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Cisco will benefit most from Huawei crackdown, says JP Morgan

Cisco is likely to benefit most from a crackdown on the procurement of telecoms equipment from the Chinese tech giant Huawei, according to JP Morgan.

In recent months, Huawei has faced mounting resistance to the use of its equipment in 5G telecoms infrastructure. It comes amid concerns about the company’s alleged ties to the Chinese government. The company has repeatedly insisted it operates independently of Beijing.

Donald Trump is reportedly considering a move to ban US telecoms firms from buying products from Huawei and ZTE, another Chinese firm. Meanwhile, the UK government is reviewing the rules around telecoms infrastructure, in a move some expect will restrict the role Huawei plays in British infrastructure. Australia and New Zealand have also pushed back against the company’s efforts to win new business in their respective markets.

In a note first reported by The Street, Samik Chatterjee, an analyst at JP Morgan, downplayed Huawei’s prospects in 2019. “While the US is considering a potential order to stop the use of Huawei equipment by US service providers, the opportunity in the domestic market is fairly limited given Huawei’s largely nonexistent presence.”

Chatterjee added: “A greater opportunity lies in the international markets (EMEA and APAC ex-China) and we expect companies with established global presence (again primarily Cisco and Ciena amongst others) to be well positioned to benefit from a pullback in business wins relative to 5G networks for Huawei.”

Last month, Huawei unveiled plans to invest $2bn in cyber security over the next five years in light of the crackdown. During a press conference, the conglomerate’s chairman, Ken Hu, revealed the company would be boosting investment in its cyber security workforce, and hit back at claims its products were insecure.

“Any concerns or allegations on security at Huawei should be based on factual evidence,” he told journalists. “Without factual evidence we don’t accept and we oppose those allegations.”