Middle East and Africa becomes key battleground for US-China trade war

• However, threat of US sanctions on Huawei is delaying many countries from putting all their eggs in the Chinese basket.
• The two most prominent Arabic large language models are from Huawei and the UAE’s G42, with Huawei’s model boasting 100b parameters, surpassing the 13b parameter model developed by G42 in partnership with Microsoft’s Azure platform.
• US is adopting a “carrot-and-stick” approach, offering incentives to key stakeholders in first-tier regional markets like the Gulf States to replace and divest themselves from Chinese equipment, in an effort to prevent these countries from falling into China’s technological orbit.
• The strategic maneuvering of both superpowers, the delicate balancing acts of regional governments and businesses, and emergence of innovative technologies will shape future landscape of enterprise technology in this region.

The Middle East and Africa (MEA) region has emerged as a key battleground in the escalating trade war between the United States and China, particularly in the realm of enterprise technology.

Two recent developments in the region have underscored this ongoing struggle for technological supremacy.

Firstly, Huawei, the Chinese technology giant, has become the first cloud vendor to establish a cloud region in North Africa, marking a significant milestone in the company’s efforts to expand its presence in the MEA market.

The move aligns with China’s broader strategy of wooing governments and telecommunications companies in the region with the promise of improved infrastructure and economic benefits, all while supporting the region’s digital transformation and national development goals.

Secondly, the UAE-based AI group G42 has facilitated a $1.5 billion deal with Microsoft in April this year, which involves replacing Chinese technology with American hardware.

This development highlights the delicate balance that many countries in the MEA region are trying to strike, as they navigate the complex geopolitical landscape and seek to avoid being overly reliant on either the Chinese or American technological ecosystems.

Brad Smith, Microsoft Vice Chair and President, said recently: “We will combine world-class technology with world-leading standards for safe, trusted, and responsible AI, in close coordination with the governments of both the UAE and the United States.”  

Delicate balancing act

According to data and analytics company GlobalData, the MEA region is emerging as a battleground for international tech supremacy across various enterprise technology domains, including cloud computing, radio access networks for enterprise 5G, and artificial intelligence (AI).

“Chinese vendors, principally Huawei, are moving in to woo telcos and governments with the promise of improved infrastructure and an immediate boost to national economies, all of which dovetails with the digitalisation of economies and the fulfillment of national visions. Offsetting this, the threat of US sanctions is delaying many countries from putting all their eggs in the Chinese basket,” Ismail Patel, Enterprise Technology Analyst at GlobalData, said.

The delicate balancing act is exemplified in the development of Arabic large language models (LLMs) for generative AI.

The two most prominent models are from Huawei and the UAE’s AI group G42, with Huawei’s model, based on self-developed Pangu, boasting 100 billion parameters, surpassing the 13 billion parameter model developed by G42 in partnership with Microsoft’s Azure platform.

Huawei strong among telcos

Another area of interest is the adoption of open RAN (radio access network) technology, which promotes interoperability and reduces reliance on proprietary equipment from vendors like Huawei.

While operators in markets like the UAE and Saudi Arabia are embracing open RAN, many other MEA markets are still selecting Huawei’s equipment to save on the costs of managing composite networks.

“Many operators and governments in MEA will continue to straddle the fine line between embracing capital-efficient Chinese technologies and locking themselves to them. Another consideration is the geopolitical backdrop concerning which of the two trade superpowers to align with. Answers will inevitably vary depending on whether the entity is a government, a large corporation, or an SME, as well as the immediate needs of the economy and business,” Patel said.

Huawei flexes muscles with Arabic LLMs

Huawei, for its part, remains bullish about its prospects in the MEA region, investing hundreds of millions of dollars in programs across the region, particularly in Africa, where it is investing $300 million in Egypt over five years to support cloud services, develop an ecosystem of software and channel partners, and train developers and technology professionals.

The new Cairo region, announced in May this year, will provide cloud services to 28 African countries including Egypt, Ethiopia and Algeria, will mark Huawei’s 33rd cloud region globally.

The company is the second-largest cloud services provider in China, according to research firm Canalys, and has been steadily expanding its global footprint. Last year it opened new data centres in Turkey and Saudi Arabia.

Moreover, the company’s launch of the Arabic LLM and the cloud service in Egypt comes amid ongoing efforts by the US-sanctioned firm to attract overseas industrial clients.

In response, the US  is adopting a “carrot-and-stick” approach, offering incentives to key stakeholders in first-tier regional markets like the Gulf States to replace and divest themselves from Chinese equipment, in an effort to prevent these countries from falling into China’s technological orbit.

However, the sustainability of this approach remains uncertain, as Patel points out, “whether or not the stick of US sanctions will be sustainable in the long term as a tool to counter the influence of Huawei and China is a question that is too complex for now.

“Also, it is contingent on a variety of factors such as geopolitics, the cost of Western equipment and technologies, the emergence of future cost-saving technologies (like network slicing, 6G, quantum communication, and enhanced edge computing), and most importantly, demonstrable success stories that can be replicated from first-tier to second-tier markets.”