Huawei may lose a major customer in Japan, raising further questions about its ambition to lead the introduction of 5G technology around the world.
SoftBank (SFTBY), which runs Japan’s third largest wireless network, said Thursday it is considering stripping out Huawei equipment, a potentially complex and expensive move.
A final decision hasn’t been taken yet, a SoftBank spokesman told CNN without giving a reason for the review of Huawei equipment.
The Chinese company has suffered a number of setbacks in major markets this year amid accusations, mainly from the US government, that it poses a security risk. Huawei denies the claims.
The SoftBank spokesman was responding to a report from Japanese newspaper Nikkei, which said the company had already decided to replace Huawei equipment in its 4G network infrastructure with hardware from Sweden’s Ericsson (ERIC) and Finland’s Nokia (NOK).
It would also order gear for its planned 5G network from the European suppliers instead of Huawei, according to the Nikkei report.
Huawei declined to comment.
SoftBank and Huawei have already experimented together with 5G technology, which the Japanese company wants to introduce commercially in 2020.
SoftBank’s confirmation that it is reviewing its use of Huawei equipment comes after Japan’s government on Monday agreed new procedures for official purchases of IT network gear. The government said it wants to prevent the use of parts that could introduce the risk of “malicious functions” such as cybertheft and interruptions of service.
Some news reports have suggested the new measures effectively bar Chinese companies like Huawei and its smaller rival ZTE (ZTCOF) from Japanese government contracts. Japan’s chief government spokesman Yoshihide Suga said Monday that the guidelines don’t target any particular companies.
Setbacks around the world
Huawei has come under increased scrutiny in multiple countries around the world this year.
Last week, UK telecoms group BT (BT) said it would not buy equipment from Huawei for the core of its 5G wireless network. BT will also remove existing Huawei technology from the heart of its 4G network within two years.
Governments in New Zealand and Australia have in recent months prevented wireless operators from using Huawei equipment for their 5G networks.
The United States is reportedly urging allies to stop using Huawei telecommunications equipment, saying it increases the risk of cyberattacks and could allow China to spy on communications or disable connections in the fast growing internet of things. Huawei has been treated with suspicion by US government officials for years and is largely shut out of the American market.
Despite that, the Chinese company is the world’s largest telecommunications equipment maker and also the second biggest seller of smartphones after Samsung. It says its equipment is trusted by customers in 170 countries and by 46 of the world’s 50 largest telecommunications companies.
Tensions between the US government and Huawei intensified this month after the company’s chief financial officer, Meng Wanzhou, was arrested in Canada. US officials allege that Meng helped Huawei get around US sanctions on Iran and are seeking her extradition.
Huawei says it complies with all applicable laws and regulations where it operates and is unaware of any wrongdoing by Meng, who is also the daughter of the company’s founder.