigate review risks, European suppliers may need to establish deeper R&D and manufacturing bases within China, forging closer alliances with local Chinese partners. - Diversified Market Strategies: Given the uncertainty in the Chinese market, European companies will accelerate the diversification of their revenue streams, particularly by pursuing growth opportunities in other major markets such such as North America, Europe, Africa, and Latin America, reducing reliance on a single market. - Technological Innovation and Differentiation: Focusing on developing cutting-edge, difficult-to-substitute technologies and solutions to remain competitive in complex, geopolitically influenced markets, even in the face of stringent localization demands. - Policy Lobbying and Diplomacy: Actively engaging in dialogue with both EU and Chinese governments to seek a more level playing field and promote adherence to international trade rules, although the effectiveness of such efforts may be limited. What are the long-term implications of this policy for the global telecom equipment supply chain and the future trend of technological "decoupling"? - Accelerated Supply Chain Fragmentation: China's actions will further drive the global telecom supply chain towards regionalization and "decoupling," leading to the formation of independent ecosystems centered around local or specific national alliances, such as parallel "Chinese standards" and "Western standards." - Increased Global Costs and Decreased Efficiency: Fragmentation of the supply chain will diminish economies of scale, increasing R&D, production, and deployment costs. This could lead to higher product prices and reduced efficiency, impacting telecom operators and consumers in the long run. - Technical Standards and Interoperability Challenges: The focus on developing indigenous technologies and standards in various countries could lead to a fragmentation of global technical standards, raising interoperability issues and hindering the integration of the global digital economy. - Investment Shift Towards Local Champions: Investors will increasingly favor "national champion" companies with strong government backing and market share in their domestic markets over purely globalized firms, leading to a shift in investment landscape and a re-evaluation of risks.