Free markets, not government regulations, will settle the 5G and AI races.
For years, China’s control of the 5G and AI future seemed unstoppable.
Backed by the Chinese state, Huawei—which is labeled a Chinese military company by the Department of Defense—embedded itself across global telecommunications networks, undercut competitors with pricing subsidized by China’s government, and expanded its footprint in everything from 5G infrastructure to enterprise networking equipment. Western governments warned about the security risks, but many markets ignored them.
However, something unexpected is now happening, even inside China.
Chinese consumers, once encouraged to buy Huawei products as a patriotic duty, are becoming increasingly skeptical of the company. Reports from Chinese-language outlets describe growing resistance to what some now call a “patriotism tax,” as buyers question whether loyalty to a state-backed firm is worth higher prices, fewer choices, and declining quality.
Huawei’s control of over one-third of the global telecommunications marketplace has come at risk as a result, and with it, so has the country’s strong position for controlling much of the globe’s 5G and AI future.
That backlash should not surprise anyone. When governments try to mandate patriotism at the checkout counter, consumers almost always eventually push back. And the incentive to opt for the best deal presumably is extra-strong in China, where living standards are only about one-fourth of American levels.
The problem for Huawei is that its early drive for dominance was never built on trust or innovation alone; it reportedly was built on subsidies, coercion, and the quiet understanding that buying Chinese alternatives was politically disfavored. Now Chinese consumers are realizing what the rest of the world learned years ago: state-backed monopolies deliver higher prices, fewer choices, and stagnation. And once that realization sets in, no amount of nationalist propaganda can fully reverse it.
This is exactly why Beijing fears real competition, because competition exposes the weaknesses of—and poor results realized from—central planning.
In this context, it is now clear that the Department of Justice was wise to approve the Hewlett Packard Enterprise–Juniper Networks merger this summer, a decision informed by warnings from the US Intelligence Community that the free market must be allowed to flourish, and American firms must be allowed to achieve scale, in order to counter state-backed competitors like Huawei.
Their restraint has shaped out well thus far.
Per December reporting from Fierce Network, new data shows that, in several networking segments long dominated by Huawei, HPE is now going head to head with Huawei:
It’s been just six months since HPE closed its acquisition of Juniper Networks with the goal of becoming an AI networking titan. And the deal already seems to be paying dividends.
New data from Dell’Oro Group shows that HPE’s third quarter ethernet campus switch revenue grew above the market rate and are now on par with those of Chinese tech giant Huawei. The analyst firm previously tipped worldwide campus switch sales to top $20 billion this year.
Siân Morgan, Research Director at Dell’Oro Group, told Fierce via email: “The combination of Juniper and HPE campus switch revenues in 3Q24 grew by four times the market growth rate, so there are no obvious signs of cannibalization between the two companies’ campus switch sales.”
Cisco, another American company, is also leading “in both the campus switch and core router markets,” so the US does not just have one good egg in its basket, either.
Thanks to the DOJ stepping back and allowing America’s free-enterprise system to work its magic, the US is now better positioned to outmatch China globally in artificial intelligence, cloud infrastructure, and secure data centers. It is also better equipped to compete in overseas markets where governments are increasingly reassessing the risks of relying on Chinese technology.
The fact that these US companies are successfully competing without subsidies (unlike Huawei) is an important point because it is proving to be the only sustainable way forward.
Huawei’s recent struggles at home have exposed the fragility of dominance built on state support rather than market trust. The only way to retain dominance long-term is to provide a quality product or service that can compete on the free and open marketplace based on merit alone, and American companies like Cisco and the newly merged HPE are doing just that.
America finally has an opening. The question is whether policymakers will continue to recognize that competing with China requires more than rhetoric. It requires resisting the urge to micromanage the economy while giving American innovators the freedom to compete and the scale to win.
Here’s hoping policymakers take this winning lesson to heart.
