China tightens curbs on Nokia, Ericsson gear with strict security checks

China is limiting European telecom suppliers Nokia and Ericsson, requiring strict security checks that slow approvals and give local firms an edge in the Chinese market

China is limiting the use of European telecom suppliers Nokia and Ericsson as President Xi Jinping accelerates efforts to reduce the country’s reliance on Western technology, according to a report by Financial Times.

 

Chinese state-backed buyers of IT equipment, which includes mobile network operators and utilities, have started scrutinising foreign bids more closely.

 

Contracts from Sweden’s Ericsson and Finland’s Nokia now undergo “black box” national security checks by the Cyberspace Administration of China (CAC). The companies are not informed about how their equipment is assessed.

 

“These reviews can take three months or longer,” a source told Financial Times. Even when European companies get permission, the long and uncertain approval process puts them at a disadvantage, while Chinese firms don’t face such checks, the source said.

 

 

If China is restricting access for security reasons, then why doesn't Europe do the same in return?” said the source.   

 

China’s move reflects Europe’s concerns

 

China’s restrictions follow similar European warnings about Chinese telecom giants Huawei and ZTE. However, those European warnings have only slightly reduced the market share of these Chinese companies.

 

Xi’s push to limit European equipment coincides with a broader self-reliance drive. Last month, speaking alongside Russia’s Vladimir Putin and North Korea’s Kim Jong Un, Xi said China “does not fear power or coercion” and “stands strongly on its own with self-reliance"

 

A 2022 update to China’s cybersecurity law required operators of “critical information infrastructure” to submit purchases with potential security risks for CAC review, further tightening Beijing’s control over foreign tech.

 

Detailed documentation required

 

State buyers now demand detailed information on every component in a system and the local content portion. Foreign companies, including Nokia and Ericsson, have even included details of Chinese R&D efforts to strengthen their bids. CAC reviews these packets and informs the buyers whether they can proceed, the news report said.

 

Analysts say the policy has hit European vendors hard. Ericsson’s and Nokia’s combined market share in China fell to about 4 per cent in 2024 from 12 per cent in 2020, according to Stefan Pongratz of Dell’Oro Group. Both companies have reported declining revenues in China, with Nokia seeing double-digit drops from 2023, the news report said.   

 

EU firms warn of 'existential threat'

 

The EU Chamber of Commerce in China said localisation rules in IT and telecom pose an “existential threat” to European companies.

 

Meanwhile, European policymakers continue to voice security concerns over Chinese vendors, but most countries have been hesitant to impose bans because Chinese equipment is low-cost and banning it could strain relations with Beijing.

 

Nokia shifts manufacturing to India

 

HMD Global, which produces Nokia-branded phones, announced in November last year that it is relocating much of its manufacturing from China to India. CEO Ravi Kunwar had said the company is gradually shifting its supply chain, sourcing and logistics to India to strengthen its export strategy, Moneycontrol had reported.

 

Nokia also laid off around 2,000 employees in Greater China last year and plans to cut up to 14,000 jobs by 2026 to save €800 million to €1.2 billion, Reuters reported.