Huawie’s exclusion is not a small decision

The exclusion of Chinese telecom hardware firm Huawei from the list of domestic gear manufacturers by Department of Telecom is a difficult decision. In the telecom department’s list, Huawei’s rivals like Nokia Siemens and Ericson are included.

Huawei is the biggest firm in the sector and it has already provided key machines to Indian telecom companies. It is the second largest telecom hardware company in the world and it is expected to edge out Ericson to get the first position this year.

The company was established in 1987 by a former PLA officer Ren Zhengfei. Because of its military connection in the past, Huawei is facing suspicious eyes in many countries. The US and Australia have banned it from establishing telecom hardware, fearing cyber espionage. In India, the government itself was in a dilemma over the last couple of years with regard to the supply of telecom gears from Chinese companies because of the volatile relationship with China. Understandably, the decision to exclude Huawei is seems to be a strategic one rather than an economic one. But in the future, the India-China relationship may be affected due to the exclusion.

Earlier, the Telecom Department has decided to allow only those firms which have at least 30% domestic value addition for the supply of telecom gears. As a follow up, Huawei has established its local manufacturing plant at Chennai with US $ 2 billion investment. The company has announced the setting up of an R&D centre in Chennai along with its production centre.

The latest decision by the department to exclude the Chinese firm from the list of domestic suppliers may make ramifications on many fronts. Firstly, Huawei is the cheapest telecom gear supplier Because of this reason, private sector firms in India prefer the Chinese firm compared to its European rivals. Already, telecom industry in the country has raised voice for the inclusion of Huawie because of the price competitiveness of the Chinese firm.

Secondly, excluding Huawei from the Indian market will be detrimental to the interest of the firms including Reliance who have already purchased equipments worth many thousand crores from the Chinese major. Many firms including the state owned BSNL have tendered Huawei’s machineries to roll out new technology oriented services like 3G. So, given the conditions, the scenario is not over for Huawie, especially if both countries are going to discuss the issue at a higher official level.