The Telecom Cold War: Nokia Leaves China as Huawei Tensions Persist
After two decades of building telecommunications infrastructure in mainland China, Nokia is initiating a near-total withdrawal from the country, reports The Asia Times. Slated to close almost all remaining sites by the end of 2026, the move is the starkest indicator yet that European and Chinese telecom supply chains are rapidly decoupling.
Nokia’s exit strategy includes shutting down its major research and development center in Hangzhou—resulting in the loss of approximately 1,600 R&D jobs—and shuttering additional offices in Beijing, Chengdu, Qingdao, and Shanghai. Operations will be consolidated under Nokia Shanghai Bell, a joint venture Nokia fully acquired in late 2025. Moving forward, Nokia’s severely reduced Chinese footprint will focus exclusively on servicing existing clients rather than developing localized equipment.
The Geopolitical Divide
The roots of this fracture trace back to 2020 and 2021 when Finland and Sweden banned Chinese vendors Huawei and ZTE from their 5G networks, citing national security threats. This European move followed earlier actions by the United States, which in 2019 barred the same companies from federal telecom contracts and heavily lobbied the European Union to implement a bloc-wide ban.
Europe’s response, however, was fractured. The UK initially permitted Huawei in non-core networks before issuing a total ban in 2020, mandating removal by 2027. Germany implemented stringent vendor vetting without explicitly banning Huawei, while Hungary fully embraced the Chinese firm, rejecting Washington’s directives entirely.
In retaliation to the Scandinavian bans, Beijing intensified its scrutiny of Nokia and Ericsson. By 2022, China’s Cyberspace Administration formalized opaque “black box” security reviews for European bids on state-run carrier contracts, leaving Nokia and Ericsson blind to the assessment criteria. Consequently, Nokia’s Greater China revenue plummeted from $2.5 billion in 2018 to just $1.06 billion last year, accompanied by a near-halving of its regional workforce. Ericsson suffered a similar fate, losing over half of its China sales and slashing a third of its local staff.
Domestic Fallout in China
Nokia’s departure has sparked concern among Chinese commentators, who warn of economic and technological repercussions.
“Nokia’s retreat from China is nothing worth celebrating,” noted a Jiangsu-based columnist writing under the pseudonym “Xiaozaojun.” Highlighting the immediate human cost, they pointed to the 1,600 families impacted by the Hangzhou closure. The columnist also dismissed assumptions that Huawei or ZTE would absorb the displaced talent, noting tightened hiring practices at both domestic firms.
Furthermore, observers fear the exit will exacerbate industry fragmentation and leave China dangerously reliant on a singular, domestic supply chain. “Decades of China-Europe collaboration once anchored global mobile standards, but a rising challenge from North America, sharpened by the AI wave, now risks splintering those standards,” Xiaozaojun warned.
Conversely, Chinese state media took a defensive stance. Columnist Lai Jiaqi criticized Nokia CEO Justin Hotard, who previously urged the EU to reconsider allowing “high-risk” Chinese vendors into its networks while China artificially capped Nokia’s market share below 3%. Lai argued that Western political suppression—combined with a lack of competitive edge in technology and pricing—is the true cause of Nokia’s declining Chinese market share.
Nokia’s AI-Driven Pivot
While consumers may associate Nokia with the bygone era of feature phones, the company has spent two decades successfully restructuring into a formidable force in global telecom infrastructure, specifically in radio access network (RAN) equipment, IP routing, and optical networking.
Nokia is now firmly aligning its future with Western interests and artificial intelligence. Last year, US chipmaker Nvidia acquired a 2.9% stake in Nokia for $1 billion. Together, they are developing AI-RAN technology aimed at leapfrogging competitors in the race toward 6G. This system, combining Nvidia’s ARC-Pro computing platform with Nokia’s radio tech and Dell servers, is scheduled for trials with T-Mobile in 2026. This partnership is viewed as a strategic maneuver to help the US reclaim its leadership in global telecom infrastructure.
Simultaneously, Nokia is redirecting its global investments. The company recently expanded its Chennai research lab into one of its largest global facilities and invested $30 million to upgrade its Allentown, Pennsylvania site, doubling its workforce to accelerate the production of chips for AI-driven optical networks.
The Threat of a Splintered Global Standard
The broader implications of Nokia’s exit are significant. If China moves to officially label Nokia and Ericsson as “untrusted vendors”—a retaliatory measure warned of by US telecom publication Fierce Network—it could severely damage their market share in regions like Africa and Latin America, where Huawei and ZTE already dominate.
Analysts warn that if Western vendors are locked out of China and Chinese vendors remain exiled from the West, the global telecom industry could regress into fragmented, region-based technical standards, reminiscent of the 3G era. For now, Ericsson has chosen to maintain its presence in China, viewing it as a crucial stepping stone for emerging markets, but Nokia’s decisive exit places immense pressure on its Swedish rival to reevaluate its stance in an increasingly polarized tech landscape.
