It has been a tough year for Huawei. And things will only get tougher.

In July, the UK government announced that UK carriers are banned from procuring new 5G equipment from ‘high risk vendor’ Huawei after the end of 2020, and must replace all Huawei 5G equipment in their networks by the end of 2027. This amends the original ruling in January that allowed Huawei limited (35%) presence in UK RAN and transport networks.

Given that all carriers in the UK currently use Huawei equipment with the exception of O2, this decision will inevitably delay the full roll-out of 5G in the country – potentially by as much as three years, and the associated costs of stripping out Huawei equipment could run into billions.

Across the rest of Europe, a growing list of carriers are also considering their options, and the removal of Huawei from their core networks is already underway. But doing so is not easy…or cheap. Vodafone for example is spending €200 million ($224 million) to extract Huawei from the core of its entire European operation. It will also take time: some carriers are much more reliant on Huawei than others (Sunrise Switzerland, for example, has a 100% Huawei 5G network) and issues around vendor incompatibility need to be carefully considered.

Huawei’s position in RAN is also at risk. European carriers may well follow the UK’s decision to remove Huawei from their RAN too, and there is growing momentum behind Open RAN technologies which aim to increase vendor competition: Telefónica has announced it will launch 4G and 5G Open RAN trials across its European operations this year, while Vodafone plans to open its entire European footprint up to tender in order to expand its supplier options and explore Open RAN technology. The Huawei saga will act as a catalyst to accelerate open RAN technology development, and adoption and may be further boosted by the introduction of statutory open RAN mandates by European governments.

The direction of travel, therefore, is clear: Huawei’s expulsion from all of Europe’s core networks seems to be a question of when, not if, and its European RAN business may be on the way out too. This will likely result in Europe playing catch-up in its 5G race with China and the US.

Meanwhile, Huawei’s consumer business has also been severely rattled in the last year. US sanctions blocked Huawei’s access to Google Mobile Services, meaning recent devices such as the P40/P40 Pro, Mate 30 series and Mate Xs must use open source versions of Android that exclude Google services such as Maps, YouTube and Gmail. Despite Huawei’s claim that their proprietary Huawei Mobile Services and AppGallery are worthy alternatives, the lack of Google services seriously impacts these devices’ appeal against competitors running a full commercial version of Android.

Huawei is also unable to work with semiconductor companies that use US technology, a list that includes Arm, Qualcomm and TSMC, the latter of which, until now, made most of the Kirin chips for Huawei’s own HiSilicon. And a further tightening of restrictions in August closed loopholes that allowed Huawei to obtain technology through third parties (e.g. by TSMC), either through alternative chip production or provision of off-the-shelf chips (e.g. from Qualcomm or MediaTek). With its inventory of chip and other components rapidly diminishing and assuming licenses to export merchant components to Huawei are not forthcoming, it is hard to see Huawei being able to produce any new smartphones at all in the second half of 2021.

So, why would European carriers want to stock Huawei devices? In the past, Huawei’s deep pockets ensured European carrier portfolios were chock full of Huawei smartphones, the most popular being the P30 which still accounts for a significant proportion of Huawei’s sales. However, this device is now over a year old, and with inventory running low, a lack of a worthy successor in the pipeline and consumer sentiment waning, Huawei is being squeezed out.

To exacerbate matters, COVID-19 has hit Europe hard. Most countries in Europe entered various stages of lockdown in March, and with physical stores closed and economic pressure leading to consumer belt-tightening, total smartphone sales decreased by 24% annually in Q2 2020. At the same time, Huawei’s market share dropped to 16% from 22% a year ago, with other Chinese vendors like Xiaomi and Oppo largely picking up the slack. Even though the market looks to be somewhat recovering, Huawei’s trajectory is ominous.

It would appear, therefore, that Huawei is fighting a battle on the European front that it just can’t win. Recently, Huawei management has been using an image of a Japanese plane from WW2 – shot full of holes but still flying – as an analogy for its current predicament. Its ability to keep the business running and even succeeding in Europe has been remarkable, but unless something changes, and quickly, it will see sales begin to drift lower.

There is, however, one glimmer of hope for Huawei: the US presidential elections. If Joe Biden enters the White House in early 2021, there could be an easing of sanctions as the Democrats seek a rapprochement over the US-China trade war. Huawei’s consumer business is likely to be the first to see an easing of pressure, with its infrastructure business benefitting only much further down the line. But even this scenario is not without its challenges. Even if Huawei does get a reprieve and is able to start building up again, the Huawei brand and public image outside of China could well have suffered irreversible damage. If Huawei does survive the next 12-24 months, it will be an uphill struggle (perhaps even an impossible task) to get consumers and businesses in Europe wanting to buy Huawei products again.