Huawei weighs French factory's future in tough European market, say sources

By Elizabeth Pineau ‌and Mathieu Rosemain

PARIS, Dec 10 (Reuters) - Huawei is considering the future of a recently completed plant in eastern France, three people ‍familiar with ‌the matter said, amid the slow roll-out of 5G in Europe and a hardening stance by some governments on using Chinese equipment.

Completed ⁠in September, the facility about 20 kilometres north of Strasbourg remains ‌empty and Huawei appears undecided on whether to proceed with the plant, its first in Europe, two local officials and a senior business executive told Reuters.

Huawei, which did not respond to requests for comment, said five years ago it would invest 200 million euros ($233 million) to manufacture wireless base-station equipment for European telecom ⁠operators, creating up to 500 jobs.

However, Europe is now taking a tougher line on trade with China, with German Chancellor Friedrich Merz recently appointing an expert commission to ​rethink trade policy towards Beijing and banning the use of Chinese components from future 6G ‌networks.

When Huawei first announced the plant, the United States was ⁠warning its European allies against allowing the Chinese company into the continent's 5G infrastructure. 

A local politician, who participated in a meeting with Huawei in early November, said all options for the 52,000 square-metre factory are on the table, but did not elaborate. 

They could ​include a sale, said a business official briefed on the matter, adding that several industrial groups had recently toured the site.

A senior executive who visited the site with staff said their understanding was that Huawei is unlikely to use it. 

A previously agreed subsidy of 800,000 euros from the Grand Est government has been cancelled due to a lack of clarity over the project, an official at the region's ​headquarters said.

"We seek ‍to attract Chinese investment to France while ​fully respecting our sovereignty ... regarding telecommunications and strategic communications, we believe these matters fall under national sovereignty. Therefore, it is logical that we implement controls in this area, hence Huawei's situation in France," a source in the French presidential office said.

'SECURITY CONCERNS SLOWED DOWN AMBITION'

The EU has introduced measures to phase out the use of Chinese equipment, although telcos in some large markets such as Spain and Germany have resisted implementing them.

Huawei currently has an estimated 35%-40% market share of installed 4G and 5G equipment in Europe, making it one of the top suppliers, ⁠telecoms consultant John Strand said. 

But growth has been slower than expected and some European governments are hardening their stance on Chinese equipment.

Merz last month confirmed that Germany will replace Huawei components in its core ​5G network next year.

"They had a lot of ambition with good products. Then ... there were security concerns that slowed down their ambition," said Jean-Luc Beylat, who chairs French tech innovation body Systematic Paris-Region and advises telecoms regulator ARCEP.

Europe's 5G market has proved less dynamic than expected, he said, with industry take-up slower than forecast.

Huawei is seeing strong growth in other business ‌lines elsewhere, including phones and smart-driving tech, helping it to bring revenues back to peak levels achieved in 2020.

"They have to prioritise their resources," said Strand.

($1 = 0.8600 euros) 

(Reporting by Elizabeth Pineau and Mathieu Rosemain. Additional reporting by Brenda Goh in Shanghai and Dominique Patton. Editing by Alexander Smith)