U.S. Think Tank says Huawei and ZTE harming telecom innovation on Chinese orders

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Top Tech and Science Think Tank, ITIF says unfair Chinese support for Huawei and ZTE has harmed global telecom equipment innovation

Chinese firms Huawei and ZTE are curbing innovation in telecom under the Chinese government’s orders says a report by ITIF. The Information Technology and Innovation Foundation (ITIF) is a top independent United States nonprofit public policy think tank based out of Washington, D.C. The organization focuses on public policies that spur technology innovation. In fact, the University of Pennsylvania has ranked ITIF the world’s most authoritative science and technology policy think tank.

Now an ITIF report published yesterday castigates the Chinese government support Huawei and ZTE policies of harming innovation in the telecom sector. The report directly blames Huawei, ZTE, and the Chinese government for harming the global telecom innovation.

China’s state-backing of Huawei and ZTE allowed these companies to seize global market share from more innovative international competitors, reducing their growth in sales and investments in R&D. This, in turn, hurt global innovation in the industry.

ITIF report

The report authored by Robert Atkinson, president of ITIF, says that Huawei and ZTE managed to seize a big chunk of the global telecom market share with the backing of China. The report indicts Huawei and ZTE for using a monopolistic approach to innovation. It says that China’s monetary support not only gave Huawei and ZTE an unfair advantage in the telecom innovation space but the report points out that it shunted the growth far more innovative international competitors. The report also says that China used unfair practices to artificially expand Huawei and ZTE market share including forcing developing countries to incorporate Huawei and ZTE telecom equipment when sanctioning term loans and aid grants.

The ITIF castigated Huawei and ZTE for innovating at a slower pace due to their huge market share and telecom service consumers around the world have ultimately paid the price.

Chinese telecom equipment firms, established and propped up by distortive Chinese government policies, are a drag on global innovation. Without unfair innovation mercantilist policies and programs, China would lack a globally competitive telecom equipment industry, and more innovative foreign companies would be larger and even more innovative.

ITIF Report

ITIF pointed out that both Chinese companies, particularly Huawei, invest significantly in R&D and generate a considerable number of international patents. However, they patent less than their global market shares would predict. The ITIF report compares Huawei with Ericsson and Nokia, both of which the report says, innovate at a fast pace and help the telecom industry far more freely and widely.  The report estimates that, if Ericsson and Nokia took all Huawei and ZTE sales, there would be 20% more global telecom equipment R&D and 75% more essential 5G patents.

While it is impossible to definitively know how much-added innovation the world would see today if Huawei and ZTE wouldn’t exist, evidence suggests that there would be more innovative firms outside of China. In addition, neither Huawei nor ZTE would have more than minor market shares, even in China. It is time for democratic, market-based nations to work together and support global innovation by no longer purchasing equipment from Huawei and ZTE, actively deploying advanced, allied-nation-produced broadband equipment, and encouraging other nations to buy non-Chinese telecom gear. This will send a clear message to China that, going forward, systemic innovation mercantilism that hinders technological innovation will no longer be tolerated.

ITIF

The report by ITIF can be read here. This report will give the United States authorities and President Donald Trump further handle to point out the near-monopolistic approach of Huawei and ZTE to widen the trade sanctions. Huawei has already been banned from importing/exporting to the United States.

This report will only worsen Huawei’s prospects of entering 5G infrastructure space in many developing countries. The ITIF is a widely respected and independent think tank in science and technology space and this report would have far-reaching implications in future Huawei and ZTE telecom deals.

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"The Internet is the first thing that humanity has built that humanity doesn't understand, the largest experiment in anarchy that we have ever had." Eric Schmidt

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