Over the past two decades, China’s Huawei Technologies Co. has come to dominate the global telecom equipment market, winning contracts with a mix of sophisticated technology and attractive prices. Its rise squeezed Europe’s Nokia Oyj and Ericsson AB, which responded by cutting jobs and making acquisitions.

Now, with Huawei at the center of a U.S.-China trade war, the tide is turning.

Nokia and Ericsson—fierce rivals themselves—have recently wrested notable long-term deals from Huawei to build 5G wireless networks, to enable everything from autonomous cars to robot surgery. Analysts say more could come their way as Huawei grapples with a U.S. export ban and restrictions from other governments concerned that its equipment could enable Chinese espionage.

Huawei’s Rise

“Huawei will, for the foreseeable future, face a broader cloud of suspicion,” said John Butler, an analyst at Bloomberg Intelligence in New York. “Nokia and Ericsson are well positioned to benefit.”

In May, the European companies both won 5G contracts from SoftBank Group Corp.’s Japanese telecom unit, replacing Huawei and Chinese peer ZTE Corp. Ericsson signed a similar pact in March with Denmark’s biggest phone company, TDC A/S, which had worked with Huawei since 2013 to modernize and manage its network.

Other carriers, expecting government curbs on Huawei, have started removing its equipment from sensitive parts of their systems. BT Group Plc is taking Huawei out of its network core, and Vodafone Group Plc has suspended core equipment purchases from Huawei for its European networks. Deutsche Telekom AG, which has Huawei throughout its 4G system, is re-evaluating its purchasing strategy.

As dozens of phone companies—including those in Canada, Germany and France—plan to choose 5G suppliers in the coming months, Cisco Systems Inc. and Samsung Electronics Co. are also vying for deals. But the key beneficiaries of Huawei’s difficulties are likely to be the two Europeans, which compete directly with the Chinese company in supplying radio-access network equipment.

Since last year, the Trump administration has pushed allies to bar Huawei from 5G, citing risks about state spying—allegations the company has denied. The move in May to block Huawei’s access to U.S. suppliers escalated the campaign. The company’s founder, Ren Zhengfei, now predicts the U.S. sanctions will cut its revenue by $30bn over the coming two years.

Outside the U.S., security concerns have led Australia, Japan and Taiwan to bar Huawei from 5G systems. The Chinese company also risks losing meaningful work in Europe and emerging markets where countries could follow with their own limits, according to Bloomberg Intelligence.

The Huawei Barometer

Publicly, executives from Nokia and Ericsson have been careful not to come off as critical of Huawei. Both manufacture in China and sell gear to Chinese phone carriers, and Nokia has a big research and development presence there. Nokia says it has already been forced to shift some of its supply chain away from China to reduce the impact of tariffs imposed by the Trump administration.

Instead of piling on Huawei, the European carriers have trumpeted their 5G successes, each using slightly different metrics. Ericsson claims it has the most publicly announced 5G contracts—21—while Nokia says it has raked in more commercial 5G deals than any other vendor (42). Huawei says it has signed 46 5G contracts. A spokesman for Huawei declined to comment further about its position relative to rivals.

Ericsson is “first with 5G,” after building high-speed networks for companies such as AT&T Inc., Swisscom AG in Switzerland and Australia’s Telstra Corp., said Chief Technology Officer Erik Ekudden. “You see that in some markets that we are attracting more customers.”

Nokia is winning 5G deals “quite handsomely,” Chief Executive Officer Rajeev Suri told Bloomberg TV this month.

While Suri said more carriers are likely to swap out Huawei gear in countries that have announced restrictions, the situation is less clear in Europe. “We don’t know yet the impact of specific operator plans,” he said in an interview. “We also don’t know where this geopolitical thing will end up.”

Nokia and Ericsson are Europe’s final survivors of a merciless winnowing of more than a half-dozen telecom equipment providers. Bloated costs, a cyclical marketplace, cash-strapped customers, and the relentless rise of Huawei—aided by access to generous Chinese state financing—helped push the likes of Canada’s Nortel Networks Corp. and Germany’s Siemens AG out of the industry.

Nokia paid some $2bn in 2013 to buy Siemens out of a joint venture established to compete against Ericsson and Huawei. Then in 2015, it spent another almost $18bn acquiring Alcatel-Lucent to broaden its product offering after pushing through more than 25,000 job cuts in the preceding three years. Still, Huawei’s share of the $33bn of sales in the global mobile infrastructure market surged to 31 percent in 2018 from 13 percent in 2010, IHS Markit data show.

Huawei, despite its troubles, remains a potent rival. Many phone companies in Europe deem its base stations, switches and routers technologically superior. Fully excluding Huawei and ZTE from 5G would raise radio-access network costs for European phone companies by 40 percent, or 55bn euros ($62bn), the GSMA industry group predicts in an unpublished report seen by Bloomberg. Nokia and Ericsson would have to almost double production to absorb Huawei and ZTE’s business in Europe and could struggle to meet demand, the GSMA report says.

Bengt Nordstrom, CEO of telecom consultancy Northstream AB, says the situation is perilous for everyone in the industry, as vendors’ budgets could be hit if Huawei faces greater restrictions. “Many component suppliers are already in a tough situation,” Nordstrom said. “They need to spend a lot of money on research, and that means they need access to the entire global market.”

For carriers, swapping vendors isn’t as simple as flipping a switch. It takes about two years to plan and implement such a technology shift and install the new equipment, Nordstrom said.

Both Nokia and Ericsson are working to make it easier for carriers to switch. Nokia has developed what it calls a “thin layer” of its 4G technology to connect to a new 5G system, allowing a carrier to avoid a wholesale swap of another supplier’s equipment. Ericsson also has a solution to allow a carrier to swap out only a portion of existing infrastructure, and says it can make some areas work side-by-side with Ericsson’s 5G gear.

Nokia and Ericsson can agree on one thing: Claims of Huawei’s technological superiority are overblown. They note that they’re involved in the latest networks in the U.S., where carriers are rolling out 5G faster than the Europeans.

“We compete quite favorably with Huawei,” Suri said, “with or without the current security concerns.”