New U.S. Government Initiative a Windfall for American 5G Tech Stocks
Software From U.S. 5G Companies to Eliminate Reliance on Huawei
Next-generation technologies like 5G will revolutionize the way we communicate and live. For now, the undisputed leader in 5G technology is China’s Huawei Technologies Co., Ltd. It’s a company that many governments believe will use its technologies to spy on people for the Chinese government.
No so fast, said White House economic advisor Larry Kudlow. The White House has said it is working with certain U.S. tech companies to develop advanced software that will curb or even eliminate Huawei’s international domination of the 5G sector. (Source: “U.S. Pushing Effort to Develop 5G Alternative to Huawei,” The Wall Street Journal, February 4, 2020.)
That’s good news for investors in U.S. 5G tech stocks.
Thanks to 5G technology, the Internet of Things (IoT) will become reality. 5G increases mobile browsing speeds 100-fold and transmits data in real time. Reducing lag time is paramount to the IoT.
For example, 5G will make autonomous cars more reliable. The reaction time of a human detecting a hazard and pressing the brake pedal is around one second. An autonomous vehicle, using 5G technology, can analyze that same information in one millisecond. That’s 1,000 times faster than humans.
What does that look like in practical terms? If you’re driving 60 miles per hour, you cover around 92 feet per second. Using 5G technology, a car travelling at 60 miles per hour can hit the brakes in under half an inch.
Huawei’s Global Proliferation of 5G Tech
5G signals have shorter ranges than 4G ones, so 5G networks need to be built closer together; as close as 500 feet apart.
On the plus side, 5G networks are tiny and can be set up on the side of buildings, lamp posts, anywhere. They will proliferate the landscape. And because 5G antennae are so small, you won’t even see them. But they will be there collecting data 24/7.
And that’s part of the problem. Huawei is one of the biggest tech companies in the world. It’s the largest seller of telecom equipment and the second-largest phone maker. The company is also known for laptops and networking devices.
Huawei is big everywhere but the U.S., in places like Canada, Europe, and Asia.
The U.S. has long maintained that Huawei has a close relationship with the Chinese military. If true, it means Huawei could pass on data to the Chinese government. It could also embed a “kill-switch” in its programming to shut down communications.
That means Huawei’s 5G technology could be a national security risk. Huawei has said there are no such links, but the U.S. is not so sure.
In May 2019, President Donald Trump issued an executive order barring U.S. companies from using technologies from companies that the U.S. considers to be national security threats. (Source: “Executive Order on Securing the Information and Communications Technology and Services Supply Chain,” The White House, May 15, 2019.)
Trump didn’t name Huawei outright in the executive order, but everyone knew who the order was aimed at.
Later that day, the U.S. Department of Commerce added Huawei and 70 of its affiliates to its “Entity List.” Any company on that list is barred from buying parts and components from U.S. companies without approval from the White House. (Source: “Entity List,” U.S. Bureau of Industry and Security, May 15, 2019.)
Not surprisingly, many U.S. tech companies stopped doing business with Huawei.
Made-in-America 5G Tech Solution
The White House clearly understands just how important 5G technology will be to the U.S. and broader economy.
To curb or eliminate Huawei’s 5G global domination, the White House announced that it is working with U.S. tech companies to develop a 5G alternative to Huawei.
That bodes well for U.S. 5G tech stocks.
The plan includes allowing software companies to develop a code that will work in machines that come from any hardware developer. This could effectively eliminate America’s reliance on Huawei equipment.
Companies that are part of this effort include Microsoft Corporation (NASDAQ:MSFT), Dell Technologies Inc. (NYSE:DELL), and AT&T Inc. (NYSE:T). (Source: The Wall Street Journal, op cit.)
Both Microsoft and Dell are developing software and cloud capabilities that are expected to replace a lot of Huawei’s equipment.
But it’s not just U.S. 5G tech stocks that can benefit from the new initiative. Companies that have a big presence in the U.S., such as Nokia Corporation (NYSE:NOK) and Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC), could also benefit.
No exact timeline has been provided, but a new U.S. 5G system is expected to be up and running within 18 months.
Tech analysts have been talking about the benefits of 5G technology for years. And it’s finally here. But there are concerns about who is implementing 5G tech that will blanket the U.S. and what those companies could do with the information that travels through the network.
President Trump believes that Huawei is a threat to the country’s national security and that made-in-America 5G software could seriously limit or eliminate our reliance on companies like Huawei.
The potential economic benefits of 5G technology are massive, and if the U.S. initiative goes ahead, it could be a moneymaker for investors in many U.S. 5G tech stocks.