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U.S. considers requiring telecom firms to build equipment outside China

By Eric Geller
Internal discussions suggest that forthcoming regulations could be broader than initially expected.

The Trump administration is debating whether to require telecommunications equipment makers to move their design and assembly operations out of China, according to two people familiar with the talks.

President Donald Trump signed an executive order in May authorizing new measures to protect the security of the U.S. telecom supply chain, and the potential relocation requirement has surfaced as one way to implement his directive, said the people, who requested anonymity to discuss internal planning.

The discussions between DHS, the Commerce Department’s Bureau of Industry and Security and the National Telecommunications and Information Administration primarily concern forthcoming 5G infrastructure and have focused on hardware such as routers and network switches rather than software, which is harder to track.

Trump’s directive is a response to growing concerns about Chinese telecom firms such as Huawei. U.S. officials worry that Beijing could use the company as a vehicle to steal or sabotage data flowing across its American customers’ networks. That concern has grown as the world moves toward 5G, which will link sensitive government and corporate systems and power a new era of internet-connected equipment such as medical devices and self-driving cars.

The Commerce Department has until Oct. 12 to issue rules that will specify which telecom equipment is banned from the U.S., and Huawei is likely to make that list. But the new discussions suggest that the rules could also restrict firms typically seen as safe alternatives, which have manufacturing operations in China.

The two largest firms after Huawei are Ericsson and Nokia. According to The Wall Street Journal, which first reported the discussions, Chinese facilities account for 45 percent of Ericsson’s manufacturing space and 10 percent of Nokia’s manufacturing space.

An Ericsson spokesperson declined to comment on talks with the administration. “We actively mitigate different types of potential risks related to our supply chain, both in our own manufacturing and in sourcing, to avoid being dependent on one supply site or vendor,” the spokesperson said. Nokia did not respond to a request for comment.

The White House declined to comment on interagency planning.

“The fourth industrial revolution will be built on the telecommunications networks being constructed today,” a senior administration official said. “It is critical that those networks be high-trust, and the President is committed to ensuring that they are safe and reliable.”