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The tech geopolitical dispute between the United States and China has become an obstacle for telecommunications infrastructure network multinationals planning projects in Latin America.
U.S. restrictions could delay licensing, make projects more expensive by blocking cheaper Chinese suppliers, and force connectivity systems to take different routes.
This is the case with submarine cables landing in the United States, which cannot have any Chinese components or technology. The same applies to fiber optics, optical repeaters, splitters and software.
“This is true for any system. Several new submarine cables being built will have to solve this problem before they can be licensed by the U.S. and even other countries,” said Erick Contag, chief operating officer of Globenet and CEO of the SubOptic Foundation, which works to promote global adoption. Non-profit association for the development and sustainability of submarine fiber optic cables and connectivity infrastructure.
Most of SubOptic’s board members come from Western companies such as ASN, Ciena, Meta and Google. Executive committee members include Ma Yanfeng, executive vice president of HMN Technologies (formerly Huawei Marine Networks), and Magda Abdelkader of Telecom Egypt.
Contag told BNamericas that in order for the United States to approve the 2014 sale of Globenet to BTG Pactual, the company had to remove Chinese systems from undersea cables, including the software layer used on top of the physical infrastructure. Globenet operates a 26,000-kilometer submarine system on different routes in the region.
The U.S. State Department has a program called “Tear and Replace” that provides funding to U.S. communications providers to remove Chinese equipment from their infrastructure.
“China-US competition will play an increasingly important role in digital infrastructure. Chinese companies are increasing investment in the region, while the United States is looking for friendly suppliers,” Contag added.
new system
Several new submarine cables are expected to come online in Latin America in the coming months and years. Gold Data-Liberty Latin America (GD-1/LD-1 cable), Trans Americas Fiber System (TAM-1), Telconet (Carnival Submarine Network), Google (Firmina), Telefónica’s Telxius and América Móvil (Tikal/AMX- 3) ) and OceanNet (Caribbean Express) are in various stages of construction of systems connecting Latin America and the United States. In most cases, the landing site is in Florida.
No Chinese suppliers emerged as suppliers for the latest projects, either ongoing or planned.
Instead, two companies dominate the list of cable manufacturers connecting Latin America to the United States: Finland’s Nokia-owned Alcatel Submarine Networks (ASN) and the United States’ SubCom. Followed closely by Xtera, also from the United States.
Suppliers rejected by the United States can still be suppliers for Latin American cable projects that do not involve the United States.
The Amazon underwater fiber optic network project led by the Brazilian government is an example. ZTT Technology and HMN are both suppliers of the project.
“We believe that our projects, including the submarine cable project, should be open. The market should be open. Economies of scale are good, and so are the companies. Globalization is here and should continue. This is what we think, and not just for HMN Tech , and the same goes for any other suppliers from China.” Leslie Cao, general manager of HMN Technologies’ system solutions division, told BNamericas.
HMN is the supplier of Infovia 01, one of the extensions of the Amazon fiber optic project in Norte Conectado, Brazil. Cao said the company plans to bid for the rest of the program, but that has not yet been announced.
HMN also provides services for the subsea portion of Chile’s FOA fiber optic backbone project and produces fiber for Petrobras’ optical network project.
“Energy companies’ remote control and platforms require digital transformation and automation, so connectivity is very important. If the signal is transmitted to satellites, the bandwidth is very limited.” Cao said.
“Latin America is a very important market for us. We started our operations in Latin America and delivered the first repeaters in the region. We have a strong team on the ground to look at any potential opportunities to grow our business.”
total cost of ownership
SubOptic’s Contag applauds the quality of technology from companies like ZTT, acknowledging that in price-sensitive Latin America, cost is key.
However, in his view, some Chinese technologies that are generally considered cheaper may lead to unforeseen expenses in the long run.
“People need to think about the total cost of ownership. You have two factors. In one case, China Development Bank helps subsidize the business, offering very good prices. The entry price is very low, but ongoing maintenance support and everything else may increase the price ,” said Contag.
Technological geopolitical issues are not limited to undersea cables. Last week, the U.S. Securities and Exchange Commission imposed sanctions on Telefónica over its business relationships with Chinese suppliers in Venezuela.
Given the geopolitical implications involved and the potential impact on its U.S. shareholders such as BlackRock, the Spanish multinational has cooperated with U.S. authorities and agreed to negotiate a fine to resolve the case.
On the chipset battlefield, the U.S. government is stepping up pressure on friendly governments and allies to prevent companies from providing chipmaking tools to Chinese customers.
The request comes amid an ongoing investigation into China’s largest semiconductor company, Semiconductor Manufacturing International Corporation (SMIC), over alleged violations of chip sanctions by using parts from a Dutch company.
“This is a war, a real war,” Contag said.
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