In a move that is expected to significantly impact the status of Huawei in global markets, New Zealand authorities effectively prevented the country’s largest telecommunications provider from using Huawei equipment as they upgrade their network. The government officials have issued a warning that Huawei’s gear could result in significant security risks, amidst a wider global concern on cybersecurity issues.

New Zealand Security Services Warn against Huawei Tech

New Zealand’s Government Communications Security Bureau (GCSB), a regulatory public body that is tasked with analyzing intelligence and safeguarding the country’s cybersecurity, has concluded that Huawei equipment might jeopardize national security. Leading New Zealand mobile carrier Spark had announced that it would partner up with the Chinese manufacturer while developing its nationwide 5G RAN (radio access network) that is set to launch in July 2020. The 2013 Telecommunications Interception Capability and Security Act (TICSA) obliges telecom companies to notify security services when they plan to implement certain changes to their systems, as telecommunications infrastructure is a critical hacker target and can offer a leeway for foreign states looking to commit espionage or cyber warfare. New Zealand’s assessment comes at the heels of a similar decision by the Australian government.

In accordance with this requirement, Spark notified the GCSB, which evaluated the case and returned with a negative verdict. This is the first time TICSA has been used to block a supplier. The negative assessment, although not technically a ban, effectively means that Spark cannot use the proposed Huawei equipment. The authorities cite security concerns, yet their decision marks a stark departure from government policy so far. Former New Zealand PM John Key had actively encouraged companies to collaborate with the Chinese firm during his time in office. Yet, in recent years, and amidst an increase in ransomware and other hacker attacks, data security has risen to the forefront of regulatory compliance, with companies taking active steps to protect the data they hold from external threats as well as careless or compromised internal users.

The Impact on Huawei’s Promising Rise

The decision is sure to land a blow on Huawei’s credibility, as the company was moving to challenge the dominance of leading international competitors Samsung and Apple in the smartphone market. The Chinese firm managed to snatch second place from Apple in Q2 2018 and consolidated its position in Q3 2018, when it sold 52 million smartphones globally, up from 39.1 million in Q3 2017. By contrast, Apple managed to marginally increase its sales to 46.9 million in Q3 2018, up from 46.7 million shipments in Q3 2017. Samsung still holds on to first place but is losing ground to Huawei: the South Korean company sold 72.2 units in Q3 2018, a significant decline from 83.3 million during the same quarter in 2017.

Infographic: Huawei Inches Towards the Top of the Smartphone Market | Statista You will find more infographics at Statista

Huawei’s national competitor Xiaomi, which currently holds fourth place, is also inching closer, having raised its sales to 34.3 million in Q3 2018, compared to 28.3 million in Q3 2017. Yet, the news about the New Zealand assessment might impact Huawei’s promising brand status, especially since they are just the last in a string of similar decisions. Last August, the US administration put a ban on the use of Huawei equipment by government executive agencies, while the UK has also launched an inquiry into Huawei’s security vulnerabilities. And it was only months ago that Australia also banned Huawei equipment from the country’s 5G networks.

It now remains to be seen whether Huawei will move to address the identified vulnerabilities and regain its status as a reliable tech provider beyond the smartphone market.