Huawei Strikes a 5G Deal in Russia Amid U.S. Ban

Huawei signed a deal to bring super-fast 5G wireless networks to Russia, signaling that the Chinese tech giant isn’t letting its blacklist status in the U.S. bring down its global business.

Russia’s top mobile network, MTS, announced on Wednesday that it had reached an agreement with Huawei to bring 5G technology, the successor to the current 4G LTE, to the country. Testing is expected to start later this year.

The move is significant since 5G is expected to usher in an era of smart cities by allowing connected devices to more quickly communicate with each other. However, it also comes at a time when the U.S. is calling Huawei a “security threat,” and warning its closest allies not to do business with the company.

“Given the situation right now in the US, as well as Europe, Huawei has to aggressively look at other areas to potentially penetrate,” says Daniel Ives, managing director of equity research at Wedbush Securities.

“From a market perspective, it is tough to see Russia becoming significant over time, but from a technology perspective, the last thing the U.S. industry wants right now is to have 5G focused in China and Russia,” Ives says. “This is a battleground in weighing who will be the winners and losers over the coming years.”

Guo Ping, one of the Huawei’s rotating chairmen, said in a statement he was “very happy” with the Russian agreement “in an area of strategic importance like 5G.” It was unclear how much the deal was worth, and how many cities in Russia it covers.

Huawei’s 5G push in Russia also comes amid a report that the company bought the intellectual property rights to facial recognition technology made by Russian company Vokord.

Patrick Moorhead, principal analyst at Moor Insights & Strategy, says that China and Russia have long shared a special bond, and that Huawei’s Russian deals are likely business as usual.

“I don’t see any special significance in the deal because of this. Huawei unabashedly and unapologetically considers itself a leader in video surveillance, and is vertically integrated all, the way to the chips inside of the cameras to the network all the way to the data center,” he says.

Nevertheless, the deals come at a time when the future of Huawei’s supply chain, and global business, is in limbo. On May 15, the Trump administration placed Huawei on its “entity list”, or blacklist, citing concerns that “Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest.” The move comes amid the escalating trade war between the U.S. and China.

The sale of American technology to someone on the blacklist requires a special license. Without it, American companies would be prohibited from doing business with Huawei.

Google briefly revoked Huawei’s Android license last month, before Google granted Huawei a temporary reprieve. Microsoft also quietly pulled Huawei laptops from its online store. The computers use Microsoft Windows, raising the question of whether Huawei may need to use its own operating system on future devices.

Huawei also relies on several American semiconductor companies, including Qualcomm, Intel, Nvidia, and Lattice, along with British-American chipmaker ARM, to supply parts for its devices. Some of those chipmakers have reportedly stopped supplying Huawei after the company was blacklisted.