Companies from China may find the going tough in the United States telecommunications market as national security concerns have derailed their local expansion plans, industry analysts said on Thursday.
The comments came after China's Huawei Technologies Co Ltd suffered another setback in the country and the U.S. government said it was planning to nationalize the construction of 5G, or the next-generation communication network.
Xiang Ligang, a telecom veteran and CEO of the industry website Cctime, said it has become increasingly challenging for Chinese telecom companies to do business in the U.S. amid heightened concerns over national security.
"The U.S. is a market Chinese companies must conquer if they want to become global players. But now politics rather than technology or products is playing a bigger role in their business prospects in the U.S.," Xiang said.
Huawei, for instance, failed to get its smartphones sold in the local carrier retailing channel, which accounts for a majority of smartphone sales in the U.S.. Verizon Communications Inc has dropped all plans to sell Huawei' s phones, while AT&T Inc also walked away from a similar deal at the last minute under pressure from the U.S. government, Bloomberg reported.
Currently, Chinese companies account for 7 of the world's top 10 smartphone vendors, but in the U.S., only one Chinese brand stood out, with ZTE Corp grabbing a market share of 12 percent. "Such contrast is a result of multiple factors, and political concern is certainly one of them," Xiang said.
Moreover, the U.S. President Donald Trump administration's proposal to nationalize the construction of a 5G system in the name of national security will also weigh on Huawei and ZTE, which also make telecom equipment.
Fu Liang, an independent telecom analyst that has been following the industry for more than 15 years, said if the plan goes through, it is highly likely for the U.S. to ban the use of any Chinese equipment in the 5G network.
"Also, a unified approach will accelerate the deployment of superfast next generation mobile communications technology, which will give a boost to the business of Huawei and ZTE's foreign competitors such as Nokia and Ericsson," Fu said.
The U.S. government has blocked a string of Chinese acquisitions over national security.