Portugal bans Chinese firms from involvement in 5G infrastructure in May 2023

Context

In May 2023 the Portugal Cybersecurity Council (CSSC) issued a resolution that was reported as formally blocking the use of Chinese firms’ products in Portugal’s 5G and related 4G infrastructure. The resolution did not name China or Chinese firms by name, but did refer to “high (security) risk” from telecommunications firms “headquartered in a country where the government exercises control, interference or pressure on its activities in third countries” – widely interpreted to be a reference to China’s Huawei and ZTE.

This measure followed a new August 2022 law which gave the Portuguese government powers to determine “the exclusion, restrictions on use, or the cessation of use of equipment or services” of Portugal-based telecommunications firms. The broader context of the decision includes great power competition between the US and China, and similar measures introduced and promoted by other EU states.

Impact

Portugal’s leading telecommunications firms:  Altice, NOS, and Vodafone, had already committed to using non-Chinese firms as 5G suppliers going forwards, but still had existing inventory of Chinese 5G equipment that needed to be replaced. One consultancy, EY for Huawei, said in a September 2024 report that this measure could damage the country’s economy by as much as one billion euros. According to the report, commissioned by Huawei itself, Huawei Portugal “contributes 718 million euros per year to the national economy, of which 197 million corresponds to Gross Value Added (GVA)”.

Responses

(i) Chinese Government and Industry Responses

On August 31, 2023, Huawei instigated a legal challenge against this measure in the Portuguese legal system. Huawei Portugal told press in a statement that it “seeks protection of its legitimate interests and legal rights under the law as a company duly established in Portugal”. Responding to this development, Chinese state media quoted Xiang Ligang, head of China’s Information Consumption Alliance, as saying that “Huawei has always sought to protect its rights and interests through legal means on similar issues. Even though the Portuguese market is not large, it is worth the effort.”

(ii) Portuguese Government and Industry Responses

In July 2023, Reuters cited a “top official” in the Portuguese government as saying that the state would not be providing financial compensation for any firms having to replace their existing Chinese equipment following the introduction of this measure.

Status

After the election of a new, centre-right government in April 2024, the incoming Infrastructure Minister Miguel Pinto Luz recommitted the country to this policy, telling press that “[t]here are certain policies that must have continuity and security is one of them”. However, Minister Pinto Luz also made clear that Portuguese firms would have “a wide time window” to replace existing Chinese equipment. In May 2024, it was reported that Nokia had agreed a contract with the Portuguese telecomms firms MEO for its 5G equipment, Huawei had previously been the sole supplier for MEO’s 2G, 3G, and 4G infrastructure.

Key Takeaways

This case is another example highlighting the extent of US and great power influence on the issue of digital infrastructure. It is also an example of a bigger state, China, responding to measures through the domestic legal system of the imposing state. In this case, the window provided to Portuguese firms to replace existing Huawei equipment appears to be far more flexible than similar nations, with no firm date found on record (in English language media).

References and Further Information

Bandhakavi, S. 2024. “Portuguese government to continue ban on Chinese 5G equipment.” Tech Monitor. September 11. Available at: https://www.techmonitor.ai/ hardware/networks/portuguese-government-to-continue-ban-on-chinese-5g-equipment

Global Times. 2023. “Portugal faces big cost if it bans Huawei from 5G network: expert.” September 6. Available at: https://www.globaltimes.cn/page/202309/1297661.shtml

Goncalves, S. 2023a. “Portugal moves closer to banning Chinese suppliers from 5G.” Reuters. May 27. Available at: https://www.reuters.com/technology/portugal-moves-closer-banning-chinese-suppliers-5g-2023-05-26/

Goncalves, S. 2023b. “Portugal won’t compensate telcos for replacing “high-risk” equipment.” Reuters. July 27. Available at: https://www.reuters.com/business/media-telecom/portugal-wont-compensate-telcos-replacing-high-risk-equipment-2023-07-26/

Goncalves, S. 2023c. “Huawei files lawsuit in Portugal over ban on supplying 5G equipment.” Reuters. September 5. Available at: https://www.reuters.com/technology/ huawei-files-lawsuit-portugal-over-ban-supplying-5g-equipment-2023-09-05/

Goncalves, S. 2024. “New Portuguese government to keep ban on Chinese 5G equipment.” Reuters. September 10. Available at: https://www.reuters.com/ technology/cybersecurity/new-portuguese-government-keep-ban-chinese-5g-equipment-2024-09-10/#:~:text=In%20May%202023%2C%20under%20the,basis%20for%20the%20new%20technology.

TPN. 2024. “Exclusion of Huawei could cost Portugal €1 billion.” September 10. Available at: https://www.theportugalnews.com/news/2024-09-10/exclusion-of-huawei-could-cost-portugal-1-billion/91958

The Macao News. 2024. “The new administration will maintain Portugal’s ban on Chinese 5G technology.” September 13. Available at: https://macaonews.org/ news/lusofonia/portugal-huawei-ban-montenegro/

Parmar, A. & Mukherjee, S. 2024. “Exclusive: Nokia to supply 5G radio equipment to Portugal’s MEO, sources say.” Reuters. May 28. Available at: https://www.reuters.com/ business/media-telecom/nokia-supply-5g-radio-equipment-portugals-meo-sources-say-2024-05-27/