Huawei Technologies Co (華為), already getting squeezed out of Europe’s vast market for the next generation of telecom equipment, is under siege in another fast-growing business: cloud computing.
US officials have been lobbying European lawmakers and industry leaders to use Western companies — while shunning Huawei — to build data centers and offer infrastructure to handle the growing tide of information.
As part of a European tour last week, US Undersecretary of State for Economic Growth, Energy and the Environment Keith Krach met executives including Deutsche Telekom AG CEO Timotheus Hoettges and Meinrad Spenger, the head of Spanish telecom carrier MasMovil, to urge them to ditch Chinese vendors of cloud infrastructure on data-security concerns.
“Look at this as an extension of that 5G,” Krach said. “Clouds are really important, whether it’s in the service cloud or in data centers themselves. This is a big deal.”
Pressure from Washington affects one of Huawei’s fastest-growing businesses.
China’s largest technology corporation by sales has in past few years accumulated an impressive roster of clients, including Deutsche Telekom, France’s Orange SA and Spain’s Telefonica SA. It is now seeking to expand its reach to customers such as oil companies, power grid operators and logistics providers.
Europe’s cloud infrastructure is a US$12.4 billion business that grew 33 percent this year from last year, according to market researcher International Data Corp.
US companies dominate the market, led by Amazon.com Inc and followed by Microsoft Corp, IBM Corp, Google and Oracle Corp.
A spokesman for Huawei declined to comment on its European cloud business.
Similar to European telecom firms slowly turning away from Huawei for their 5G infrastructure, US pressure is already working in the cloud.
Orange CEO Stephane Richard in July told analysts that the company’s cloud built on a Huawei infrastructure was “likely no longer relevant.”
“Clearly today, the Huawei Cloud infrastructure is not necessarily the one we’re going to be promoting in Europe,” Richard said.
Orange’s Huawei-built cloud is used by the European Space Agency and automarker PSA Group.
Just days before Richard’s call with analysts, Orange signed a cloud deal with Google.
Deutsche Telekom declined to comment on its CEO’s meeting with Krach and its cloud-business plans. The company, whose biggest sales come from its T-Mobile unit in the US, has cloud partnerships with Cisco Systems Inc, Microsoft, OVH SAS and Amazon.
It also has an offer based on Huawei infrastructure, called Open Telekom Cloud, for small and medium-sized companies.
While Huawei is struggling, US companies are thriving.
Nokia Oyj on Wednesday signed a five-year deal to move its IT infrastructure onto Alphabet Inc’s Google Cloud.
The US provider also recently won a multi-year deal to store Renault SA’s manufacturing data, marking its first major industrial cloud deal in France.
“Huawei is losing market share in Europe,” Center for Strategic and International Studies technology policy program director Jim Lewis said. “I think its brand has been damaged. Their handset sales continue to do well, but in infrastructure they are being squeezed out of the developed world.”
US sanctions have already jeopardized Huawei’s supply chain. A US ban on chip sales to Huawei kicked in on Sept. 15, disrupting its wireless, handset and cloud offerings.
In 5G, the UK has imposed a full ban, while France has devised rules making it riskier for operators to use Huawei equipment, without banning it outright.
Telefonica, which retracted plans to use mainly Huawei for its 5G, sells a cloud offer with the Shenzhen-based company in Spain, Brazil, Argentina and Chile.
It also has partnerships with Google, SAP AG and Microsoft. Krach cited Telefonica as one of the 50 telecom operators committed to the US’s “clean network” plan.
Huawei is far from defeated in Europe. On a rainy day last week, it opened a large research center in an upscale Paris neighborhood. Orange said it would selectively keep parts of Huawei’s infrastructure in its offerings.
However for now, the US is maintaining pressure on its European counterparts.
“All these companies that have cloud businesses and data centers that use Huawei, they understand that in terms of 5G, sophisticated smartphones and their servers, they are going to be out of chips,” Krach said upon return from his eight-country tour.
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