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itif.org Backfire:Export Controls Helped Huawei and Hurt U.S.Firms RODRIGO BALBONTIN|OCTOBER 2025 Huawei is a more innovative company today than it was before the U.S.government sought to choke its supply chain.This case should serve as a lesson:U.S.techno-economic power is weaker than most think,and sanctions often hurt U.S.competitiveness more than Chinas.KEY TAKEAWAYS The first Trump administration tried to limit sales of Huaweis telecom equipment in America and other nations due to cybersecurity concerns.The administration later imposed export controls on Huawei in an attempt to kill it for doing business with Iran.The U.S.governments rationale for its actions against Huawei is a legacy of an earlier era when America had enough power to impose crippling sanctions without harming its own companies competitiveness.Because of U.S.actions,Huawei developed its own operating system(OS),built its own chips,and bought equipment from other nations.Despite U.S.actions against Huawei,it remains the worlds largest telecom equipment manufacturer,with a 34 percent global market share in 2024,up 2 percentage points from 2018.Meanwhile,Huawei succeeded in boosting its global market share in telecom equipment and expanding into new markets,such as smart automotive solutions.Indeed,Huawei asserts that it has built an ecosystem entirely independent from U.S.technologies.While export controls made Huawei a more robust competitor,they also hurt U.S.technology companiesreducing their sales to Huawei by$33 billion between 2021 and 2024and they triggered retaliation from the Chinese government.Its time for the U.S.government to rethink the use of export controls on China,recognizing that this is a new era when the effect is just as likely to backfire and hurt American companies and jobs.INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 2 CONTENTS Key Takeaways.1 Introduction.3 Huawei 101:Its Businesses and U.S.Actions Against the Company.4 U.S.Governments Sanctions on Huawei for Alleged Business with Iran.6 U.S.Governments Attempts to Cripple the Company.7 The Effect of Export Controls on Huaweis Global Market Share.10 Huaweis Innovations After the Export Controls.10 How Huawei Bounced Back From Export Controls.12 Chinas Mercantilism Allowed Huawei to Survive.12 Huawei Had More Than Six Years to Prepare“Spare Tires”to Deal With Export Controls.14 Expanding Reliance on the Local Market.14 Huawei Overinvested in R&D Capabilities Before Restrictions,and Kept Investing After Them.17 Huawei Started Working on an Indigenous OS Years Before the Export Controls.20 Investing in Semiconductors Was Critical to Continue the Companys Operations.21 Other Short-Term Measures.21 How Export Controls On Huawei Are Affecting U.S.Companies.22 Export Controls Cut U.S.Businesses Sales by at Least$33 billion.22 Export Controls Triggered the PRC to Retaliate Against U.S.Companies.25 Why This Matters.26 Policy Recommendations.26 Conclusions.28 Endnotes.29 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 3 INTRODUCTION Does the United States have the power to kill Chinese companies?And can it do so without reducing its own techno-economic power?At least regarding Huawei,the answer to both questions is a definite no.Due to cybersecurity concerns,since 2018,the U.S.government has gradually banned the sale of Huawei products for U.S.telecommunications networks and encouraged other nations to do the same.But that was not enough for U.S.policymakers;they sought to kill the company.In 2019,the U.S.government sanctioned Huawei for doing business with adversaries,such as Iran,by taking judicial actions and adding the company to the Department of Commerces Bureau of Industry and Security(BIS)Entity Listattempting to cripple Huawei by disrupting its supply chain.Both the Biden and the second Trump administration have continued to sanction the company.The export controls backfired.Huawei is the worlds largest telecom equipment manufacturer,and its global market share for telecom equipment increased from 29 percent in early 2018 to 31 percent by 2024.1 At the same time,U.S.technology companies such as Intel,Qualcomm,Teradyne,and others lost more than$33 billion in sales to Huawei between 2021 and 2024in a conservative estimateweakening these American companies globally while strengthening Chinese or other nations tech companies,including Japan.Additionally,due to the restrictions,Huawei launched its OS,HarmonyOS,in 2019,which now has nearly a billion users and is compatible with mobiles,tablets,and laptopsa direct threat to Googles Android and Microsofts Windows global market share.2 The company is also catching up on chipmaking,claiming that in 2023 it was able to replace more than 13,000 components and redesign over 4,000 different circuit boards.3 It is also reported that Huawei can substitute Nvidias H20 chip,a specific model that meets the U.S.governments requirements for exporting semiconductors to Chinalimiting Nvidias global sales.4 As of August 2025,Huawei claimed to have built an entire ecosystem independent of U.S.technologies.5 Huawei was able to do this because it anticipated these U.S.actions as early as 2012 and invested heavily to offset them.6 The companys research and development(R&D)investments grew proportionally more than those of any other major technology companyincluding Alphabet,Apple,and Microsoftand it increased its reliance on the Chinese market to sustain revenues.In addition,the Peoples Republic of China(PRC)provided significant financial support to the company to decouple from the United States after the restrictions were in place.Sanctioning Huawei and attempting to cripple the company has proven to be hubristic and self-defeatingU.S.techno-economic power is weaker than decision-makers in Washington might think.This should be a wake-up call for U.S.policymakers.Its possible the U.S.government might have been able to cripple Huawei in the late 2000s or early 2010s when its and Chinas technological capabilities were significantly weaker.But by the late 2010s,it was too late.As a result,the only outcome was to weaken U.S.technology companies and strengthen Huawei and Chinas innovation.Sanctioning Huawei and attempting to cripple the company has proven to be hubristic and self-defeatingU.S.techno-economic power is now weaker than decision-makers in Washington INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 4 might think.To the extent Huawei poses a cybersecurity threat,excluding it from U.S.networks and urging allies and trade partners to follow suit should have been the sole focus.However,the U.S.government sought to punish Huawei for allegations of doing business with Iran without fully considering the extent of this measures cost to U.S.companies and for American techno-economic power.Moreover,the U.S.governments attempt to cripple Huawei underestimated the extent of the Chinese governments support for the company,Huaweis technological advancements,and its ability to source non-U.S.inputs or develop them domestically.The U.S.governments approach was outdated,not reflecting the current relative power of the United States.This report shows how export controls accelerated Huaweis innovations and harmed American companies.It first describes the U.S.actions against the company and how the current context differs from the U.S.-Japan technological rivalry of the 1980s,the last time the United States tried to stop the growth of a competitor.The report also provides a brief overview of Huaweis businesses and its innovations after the export control measures.It then examines how the company overcame the restrictions by receiving support from the PRC and by preparing to offset the measures for over six years.In addition,it highlights how U.S.firms have been directly affected,with lost sales of over$33 billion between 2021 and 2024,and exposure to retaliation by the Chinese government due to these export controls.The report also explains why this backlash against U.S.companies matters in the context of U.S.-China techno-economic competition.Finally,the report proposes a framework to address the global rise of Chinese technology companies:The United States should press more countries to ban Huaweis imports.Export controls should be applied jointly with allies,or not at all.Export control measures must consider impacts on U.S.firms and techno-economic power.HUAWEI 101:ITS BUSINESSES AND U.S.ACTIONS AGAINST THE COMPANY Huawei is a privately owned company headquartered in Shenzhen,China,with close ties to the Chinese government,and is one of the worlds largest technology companies.7 The firm reported revenues of$124 billion in 2024,of which information and communication technologies(ICT)infrastructure accounted for 43 percent,and consumer markets(e.g.,smartphones,laptops,wearables,and tablets)accounted for 39 percent.8 Other areas of the companys business include smart grids and energy storage technologies,cloud computing,and smart automotive solutions.Starting around 2018,U.S.policymakers viewed the growing presence of Huawei within 5G networks as a cybersecurity threat.Policymakers argued that Huaweis technologies could enable the Chinese government to conduct espionage through backdoors.9 To address this concern,the U.S.government imposed a de facto import ban on Huawei through a patchwork of measures.(See table 1.)In addition,the global expansion of the company within 5G networks was also assessed as a cybersecurity concern,prompting the government to launch a diplomatic campaign to urge allies and trade partners to follow suit.10 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 5 Table 1.De facto import bansactions to exclude Huawei from U.S.5G networks(2017 to present).11 Date Measure Instrument December 2017 Prohibition by the U.S.Department of Defense from purchasing products from Huawei or ZTE for covered missions.National Defense Authorization Act(NDAA)for fiscal year 2018 May 2018 Ban on retail sales of phones and other telecommunication devices from Huawei and ZTE within U.S.military facilities.U.S.Department of Defense ruling August 2018 Prohibition of all federal procurements from Huawei and ZTE.Additionally,it extended the ban to federal grants,loans,and subsidies,thereby broadening the impact of the restriction to most local government entities.NDAA for fiscal year 2019 May 2019 National emergency declaration due to alleged threats to the national telecommunications supply chain and authorization for the Department of Commerce to ban transactions from organizations considered“foreign adversaries.”Executive Order(EO)13873 January 2020 Denial of transactions to purchase equipment from companies categorized as a national security threat to any recipient of federal telecommunications subsidies.Federal Communications Commission(FCC)ruling March 2020 Total ban of telecommunication equipment or services that pose a national security risk,and a program to remove any such equipment and services currently used in U.S.networks.Secure and Trusted Communications Networks Act of 2019 June 2020 Ban of Huawei and ZTE from receiving Universal Service Funds(USF),and force potential U.S.fund recipients to remove their equipment.FCC ruling January 2021 Establishment of a review process to potentially ban transactions from companies that pose a national security risk,including Huawei.2021 Department of Commerces to enforcement of EO 13873 January 2021 Forcing of rural carriers to remove and replace Huawei equipment,offering reimbursement.FCC ruling November 2022 Prohibition of allowing Huawei telecom or surveillance equipment to enter the United States through the FCCs Certification process or any other so-called“backdoors.”FCC ruling December 2024 Amendment and clarification of the January 2021 Department of Commerces interim ruling,closing backdoors that allowed Huawei,for example,to update software.Department of Commerces final rule implementing EO 13873 May 2025 Prohibition of Chinese labs deemed security risks from testing U.S.electronics.FCC ruling INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 6 Despite these efforts,many allied countries and nations from the so-called Global South still use Huawei technologies for their 5G infrastructure.(See figure 1.)As of September 2025,over 3.2 billion people outside China resided in countries that use 5G networks that rely on Huawei equipment,while another 370 million live in countries where Huawei is not banned but is absent from their 5G networks.Huawei remains embedded in the 5G networks of nine U.S.alliesHungary,Iceland,Italy,South Korea,Spain,the Netherlands,the Philippines,Thailand,and Turkeyand is being phased out from six others:Belgium,France,Germany,Poland,Romania,and the United Kingdom.12 Among the rest,Huaweis 5G is banned in 12 countries,and 10 countries have excluded the company without the need for a ban.13 Figure 1.Prevalence of Huawei technologies in 5G infrastructure outside China14 U.S.Governments Sanctions on Huawei for Alleged Business with Iran In early 2019,Huaweis alleged business with the Iranian regime,and to a lesser extent with the North Korean regime,led the U.S.government to take action to penalize the company.The efforts taken to punish Huawei caused the U.S.government to lose focus on strengthening Americas power in the context of its techno-economic competition with China.As this report describes in further sections,these actions ultimately weakened U.S.competitiveness by hurting American companies.The U.S.government started judicial and administrative actions to sanction Huawei:INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 7 Judicial actions.In January 2019,the U.S.Department of Justice unsealed indictments against Huawei and its CFO,Wanzhou Meng,the daughter of the founder,Ren Zhengfei,for bank fraud,wire fraud,conspiracy,and obstruction of justice.15 Mengs case was dismissed with prejudice in 2022.16 The broader criminal case against Huawei is expected to begin in early 2026,which also includes allegations of its business dealings with the North Korean government.17 Administrative actions.The U.S.Department of Commerces BIS announced the inclusion of Huawei and its subsidiaries on the Entity List in May 2019,arguing that the company“has been involved in activities contrary to the national security or foreign policy interests of the United States.”18 The specific accusation that led to its inclusion on the Entity List was evasion of sanctions by doing business with the Iranian government.The Entity List is an executive tool used to target foreign individuals and organizations,subject to specific license requirements for the transaction of certain goods.19 U.S.Governments Attempts to Cripple the Company U.S.companies had a significant role in Huaweis supply chain by the time it was included on the Entity List,and U.S.government officials attempted to“kill”or“cripple”the company using this as leverage.20 By 2019,American companies accounted for one-third of Huaweis expenses,with U.S.firms comprising 33 of its top 92 vendor suppliers.21 These companies provided essential inputs to Huawei,such as chipsets used in headsets and telecommunications networks,equipment,electronic components,OSs,and semiconductor design software.22 However,the U.S.government underestimated the Chinese governments support for Huawei and the companys innovation capabilities to overcome the attempts to damage its supply chain critically.The U.S.government attempted to cripple Huawei by enforcing Entity List-based export controls.The inclusion on the Entity List means a ban on any sale or transfer of U.S.technologies without a license from BIS,including R&D collaboration.The requirement for a license is extended to the export and re-export of all products subject to the Export Administration Regulations(EAR),and all applications for licenses are under a“presumption of denial,”meaning the unlikelihood of obtaining exceptions.For Huawei,its inclusion on the Entity List meant that critical inputs from U.S.-based companies would no longer be available,including hardware for its smartphones and other products,as well as software,such as Google Mobile Services.Huawei enjoyed approximately a year and a half of limited breathing room to navigate the 2019 export controls until August 2020.The restrictions that took immediate effect after its inclusion in the Entity List applied to goods subject to the EARU.S.-made products and certain foreign goods manufactured using significant U.S.content.In May 2020,BIS expanded the jurisdiction for export controls on foreign-made chips fabricated with U.S.equipment(i.e.,expansion of the Foreign-Produced Direct Product Rule),explicitly citing HiSilicon,a semiconductor subsidiary,as an example of Huaweis affiliates targeted by these restrictions.23 Moreover,following the companys inclusion on the Entity List,BIS issued successive 90-day temporary general licenses(TGLs)that allowed Huawei to continue obtaining certain U.S.technologies,such as software updates.24 An August 2020 amendment stopped the TGLs and tightened the Foreign-Produced Direct Product Rule,including foreign-made chips fabricated“from U.S.technology or software to support the manufacture of indigenous chipsets,”effectively limiting the companys access to the worlds most advanced chips produced by the Taiwanese firm TSMC.25 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 8 The restrictions after August 2020 included some exceptions,as BIS introduced a permanent authorization for“cybersecurity research and vulnerability disclosure.”For instance,in November 2020,Qualcomm and Intel announced that the U.S.government had granted licenses to sell a limited number of products,including 4G technology for mobile devices;these licenses were later revoked in May 2024.26 Microsoft received a license allowing it to include Windows in Huaweis laptops,which expired in March 2025.27 Additionally,in September 2022,BIS granted a permanent authorization to collaborate with Huawei and its subsidiaries on standards setting and dialogue,aiming to prevent the fragmentation of international 5G and Wi-Fi protocols.28 In 2022,the Biden administration announced export controls on advanced semiconductors and equipment to slow the Chinese semiconductor industry as a wholei.e.,not targeting specific companies.29 These measures led some American companies to redesign some of their products to meet U.S.government standards.A notable example is Nvidias H20 chip,which is a second-tier version of its advanced data center chips designed to meet the 2022 restrictions.30 The U.S.government later banned the export of the H20 chip in January 2025which boosted Huaweis Ascend 910C chips in the Chinese market almost immediatelyand later lifted the ban in July of that year.31 Export Controls During the 1980s U.S.-Japan Technological Competition The United States was once able to halt the growth of entire industries that threatened American global leadership,such as the U.S.-Japan technology rivalry in the 1980s,particularly in the semiconductor sector.But the conditions that led the United States to stop the Japanese semiconductor industrys growth do not apply to todays U.S.-China techno-economic competition.The rapid rise of the Japanese economy during the 1980s was viewed as a threat by some U.S.policymakers.Japanese semiconductor,automotive,and consumer electronics companies were quickly gaining global market share,while Japans economy was largely inaccessible to American competitors.In 1985,the United States launched a Section 301 investigationan instrument of the U.S.Trade Act used to impose trade remedies in response to unfair trade practicesagainst Japans semiconductor and electronics industries based on allegations of dumping and currency manipulation,leading to a 100 percent tariff on Japanese electronics.32 Additionally,in 1986,both countries reached an agreement on semiconductors:Japan committed not to compete against the United States through dumping and allowed U.S.semiconductors to capture a 20 percent share of its domestic market.33 Some experts consider these measures the“start of the decline for Japans semiconductor industry.”34 Japans semiconductor industry grew rapidly during the 1980s,and it temporarily held the majority of the global market between 1986 and 1992.35(See figure 2.)The United States was able to regain its global market share through a mix of measures:addressing Japanese unfair trade practices,implementing industrial policies to support the American semiconductor industry,and capitalizing on shifts in global demand toward microprocessors and logic chips.A notable example of how the United States treated this as a public-private effort is the Semiconductor Manufacturing Technology(SEMATECH)consortium,created in 1987 by 14 U.S.semiconductor firms,which received$870 million from the U.S.Defense Advanced Research Projects Agency(DARPA).36 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 9 An example of the United States sanctioning a specific Japanese company is the“Toshiba-Kongsberg scandal”in 1986,when it was revealed that Toshiba Machine,a subsidiary of the Japanese electronics manufacturer Toshiba Corporation,had sold sensitive technologies to the Soviet Union(USSR).37 Toshibas tools,combined with those of the Norwegian weapons manufacturer Kongsberga company that was also supplying the USSRwere used to reduce the detection of nuclear submarines.38 Toshiba Machine was sanctioned by the United States in 1988,which banned Toshiba Corp.and Toshiba Machine from public procurement,along with certain Toshiba Machine products,for three years.39 Figure 2:U.S.and Japanese global semiconductor market share,by revenues,1984201940 The context and effectiveness of the U.S.governments measures against Japanese companies in the 1980s differ from the ongoing U.S.-China techno-economic rivalry,as summarized in table 2.Table 2:Summary of the U.S.-Japan(1980s)vs.U.S.-China(present day)tech rivalry Context Similarities Differences Geopolitical Both represent contests between the United States and a rising economy.Japan was(and remains)a U.S.ally;China is a strategic rival.Japan cooperated;China retaliates and pushes decoupling.Trade Large bilateral trade deficits drove/drive tensions.Todays globalized supply chains make restrictions harder to enforce and less effective.Industrial policy Semiconductors were and remain central to competition.The U.S.responded with industrial policies U.S.China rivalry spans more sectors,including advanced and military technologies.Japans security risks were United StatesJapan0 0P841990200020102019INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 10 Context Similarities Differences promoting the semiconductor industry(SEMATECH in 1987;CHIPS Act in 2022).product-specific,with few IP theft concerns;contrary to the current concerns about Chinese technology firms.Firm-level support Both relied/rely on“national champions”(Toshiba,Huawei)that benefited/benefit from state support and protected markets.Japanese firms are private conglomerates(keiretsu).Chinese firms are state-owned or closely tied to the CCP.The Effect of Export Controls on Huaweis Global Market Share Before the export controls,Huawei and its subsidiaries held a significant global market share in several of their businesses.Huawei has not fully recovered its revenues before the restrictions;however,the company has demonstrated resilience by regaining market share,mainly relying on the Chinese market.Some examples are listed below:Lower market share on smartphone shipments than before the export controls,but a higher participation in the Chinese market.The company had a 20 percent global market share in smartphone shipments by 2019,which dropped to“virtually zero”after the restrictions,although by December 2024,it had increased to 4 percent.41 As of April 2025,Huawei was virtually tied with Xiaomi as the most popular mobile phone company in China,with approximately 18 percent market share.42 Similar market share in ICT infrastructure before and after export controls.Huawei currently holds at least 31 percent of the global revenue for radio access network(RAN)products,slightly higher than its 30 percent market share in 2016.43 Regaining market share in smartphone chipsets.The market share of smartphone chipsets from HiSilicon,Huaweis semiconductor design subsidiary,peaked in the second quarter of 2020 at 16 percent,making it the third-largest supplier worldwide.However,it dropped to zero in the second quarter of 2022 and rebounded to 4 percent in the first quarter of 2025.44 Huaweis Innovations After the Export Controls After its inclusion in the Entity List,Huawei is focusing on launching products that replace those previously supplied by U.S.companies.Notably,the company claims to have developed“an ecosystem entirely independent of the United States.”45 One of the pillars of this independent ecosystem is Huaweis in-house built OS,HarmonyOS,which was initially developed as a“backup plan”in case of U.S.restrictions;the company now expects it to become “a third mobile operating system for the world.”46 HarmonyOS is also compatible with computers,and there are reports that Huawei is rolling out its laptops with this system instead of Microsofts Windows.47 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 11 Huawei is focusing on launching products that replace those previously supplied by U.S.companies,and it claims to have developed“an ecosystem entirely independent of the United States.”Cutting off Android and Windows OS helped create and accelerate the deployment of Huaweis OS.HarmonyOS runs on over 1 billion devices,and supports smartphones,laptops,tablets,and over 1,000 peripheral devices such as printers.48 Huawei is exploring using HarmonyOS in other developments,such as microsatellitesand with its new generation,HarmonyOS NEXT,the firm expects to complete the decoupling from Western-led OSs.49 According to Chinese media,HarmonyOS was developed with the collaboration of 20 research institutes and 10,000 engineers,and the effort has registered over 2,700 patents.Some Western companies operating in China,such as BMW,have already partnered with Huawei to incorporate its OS into their next-generation vehicles.50 The effort to build an indigenous OS aligns closely with the PRCs goals of technological self-reliance and challenges Western dominance in global markets.Android and Apples iOS account for nearly 99 percent of the worldwide smartphone market,and Apple,Google,and Microsoft together account for more than 90 percent of the laptop OSs share.51 Moreover,OpenHarmony,the software upon which HarmonyOS is based,is managed by the OpenAtom Foundation,a Chinese government-controlled organization.52 Huawei is also investing in reducing its reliance on foreign chipmaking technologies.The company claims that in 2023 it was able to replace more than 13,000 components and redesign over 4,000 circuit boards.53 HiSilicon designed a 7 nanometer(nm)chip that compensates for its lower computing power by utilizing HarmonyOS and began deploying this chip in its devices in 2023.54 Huaweis AI chip,Ascend 910d,is expected to perform on par with Nvidias H100,one of the companys most advanced products,yet at nearly 6070 percent of its cost.55 However,some reports estimate that Huawei lags significantly behind Western chipmakers,such as Nvidia and AMD,and will struggle to compete outside China.56 Reports suggest that Huawei can substitute Nvidias H20 chip with the Ascend 920 model,announced in April 2025.57 It is expected that Huawei will become Chinas top AI chipmaker by 2026,with the opening of three new plants.58 Despite this,the company will not have the necessary scale to meet demand in the Chinese market within the next year.59 In addition,Nvidia reported halting H20 chip production in August 2025 due to significant pushback from the Chinese government,and reports suggest that Chinese technology companies have been banned from acquiring it since September 2025 due to cybersecurity concerns.60 The company is also opening new product lines,directly competing against U.S.firms.For example,Huaweis smart driving solutions have been implemented in at least half a million cars,and some analysts suggest its technology is superior to Teslas.61 The Huawei MateBook X Pro and Huaweis Watch D also offer features and specifications that are often considered equal to or superior to those of Western competitors.62 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 12 HOW HUAWEI BOUNCED BACK FROM EXPORT CONTROLS Chinas Mercantilism Allowed Huawei to Survive The export controls did not take into account the Chinese governments efforts to secure the companys survival.There is precedent for the Chinese government intervening to rescue the company.Ren Zhengfei,Huaweis founder and president,stated that“Huawei would no longer exist”without protectionist policies to shield it from foreign competitors during its internationalization efforts in the 2000s.63 At that time,Chinese-backed loans,such as those from the China Development Bank and the Export-Import Bank of China,aided Huaweis international expansion,allowing the company to outbid competitors and adopt a“vacuum-cleaner approach just sucking up the market.”64 Over the 2010s,Huawei and state-owned ZTE artificially gained market share from Ericsson and Nokia in telecommunications equipment through direct support from the Chinese government,as well as indirect support such as restricting foreign companies access to the expanding Chinese market.65 Following the U.S.export controls in 2019,Huawei continues to receive support from the PRC through financial support,direct procurement from state-owned Chinese companies,and a continued preferential treatment as a“national champion”for strategic national initiatives.Huaweis success stands on the shoulders of Chinese innovation mercantilism.By 2019,Huawei had received$75 billion in state support since its establishment,including$1.6 billion in grants,$46.3 billion in credit facilities,$25 billion in tax breaks,and$2 billion in subsidized land purchases.66 This helped the company gain market share,particularly in the global telecommunications equipment market.The company has also benefited from various other types of government support,including its role as a recipient of Belt and Road Initiative(BRI)projects,which helped the company expand its global footprint and build the necessary connections to navigate restrictions.67 The Chinese government has implemented various practices to support Huawei and other national champions,including protecting the domestic market,undervaluing the currency,promoting exports,and ignoring intellectual property(IP)theft.68 The Information Technology and Innovation Foundation(ITIF)has a longstanding record of reporting on how the PRC has subsidized Huawei and other Chinese telecommunications companies,such as ZTE.Huaweis and ZTEs global market share,primarily accumulated during the 2010s,was a direct result of Chinas mercantilist policies and programs,such as closing Chinas market to foreign companies,thereby securing a sizable customer base.69 A 2020 ITIF study found that if Ericsson and Nokia had captured Huaweis and ZTEs equivalent market shares,the world would have seen a 20 percent increase in telecommunications equipment R&D investments and 75 additional essential 5G patents.70 Hence,Chinese state support for Huawei not only helps advance Chinas agenda of techno-economic dominance at the expense of Western incumbents,but also undermines overall global innovation.Following its inclusion in the Entity List in 2019,Huawei continues to receive support from the PRC.For example,the company has received more than 215 billion yuan($30 billion)from the central and Shenzhen governments to acquire two chip plants and to build at least three others.71 The PRCs continued support is reflected in several additional ways:INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 13 Favorable financial support to mitigate the effects of the export controls.HONOR,a former Huawei subsidiary,is a budget-brand smartphone whose business was heavily affected by U.S.restrictions,as it relied on U.S.semiconductors for its hardware and had access to the Google Play Store for its software.72 HONOR was acquired in 2020 for 100 billion yuan($15.2 billion)by a consortium of private and state-backed investors.73 In this transaction,the Chinese government acted as the“investor of first resort,”allowing Huawei to divest from an asset subject to export controls under its ownership,while the PRC government secured the continuation of production for a company that,after the acquisition,was able to keep importing foreign chips.74 Direct procurement from state-owned Chinese companies.The PRC has consistently favored Chinas national champions through the procurement of public agencies or state-owned companies.For example,in 2021,China Mobile,a state-owned Chinese telecommunications company,announced that Huawei would be the vendor for 60 percent of 5G network station contracts.75(ZTE acquired nearly 30 percent,while Western competitors such as Ericsson and Nokia received the remaining few contracts.)China Mobile allocated Huawei 52 percent of a$1.1 billion contract for 5G network deployment between 2023 and 2024.76(Ericsson and Nokia received 13 percent of the resources;notably,another Chinese state-owned company,Datang Mobile,received awards in addition to ZTE.)What ITIF stated in 2020 remains valid in 2025:“The only reason a non-Chinese firm is allowed to gain 5G market share is to continue the illusion of an open competitive market,and to give the Chinese government leverage over European governments that seek to limit Huawei deployment in Europe.If the EU threatens to take strong action against unfair Chinese practices,the Chinese government can retaliate by threatening to completely exclude European providers.”77 Continued preferential treatment as a“national champion”for strategic national initiatives.Huawei has been one of the primary beneficiaries of Chinas industrial policies aimed at promoting the countrys strategic industry upgrades.For instance,the 2023 expansion of the semiconductor R&D tax incentive served as a de facto subsidy for Huawei and HiSilicon(Huaweis semiconductor design subsidiary),among others,since semiconductor R&D expenditure can yield up to a 220 percent deduction from the companys taxable income.78 In 2023,the PRC designated Huaweialong with Advanced Micro-Fabrication Equipment(AMEC),Naura,and Semiconductor Manufacturing International Corporation(SMIC)as targets for increased governmental support for semiconductors,without requiring the demonstration of performance objectives.79(To be sure,semiconductor tax credits can be legitimate tools for nations to use to promote their semiconductor industries,so long as those tax credits are made available equally to companies from all countries competing in a nations market.)INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 14 Since 2012,Huawei has shifted toward greater reliance on the Chinese domestic market to buffer against restrictions,invested heavily in R&D,developed capabilities to produce in-house critical hardware and software,and stockpiled resources to survive the first year after restrictions.Huawei Had More Than Six Years to Prepare“Spare Tires”to Deal With Export Controls80 ITIF noted in 2020 that export controls were“shooting U.S.exporters in the foot,”as they went beyond protecting the U.S.telecommunications networks for cybersecurity reasons,limited U.S.company exports,and incentivized Huawei“to produce its own inputs,including computer chips.”81 This assessment proved to be accurate.Moreover,the export controls overlooked that Huawei had prepared for a restrictions scenario for over six years before the company was added to the Entity List in 2019.Notably,a 2012 U.S.House Permanent Select Committee on Intelligence special report revealed the companys unfair practices and its ties with the Peoples Liberation Army(PLA)acted as an early warning.82 Since 2012,Huawei has shifted toward greater reliance on the Chinese domestic market to buffer against restrictions,invested heavily in R&D,developed capabilities to produce in-house critical hardware and software,and stockpiled resources to survive the first year after restrictions.A year after the 2012 House report,Huawei initiated an aggressive public relations campaign in the United States to improve its image.When the campaign did not lessen the scrutiny over the companys practices and cybersecurity concerns,it officially declared that it was“not interested in the U.S.market anymore,”noting that its U.S.market sales were only$1 billion.83(This ignored the fact that the company relied heavily on U.S.technology components for all its operations.)Expanding Reliance on the Local Market While the 2000s were a decade of international expansion for Huawei,the company reversed this trend in the subsequent decade.Before the 2008 global financial crisis,Huaweis global expansion led to a significant increase in its non-Chinese revenues,jumping from 21 percent in 2005 to 75 percent in 2008.As the shock from the crisis led the company to increase its share in Chinese markets by 15 percentage points from 2008 to 2009,Huawei slowly recovered its income from non-Chinese markets by 2011.However,since 2012,Huawei has significantly expanded its presence and increasingly relied on revenues from China.By 2019,China represented 59 percent of Huaweis revenues,and in its latest 2024 annual report,China provided 71 percent of revenues.INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 15 Figure 3:Huaweis revenues from China as a share of total revenues84 While revenues from China have increased in relative terms for the company since 2012,revenues from the rest of the world also rose in the years leading up to the U.S.restrictions.As shown in figure 4,Huaweis global revenues increased 2.5 times between 2011 and 2020,the years when revenues peaked.However,revenues generated in China grew sixfold during this period,whereas revenues from non-Chinese markets rose by 78 percent.Revenues from China have served as a buffer to offset the impact of U.S.export controls.During the first year after them,revenues from China increased by 12 percent,offsetting the 14 percent decline in non-Chinese markets,which enabled Huawei to report an overall year-over-year increase.In the following years,revenues from China bounced back rapidly.Between 2019 and 2024,revenues from China increased by 4 percent,while revenues from non-Chinese markets declined by 7 percent.0 0Pp 0220042006200820102012201420162018202020222024INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 16 Figure 4:Huaweis revenues by region(billion CNY,2024 prices)85 Revenues from China have served as a buffer to offset the impact of U.S.export controls.One example of how the Chinese market has served as a buffer is Huaweis market share for smartphone devices.The company once dominated the Chinese smartphone market,accounting for 37 percent and 38 percent of total sales in 2019 and 2020,respectively.As the export controls affected the firms production,by 2021,this market share had fallen to approximately 5 percent.Considering that HONOR spun off from Huawei through the previously described state-supported acquisition,the comparison of post-restrictions market share should involve both companies.In this context,despite a challenging 2021,the combined market share of Huawei and HONOR in China averaged 29 percent for the 2022 to 2024 period.(See figure 5.)As of 2025,Huaweis market share in this sector has virtually tied with Xiaomi,making it one of the two most dominant ICT companies in China.01002003004005006007008009001,0002011201320152017201920212023OtherAmericasAsia PacificEMEAChinaINFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 17 Figure 5:Huaweis market share in China for smartphone sales86 Huawei Overinvested in R&D Capabilities Before Restrictions,and Kept Investing After Them Huawei outperformed all its competitors in terms of R&D investment before the U.S.restrictions.Between 2013(the first full year after the October 2012 House report on Huawei)and 2020,Huawei increased its real R&D expenditure by more than threefold,surpassing that of any other peer company,as shown in figure 6.Regardless of whether this investmentwhich exceeded that of the rest of the industrywas motivated by global expansion or by the fact that Huawei executives were indeed accounting for restrictions risks,in practice,these years of R&D overspending allowed the company to build a knowledge base to confront the restrictions challenge.0%5 %05 172018201920202021202220232024HONORHuaweiINFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 18 Figure 6:Real R&D expenditure growth by company(indexed;2013=100)87 Growth in Huaweis R&D expenditures declined after the restrictions,yet it still set a record for the company in 2023 and 2024.88 Huaweis efforts to develop(or catch up with)frontier technologies have not diminished.One way to approximate this is by examining R&D intensity,which considers the companys R&D expenditure as a share of total revenues for a given year.Huawei had historically lagged behind in corporate R&D compared to competitors such as Ericsson and Nokia.89 However,as figure 7 shows,U.S.restrictions forced the company to increase its R&D intensity to an average of 20 percent between 2019 and 2023,outperforming all competitors except Intel(which competes with Huawei only in one of Huaweis businesses:semiconductors).AppleHuaweiAlphabetZTEMicrosoftSamsungEricssonIntelNokiaCisco SystemsIBM01002003004005006002010201220142016201820202022INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 19 Figure 7:R&D intensity by company(R&D expenditure as a share of net sales)90 Huawei took advantage of the TGL granted after its designation to the Entity List to release HarmonyOS.Additionally,Huawei increased its number of R&D personnel since the U.S.restrictions were imposed,hiring more than 17,000 employees in this field between 2019 and 2024.(See figure 8.)While Huaweis R&D staff accounted for 45 percent of the total staff count during the five years preceding the restrictions(20142018),this proportion rose to an average of 55 percent in the five years following the U.S.inclusion of the company on the Entity List(20202024).There is no available information about the specific units or research projects to which these additional R&D researchers have been assigned.IntelHuaweiZTENokiaEricssonAlphabetCisco SystemsMicrosoftSamsungIBMApple0%5 %05 10201220142016201820202022INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 20 Figure 8:Number of R&D employees and R&D personnel as a share of total employees for Huawei91 Huawei Started Working on an Indigenous OS Years Before the Export Controls The export control for software,in practice,began in August 2020 after BIS stopped granting the TGL.92 This meant that Huawei would lose access to all non-open-source dealings,such as licensing for Googles Android OS,Googles Play Store app ecosystem,and any other software-related business with U.S.-headquartered companies.Huawei sold its handsets with Android Open Source Project in China(since Googles services were blocked in the country due to censorship)and the Google-certified Android OS for the rest of the world as the integrated OS.Microsoft enjoyed a license until March 2025,allowing it to include Windows OS in Huaweis laptops.93 Huawei took advantage of the TGL granted after its designation to the Entity List to release HarmonyOS in August 2019.The company had previously explored using another OS instead of Android,such as Microsofts Windows Phone OS or Samsungs Tizen in 2014.94 Huawei explicitly built its in-house OS in anticipation of potential U.S.restrictionstwo months before the restrictions,a spokesperson stated,“Huawei does have backup systems but only for use in extenuating circumstances.”95 Some reports indicate that the company has been prepared for“worst-case scenarios”since the 2012 House report.96 Evidence suggests that the firm was preparing for an indigenous OS as early as 20132014.For example,LiteOS,an OS for real-time Internet-of-Things devices,was launched in 2015.97 Some of the functions of LiteOS used to build HarmonyOS and its open-source version,OpenHarmony,are described as its direct predecessors.98 Similarly,the technology enabling cross-device tasks and efficient resource allocation scheduling for the OS patent application dates back to May 2015,suggesting that at least part of the research was conducted in 2014 or earlier.99 Number of R&D employeesPercentage of total employees0 0P0,00040,00060,00080,000100,000120,0002010201520202024INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 21 Investing in Semiconductors Was Critical to Continue the Companys Operations Huawei developed semiconductor capabilities to achieve self-sufficiency in the event of U.S.restrictions.To achieve this goal,the company took three clear actions:invested in its main chip design subsidiary(HiSilicon),began working with companies that have complementary strengths in the semiconductor supply chain,and created incentives to develop an ecosystem within China through an investment platform.HiSilicon,fully owned by and originating as a spin-off of Huawei in the 2000s,served as the cornerstone of Huaweis backup plans for chips.The day after the export controls were announced in May 2019,HiSilicons CEO sent a letter warning that the company had been preparing a“spare tire”for the survival of Huawei.100 HiSilicon provided Huawei with the organizational and staffing capabilities to develop physical components that could replace U.S.technologies.By 2012,HiSilicon had developed at least 120 chip designs and distributed at least 150 million chips.101 HiSilicon has been developing chips branded as Kirin since 2014 and helped design the worlds first 7 nm chipset commercialized with 5G support,Kirin 980,in 2018 in partnership with TSMC.102 HiSilicon produced more than$7 billion worth of chips during the period before the 2019 restrictions.103 The second action taken was to collaborate with companies that have complementary capabilities.For example,in 2015,Huawei announced a joint venture with SMIC(a partially state-owned Chinese company),Imec(a Belgian research consortium),and Qualcomm(a U.S.semiconductor company)called SMIC Advanced Technology Research&Development(Shanghai)Corporation.This joint venture,majority owned by SMIC,focused on R&D to develop 14 nm semiconductor technology for mass production by 2020.104 SMIC announced the start of volume production for the 14 nm chip in late 2019,and the first commercialization took place in 2020 with HiSilicons 14 nm Kirin 710A chip.105 Finally,Huawei sought to build a local ecosystem of suppliers to strengthen Chinas self-sufficiency in semiconductors.In 2019,before Huaweis inclusion on the Entity List,the company launched Hubble,a venture capital subsidiary designed as an investment vehicle for semiconductor startups,with a registered capital exceeding$100 million.Before the establishment of Hubble,Huawei had maintained a practice of not investing in third-party companies.106 To date,Hubble has invested in at least 100 startups.107 For example,it is an investor in companies developing key semiconductor fabrication processes,such as Focuslight Technologies(a photolithography equipment maker),Suzhou Everbright Photonics(a gallium-nitride chipmaker),and Xuzhou Chemicals(which develops photoresist technologies used in lithography).108 Hubble is currently being used to further promote Huaweis ecosystem by funding startups that would be locked into it,for instance,by investing in humanoid robots that can integrate the companys new developments in chips(Huaweis Ascend AI chips),large language models(Pangu),and HarmonyOS.109 Other Short-Term Measures The cumulative congressional and executive actions raising concerns about Huawei during late 2017 onward allowed the company to take actions to mitigate potential U.S.measures against it.For example,Huaweis inventories of raw materials expanded by more than 86 percent from 2017 to 2018,and the company has kept a high level of stockpiles of raw materials since the restrictions relative to other inventories.(See figure 9.)These raw materials include electronic components and sub-assemblies used in manufacturing telecommunication equipment and INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 22 consumer devices,as well as large orders of the 7 nm Tiangang core chips,manufactured by TSMC using U.S.wafer fabrication equipment and supplying Huawei until the end of the TGL.110 These inventory levels allowed the company to effectively boost its revenues during the first year after it was added to the Entity List,in addition to other measures such as issuing bonds in the Chinese market for over$800 million to increase liquidity and reduce its financial reliance on foreign markets.111 Figure 9:Huaweis raw materials as a share of total inventories112 HOW EXPORT CONTROLS ON HUAWEI ARE AFFECTING U.S.COMPANIES The U.S.actions against Huawei served as an incentive for the company to accelerate its decoupling from U.S.technologies.U.S.exports to Huawei exceeded$11 billion when the firm was added to the Entity List.113 Without those inputs,it created a“void”in Huaweis supply chain that was mostly filled by Huaweis in-house processes or Chinese technologies.Restrictions against the company harmed U.S.businesses by reducing sales of former Huawei suppliers and triggering retaliation from the PRC against them.Export Controls Cut U.S.Businesses Sales by at Least$33 billion ITIF estimates that restrictions on doing business with Huawei caused U.S.companies to lose at least$33 billion in sales between 2021 and 2024.This estimation is based on two main priors.Before U.S.restrictions,Huawei spent roughly 33 percent of its operating costs on American suppliers.114 Following the August 2020 amendment to terminate the TGLs,BIS authorized a limited number of export licenses from 2021 to 2024;however,this information is not publicly available.115 Anecdotal evidence suggests that Huawei purchased between 5 and 10 percent of its operating costs from U.S.firms during this period;ITIF conservatively estimates that share to be 15 percent.116 0 0P 102012201420162018202020222024INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 23 To model what would have happened without the export controls,ITIF combined two different types of alternatives for Huawei,creating a total of four different estimations,summarized in figure 10.The first case involves trying to infer what Huaweis growth would be without U.S.restrictions.To do this,ITIF modeled two scenarios:the“current sales”scenario(using existing data on Huaweis performance)and a“no export controls scenario,”which assumes that Huaweis sales would follow the same pattern as the average of its main Western competitors(Alphabet,Apple,Ericsson,Nokia,and Microsoft)from 20212024.The second consideration for Huawei in this analysis is whether the company was already on a path to decouple from U.S.technologies,regardless of U.S.actions.To explore this,ITIF modeled two cases:a base case wherein U.S.firms accounted for roughly 33 percent of Huaweis operating costs for all years(business-as-usual suppliers,or“BAU suppliers,”scenario)and a“decoupling scenario,”assuming Huawei would fully decouple from U.S.technologies by 2027the 100th anniversary of the PLA.Figure 10.Lost sales to U.S.suppliers due to export controls against Huawei between 2021 and 2024(billions)117 Sales from U.S.firms to Huawei helped sustain American market share in key technology products and funded R&D projects,preventing China from capturing that share.At the industry level,Huawei often did not represent a significant portion of the revenues of American advanced manufacturing companies.(See table 3.)However,these sales helped U.S.companies reach the necessary volumes and margins to invest in innovation,ultimately maintaining competitiveness and market share.Restrictions against Huawei directly harmed U.S.businesses by reducing sales of former Huawei suppliers and triggering retaliation from the PRC against them.The restrictions also had a secondary effect on American companies supplying Huawei.Many of them reported in their annual statements that U.S.action negatively impacted the overall demand for their products.For example,Analog Devices Inc.,an American semiconductor company,reported in its 2020 annual report that restrictions were“causing our current or potential customers to amass large inventories of our products,replace our products with products from another supplier that is not subject to the export restrictions,or focus on building indigenous semiconductor capacity to reduce reliance on U.S.suppliers.”118$46.9$43.3$36.9$33.9No export controls with BAU suppliersCurrent sales with BAU suppliersNo export controls with decouplingCurrent sales with decouplingINFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 24 Table 3:Examples of U.S.advanced manufacturing companies affected by the export controls119 Company Example of What It Supplied to Huawei Relevant Financial Information Analog Devices Inc.Chips used in radio systems for 5G telecommunications networks Sales to Huawei represented between 2 and 3 percent of total sales by 2020.Broadcom Wireless communication chips for smartphones and other devices Huawei represented 4 percent of Broadcoms revenues in 2019,or$900 million.Cadence Electronic design automation software(EDA),also provided to HiSilicon In May 2025,the U.S.government imposed new export controls on EDA sales to Chinese companies.Intel License to ship laptop central processors to Huawei in 2020(revoked in 2024)When the 2024 license was revoked,Intel maintained its revenue expectation for the year,but“below the midpoint”between$12.5 billion and$13.5 billion.Micron Technology Dynamic Random Access Memory(DRAM)Huawei represented 13 percent of revenues by February 2019.Qorvo Radio frequency(RF)supplier for Huawei handsets and base stations Huawei accounted for 13 percent of 2019 revenues,10 percent in 2020,and 5 percent in 2021,after which it stopped reporting significant sales.Qualcomm License in 2020 to sell older 4G chips to Huawei(revoked in 2024)Between October 2023 and May 2024,revenues from Huawei represented$560 million(1.4 percent for the fiscal year ending in September 2024)Texas Instruments Analog chips for Huawei smartphones and telecom equipment Sales to Huawei represented between 3 and 4 percent of total sales in 2019.Giving Away Market Share to a Foreign Competitor:The Case of Teradyne Teradyne is an American manufacturing company specializing in Automated Test Equipment(ATE)for the semiconductor industry.ATE plays a critical role in semiconductor manufacturing,as it guarantees essential quality controls during the different stages of the process.Teradyne,along with its Japanese competitor Advantest,together account for roughly 8090 percent of the global market for semiconductor testers in many segments.120 Teradyne is also a global leader in advanced robotics through its subsidiary Universal Robots.121 As the export controls against Huawei limited the supply of U.S.technologies to the firm,but were not coordinated with allies,Teradyne was impacted,but its Japanese competitor was not.Thus,Huawei replaced Teradynes inputs with Advantests,giving up global market share.122 Advantests global market share for semiconductor testers grew from 43 percent in 2020 to 58 percent in 2024,while Teradynes declined roughly in a similar,inverse proportion.123 The restrictions have also harmed Teradynes ability to keep investing in innovation capabilities.The company observed two consecutive years of revenue decline,from$3.7 billion in 2021 to INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 25$2.7 billion in 2023.As of September 2025,it had not recovered its pre-restriction sales.This revenue loss has impacted the firms innovation capabilities.Figure 11 shows the R&D expenditure for Advantest and Teradyne,indexed in 2020,when restrictions began.After the restrictions came into effect for ATE products,Advantest was able to expand its R&D expenditure by roughly 50 percent,while Teradyne observed a decrease in real R&D expenditure.Figure 11.R&D expenditure(indexed;2020=100).124 U.S.restrictions also compelled American companies to cancel their contracts with Huawei,such as the earlier removal of Googles Play Store from Huawei devices.This meant that Huaweis wearables could not be updated to meet Googles security and development standards.125 A similar pattern occurred with Microsoft and its laptop OS,the Windows series.Windows license to Huawei expired in March 2025,giving the Chinese company enough time to incorporate HarmonyOS into its laptops.126 After March 2025,reports indicate that Huawei is only rolling out laptops using its in-house-built OS,HarmonyOS,threatening Microsofts market share.127 Export Controls Triggered the PRC to Retaliate Against U.S.Companies While there has not been a formal retaliation from the Chinese government against the United States due to Huaweis inclusion on the Entity List,the PRC has since taken actions that effectively serve as a response to the restrictions.A few months after the restrictions were imposed in 2019,Cisco executives declared that the company was“uninvited”to compete in bids by Chinese state-owned companies.128 Thus,Cisco was de facto barred from continuing to sell telecommunications infrastructure to Chinese carriers.(Cisco still sells equipment to other Chinese companies,such as electric vehicle makers.)129 In December 2019,the PRC instructed all government agencies to phase out foreign-made technologies,including hardware and software,by 2022.130 This measure was directly targeted at reducing the market share of American firms,such as Dell,HP,and Microsoft,while being functional to the PRCs goal of technological self-sufficiency.Likewise,local governments in China,such as Shenzhen,started promoting the adoption of HarmonyOS as their primary system,under the“Shenzhen Action Plan for Supporting the Development of Native HarmonyOS Open AdvantestTeradyne0204060801001201401602017201820192020202120222023INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 26 Source Applications in 2024,”which is seen as a basis for a nation-wide initiative to phase out American OS.131 In addition,the PRC established its version of the Entity List in May 2019,called the“Unreliable Entity List,”with a justification similar to that of the American version.132 This tool provides the PRC with a legal basis to target retaliatory measures against specific companies,primarily American ones.The Unreliable Entity List uniquely includes American companies,and it has been utilized by the Chinese government as a“bargaining tool”during ongoing trade negotiations,highlighting the retaliatory nature of the measure.133 WHY THIS MATTERS The U.S.China techno-economic rivalry plays out across every strategic sector,including those in which Huawei competes with American firms for global market share.As ITIF has reported,China is rapidly catching up with the United States in robotics,electronic displays,and artificial intelligence,and it lags behind in machine tools and semiconductors.134 These are all critical links in Huaweis supply chain.Because U.S.policy has shaped Huaweis innovation path,its continued growth erodes Americas competitive edge.The business opportunity loss for American firms doing business with Huawei ultimately matters for the U.S.public interest for three reasons:1.The acceleration of Huaweis decoupling from using U.S.technologies impacts American global market share in key products,such as OSs.2.The loss of revenues from doing business with Huawei undermines American competitiveness,as it limits U.S.firms ability to reinvest in R&D and advanced production.135 3.The acceleration of Huaweis decoupling from U.S.technologies is leading to a lock-in of consumers to products within an ecosystem that privileges Chinese standards and supply chains.U.S.technology companies are now in a weaker position to lead globally due to Huaweis accelerated decoupling.As Nokia and Ericsson were ultimately unable to offset the unfair competition against Huawei and ZTE in 5G,this pattern will likely repeat for the cases of HarmonyOS,the new generation of Huaweis wearables competing against American firms,or both.The result is likely to be a decline in global market share for companies such as Google and Microsoft.POLICY RECOMMENDATIONS The rationale used by the U.S.governments actions against Huawei is a legacy of an earlier era,when America could impose sanctions without significantly harming its competitiveness and could hinder the production capabilities of its adversaries.This framework is outdated,as global supply chains have become increasingly complex and Chinese techno-economic power has reached,in some cases,unassailable levels.The United States needs a realistic approach.The fact that the United States is incapable of crippling a company such as Huawei does not preclude the need to take actions against Chinese INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 27 mercantilism.A modern framework should pair import bans for cybersecurity reasons with limited,targeted export controls on advanced technologies.Some of the measures that U.S.policymakers should consider for this modern framework include the following:Press more countries to ban Huaweis imports.In 2020,ITIF recommended that the U.S.government urge its allies to exclude Huawei and ZTE from their markets,particularly in the telecommunications network infrastructure and equipment sector,to counter the companies artificial competitiveness resulting from Chinese support and the lack of opportunities for rivals to access the Chinese domestic market.136 This assessment has not changed.Despite foreign policys efforts across multiple U.S.administrations,Huawei remains in many European marketseven as its predatory practices have particularly harmed Ericsson and Nokia.Some allies are phasing out Huawei from their 5G network.Germany,for example,plans to phase out Huawei from core 5G networks by 2026 and from the radio and management layers by 2029.137 However,nine U.S.alliesHungary,Iceland,Italy,South Korea,Spain,the Netherlands,the Philippines,Thailand,and Turkeycontinue to use Huawei in their 5G infrastructure without a plan to phase out the company entirely.The U.S.government needs to reverse course on its go-it-alone approach to competitiveness and start to bring in a“coalition of the willing”that understands the threat to the West from Chinese national power industry predation and is willing to take collective steps in self-defense.One such step should be to ban further sales of Huawei telecom equipment.A modern framework should pair import bans for cybersecurity reasons with limited,targeted export controls on advanced technologies.Export controls should be applied jointly with allies,or not at all.Export controls,in part,were ineffective because regulatory loopholes allowed Huawei to fully offset American inputs of the same cost and quality as those of U.S.allies,including Japan.As this report shows,blanket export controls on Huawei have undermined American competitiveness in markets where the company has other substitutes,such as the case of ATE for chipmaking tests.This experience demonstrates that unilateral export controls,besides being ineffective and harmful to U.S.companies,actually work to the advantage of American allies.Export control measures must consider impacts on U.S.firms and techno-economic power.For decades,U.S.foreign policy makers and mavens were willing to spend U.S.techno-economic power to achieve foreign policy goals,such as sanctioning a country we wanted to punish,such as Iran.America can no longer afford such spending of its“technology capital.”Huaweis experience demonstrates that export controls are detrimental to the United States in both absolute and relative terms:they reduced the resources available for U.S.companies to invest in R&D and innovation,and helped shape Huawei as a INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 28 competitor in new products,such as OSs,which now threaten U.S.dominance in this global market.It is time for an intellectual and operational reset.U.S.policymakers cannot assume that the United States maintains global leadership in advanced sectors.American competitiveness is faltering and requires a coordinated strategy,led by the federal government,to reverse this trend.CONCLUSIONS The approach taken by the U.S.government against Huawei,with export controls to sanction the company and cripple it,was hubristicand ultimately backfired.An import ban on Huaweis 5G network in the United States,along with urging allies and trade partners to follow suit,would have addressed the cybersecurity concerns about the company.Yet,the measures went beyond.The U.S.government took actions against the company for its alleged business with adversaries,such as Iran,which turned out to be costly for U.S.firms and damaging to American competitiveness.It later tried to cripple the company,underestimating Huaweis innovation capabilities and the PRCs support.Moreover,as this report shows,a 2012 Congressional report denouncing the companys predatory practices and cybersecurity risks served as an early warning that prompted the company to invest in decoupling from U.S.technologies.Huaweis resiliency threatens American competitiveness and market share.After the implementation of export controls,the company has successfully launched its in-house OS,HarmonyOS,which is now being rolled out on mobile devices,tablets,and laptopspotentially threatening U.S.firms market share in these sectors.The company is also catching up in chipmaking and exploring new business lines,such as energy storage technologies and smart automotive solutions.Additionally,this report demonstrates how export restrictions harm U.S.companies,resulting in over$33 billion in lost sales and,in some cases,a relative reduction in R&D investments.The failure of U.S.policies against Huawei evidences an outdated rationale to address Chinese mercantilism.The current U.S.-China techno-economic competition differs significantly from earlier episodes when U.S.technological leadership was challenged.For example,the United States regained its semiconductor lead during the U.S.-Japan rivalry of the 1980s and today commands nearly five times Japans global market share.It succeeded by combining restrictions,diplomacy with an allied partner(Japan),and sustained innovation.None of those conditions applies today:Chinese support offsets restrictions,the rivalry is with an adversary rather than an ally,and China has caught up or even pulled ahead in many strategic technologies.In other words,the United States is using yesterdays tools against a fundamentally different adversary;it needs a realistic,not hubristic,policy approach.INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 29 Acknowledgments Huaweis building“spare tires”in anticipation of U.S.sanctions is based on the companys own statements,notably by Ren Zhengfei in 2019.However,the broader narrative of Huaweis preparations for U.S.restrictions and the“spare tire”concept was first fully documented and gained broad attention through detailed reporting in Eva Dous book House of Huawei:The Secret History of Chinas Most Powerful Company.“Backfire,”the title of this report,is also the title of one of Annabel Yaos singles.Annabel Yao,a Chinese pop star and one of Ren Zhengfeis daughters,is often referred to as the“Huawei Princess.”The author wishes to thank the following individuals for assisting with this report:Robert Atkinson,Daniel Castro,Eli Clemens,Randolph Court,and Stephen Ezell.About the Author Rodrigo Balbontin is an associate director covering trade,IP,and digital technology governance at ITIF.He has extensive experience in policy design and research on science,technology,and innovation governance;digital economy and trade;and Internet governance.He earned his masters degree in science and technology policy at the University of Sussex and a bachelors degree in economics at the University of Chile.About ITIF The Information Technology and Innovation Foundation(ITIF)is an independent 501(c)(3)nonprofit,nonpartisan research and educational institute that has been recognized repeatedly as the worlds leading think tank for science and technology policy.Its mission is to formulate,evaluate,and promote policy solutions that accelerate innovation and boost productivity to spur growth,opportunity,and progress.For more information,visit itif.org/about.ENDNOTES 1.TelecomLead,“Huawei Strengthens Lead in Global Telecom Equipment Market,”March 20,2025,https:/ Pongratz,“Key Takeaways Worldwide Telecom Equipment Market 2018,”DellOro Group,March 4,2019,https:/ Daws,“HarmonyOS Next:Huaweis Challenge to Apple and Android,”Telecoms Tech News,April 25,2024,https:/ Devanesan,“What Three Years of US Sanctions Did to Huawei,”TechWire Asia,March 28,2023,https:/ Shilov,“Huawei introduces the Ascend 920 AI chip to fill the void left by Nvidias H20,”Toms Hardware,July 18,2025,https:/ Feng,“Tech war:Huawei executive claims victory over US sanctions with computing,AI ecosystem,”South China Morning Post,August 29,2025,https:/ TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 30 war/article/3323647/tech-war-huawei-executive-claims-victory-over-us-sanctions-computing-ai-ecosystem.6.Since 2012,following a U.S.congressional report that denounced the companys unfair practices and cybersecurity risks,Huawei has accelerated its efforts to decouple from U.S.technologies.7.Fortune,“Global 500 Rankings,”Fortune,https:/ Investment&Holding Co.,Ltd.,2024 Annual Report(Shenzhen:Huawei Investment&Holding Co.,Ltd.,March 31,2025),https:/ Kaska,Henrik Beckvard,and Tom Minrik,Huawei,5G and China as a Security Threat(Tallinn:NATO Cooperative Cyber Defence Centre of Excellence,2019),https:/ccdcoe.org/uploads/2019/03/CCDCOE-Huawei-2019-03-28-FINAL.pdf.;Congressional Research Service,U.S.Restrictions on Huawei Technologies:National Security and Foreign Policy Considerations,R47012,updated January 5,2022,https:/www.congress.gov/crs-product/R47012.10.Susan Heavey and Makini Brice,“U.S.wont partner with countries that use Huawei systems:Pompeo,”Reuters,February 21,2019,https:/ Defense Authorization Act for Fiscal Year 2018,H.R.2810,115th Cong.(20172018),https:/www.congress.gov/bill/115th-congress/house-bill/2810;Katie Collins,“Pentagon reportedly bans sale of Huawei and ZTE phones on US military bases,”CNET,May 2,2018,https:/ Defense Authorization Act for Fiscal Year 2018,H.R.2810,115th Cong.(20172018),https:/www.congress.gov/bill/115th-congress/house-bill/5515/text;Executive Office of the President,Executive Order 13873,“Securing the Information and Communications Technology and Services Supply Chain,”84 Fed.Reg.22689(May 17,2019),https:/www.federalregister.gov/documents/2019/05/17/2019-10538/securing-the-information-and-communications-technology-and-services-supply-chain;Federal Communications Commission,“Protecting Against National Security Threats to the Communications Supply Chain Through FCC Programs;Huawei Designation;ZTE Designation,”final rule,85 Fed.Reg.230(January 3,2020),https:/www.federalregister.gov/documents/2020/01/03/2019-27610/protecting-against-national-security-threats-to-the-communications-supply-chain-through-fcc-programs;U.S.Congress,Secure and Trusted Communications Networks Act of 2019,H.R.4998,116th Cong.(20192020),https:/www.congress.gov/bill/116th-congress/house-bill/4998;Federal Communications Commission,Public Safety and Homeland Security Bureau,“In the Matter of Protecting Against National Security Threats to the Communications Supply Chain Through FCC ProgramsHuawei Designation,”DA 20-690,June 30,2020,https:/docs.fcc.gov/public/attachments/DA-20-690A1.pdf;Department of Commerce,“Securing the Information and Communications Technology and Services Supply Chain,”final rule,86 Fed.Reg.4909(January 19,2021),https:/www.federalregister.gov/documents/2021/01/19/2021-01234/securing-the-information-and-communications-technology-and-services-supply-chain;Federal Communications Commission,“Protecting Against National Security Threats to the Communications Supply Chain Through FCC Programs,”final rule,86 Fed.Reg.2904(January 13,2021),https:/www.federalregister.gov/documents/2021/01/13/2021-00052/protecting-against-national-security-threats-to-the-communications-supply-chain-through-fcc-programs?;Federal Communications Commission,“FCC Bans Authorizations for Devices That Pose National Security Threat,”news release,November 25,2022,https:/www.fcc.gov/document/fcc-bans-authorizations-devices-pose-national-security-threat;Federal Register,“Securing the Information and Communications Technology and Services Supply Chain,”December 6,2024,https:/www.federalregister.gov/documents/2024/12/06/2024-28335/securing-the-information-and-communications-technology-and-services-supply-chain;David Shepardson,“U.S.agency votes to bar Chinese labs deemed security risks from testing U.S.electronics,”Reuters,May 22,2025,INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 31 https:/ countries,such as the Netherlands,are partially allowing Huaweis technologies in their 5G network,but keeping it out of their“5G core.”13.Countries where the government has pledged not to use Huaweis 5G but not formally prohibited it are banning Huaweis 5G for purposes of this report.14.Based on Noah Berman,Lindsay Maizland,and Andrew Chatzky,“Is Chinas Huawei a Threat to U.S.National Security?”Council on Foreign Relations,February 8,2023,https:/www.cfr.org/backgrounder/chinas-huawei-threat-us-national-security;the information was updated for Albania:Alice Taylor,“How Albania Is Pushing Back Against Chinas Global Grip,”Res Publica,July 2,2025,https:/respublica.edu.mk/blog-en/politics/how-albania-is-pushing-back-against-chinas-global-grip/?lang=en;for Armenia:Team Telecom Armenia,“Team Telecom Armenia and Ericsson Sign a MoU Regarding Strategic Cooperation,”press release,March 19,2025,https:/www.telecomarmenia.am/en/news/2025/03/19/team-telecom-armenia-and-ericsson-sign-a-mou-regarding-strategic-cooperation/1214/;for Austria,Belgium,Bulgaria,Cyprus,France,Hungary,and Romania:“Seventeen EU Countries Not Ready to Cut China 5G Dependence,”Euractiv,March 18,2025,https:/ Belarus:Manny Pham,“Belarus to Deploy Single 5G Network,”Developing Telecoms,April 7,2025,https:/ Bhutan:Saf Malik,“Ericsson to Install 5G Network in Kingdom of Bhutan,”Capacity Media,September 21,2021,https:/ Burundi:James Barton,“Burundis Regulator Expects Commercial 5G Launch in July 2024,”Developing Telecoms,July 7,2023,https:/ Cape Verde:“Huawei Set to Build 5G Wireless Network for Cabo Verde,”Forum Macao,September 5,2019,https:/www.forumchinaplp.org.mo/en/economic_trade/view/6116;for Comoros:AXIAN Telecom,“Yas Comoros,Part of AXIAN Telecom,Secures 25 Million IFC Loan to Drive Digital Transformation in Comoros,”press release,June 20,2025,https:/www.axian- Costa Rica:Carlos Cordero Prez,“6 razones del Tribunal Contencioso para rechazar la medida cautelar solicitada por Huawei contra reglamento de ciberseguridad de 5G,”El Financiero(Costa Rica),February 21,2025,https:/ Czech Republic:John Tanner,“O2 Czech Republic Deploys 5G SA Core Software From Nokia,”Developing Telecoms,June 13,2025,https:/ Denmark:“European Countries Who Put Curbs on Huawei 5G Equipment,”Reuters,September 29,2023,https:/ Estonia,Germany,Latvia,and Lithuania:Christopher F.Schuetze,“Germany to Phase Out Huawei,ZTE Components From Its 5G Network,”The New York Times,July 11,2024,https:/ Eswatini:Ecofin Agency,“5G Goes Live in Eswatini,But Coverage and Access Still Limited,”Ecofin Agency,March 26,2025,https:/ Gabon:Vaughan OGrady,“5G Trials Underway in Nigeria and Gabon,”Developing Telecoms,November 26,2019,https:/ Gambia:James Barton,“QCell Brings 5G to Gambia,”Developing Telecoms,June 9,2023,https:/ Greece:Adam Satariano and Eliza Triantafillou,“Gifts,Gadgets and Greece:Inside INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 32 a Huawei Lobbying Campaign,”The New York Times,September 28,2023,https:/ Guatemala:Teresa Carrelli,“Las subastas de 5G en Latinoamrica no vetan a Huawei como peda Washington,”Global Affairs,Universidad de Navarra,May 16,2024,https:/www.unav.edu/web/global-affairs/las-subastas-de-5g-en-latinaomerica-no-vetan-a-huawei-como-pedia-washington;for Guyana:Mavenir,“eNet Launches New 4G/5G Services in Guyana Powered by Mavenirs Cloud-Native IMS and Digital BSS,”press release,July 11,2023,https:/ India Juan Pedro Toms,“Indias DoT Scrutinizes Chinese Gear in National 5G Networks,”RCR Wireless News,April 17,2025,https:/ Iraq:John Lee,“Asiacell and China Mobile Partner on Digital Transformation,”Iraq Business News,June 7,2025,https:/www.iraq- Jordan:David Schenker,“Jordans Retreat from China on 5G Could Signal a Growing Distance,”The Washington Institute for Near East Policy,April 25,2023,https:/www.washingtoninstitute.org/policy-analysis/jordans-retreat-china-5g-could-signal-growing-distance;for Kuwait:Juan Pedro Toms,“Kuwait Deploys 5G-A With Huawei and Knetco,”RCR Wireless News,August 25,2025,https:/ Lebanon:Huawei,“Huawei Brings State-of-the-Art 5G to Lebanon,”press release,November 6,2018,https:/ Zaptia,“General Authority for Communications and Informatics Reaches Agreement With Chinas Huawei to Resume Operations in Libya,”Libya Herald,August 21,2025,https:/ Madagascar:“Telma Madagascar Starts 5G Network Powered by Ericsson,”TelecomLead,June 30,2020,https:/ Malaysia:Gigi Onag,“U Mobile Picks Huawei and ZTE to Deploy Malaysias Second 5G Network,”Light Reading,April 15,2025,https:/ Mongolia:Ooluun B.,“Mongolia Launches 5G Network,”Montsame(Mongolian National News Agency),May 20,2025,https:/montsame.mn/en/read/369748;for Montenegro:“Crnogorski Telekom Tests 5G in Cooperation With Ericsson Nikola Tesla,”Ericsson Nikola Tesla(company news),March 12,2025,https:/ Myanmar:“Myanmar Uses Huawei Technology and Equipment to Test 5G,”EEWorld(English edition),August 1,2019,https:/ the Netherlands:Harry Baldock,“Huawei Cut from the Core of Dutch 5G,”Total Telecom,May 21,2021,https:/ North Macedonia:“The Construction of the 5G Network Brings the Demise of the Chinese Domination in North Macedonias Telecommunications,”TechDiplomacy,May 1,2023,https:/techdiplomacy.org/news/the-construction-of-the-5g-network-brings-the-demise-of-the-chinese-domination-in-north-macedonias-telecommunications/;for Pakistan:Kalbe Ali,“Little 5G Fanfare as Industry,Users Await Next-Gen Network,”Dawn,January 15,2025,https:/ Panama:“EE.UU.trabaja con Panam para retirar equipos de telecomunicaciones de Huawei,”BNamericas,June 12,2025,https:/ Paraguay:Violeta Contreras Garca,“Estados Unidos aplaude licitacin 5G en Paraguay;Huawei,”DPL News,August 16,2025,https:/ Poland:Zoltn Ksz,“Reducing Chinese Influence in the EUs Telco:Poland Moves Ahead,”EU Tech Loop,February 7,2025,https:/ Portugal:Foo Yun Chee,“New Portuguese Government to Keep Ban on Chinese 5G Equipment,”Reuters,September 10,2024,https:/ Rwanda:Adam Au and Felicia Feiran INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 33 Chen,“China Expands AI Globally Through the Digital Silk Road,”East Asia Forum,April 11,2025,https:/eastasiaforum.org/2025/04/11/china-expands-ai-globally-through-the-digital-silk-road;for Senegal:Matshepo Sehloho,“Sonatel Opens Orange 5G Lab in Dakar,”Connecting Africa,July 4,2022,https:/ Serbia:Valentina Bajic,“Serbia to Launch 5G Auction in Q4 2025,”SeeNews,August 12,2024,https:/ Singapore:Abhishek Vishnoi and Yoojung Lee,“Singapore Issues Final 5G Awards to Singtel,StarHub,M1 Group,”Bloomberg,June 25,2020,https:/ Slovenia:Ela Petrovi,“Opposition in Slovenia Defeats Governments Anti-Huawei Bill,”Euractiv,February 7,2022,https:/ South Sudan:“Digitel Launches South Sudans First 5G Trial,”SAMENA Daily News,June 19,2024,https:/www.samenacouncil.org/samena_daily_news?news=101009;for Spain:Ramn Muoz,“El Gobierno incluye a Huawei en el organismo pblico que controla el 5G,”El Pas,August 12,2025,https:/ Turkey:“Turkcell and Huawei Signed Three MOUs on 5.5G,Green Energies,and AI-Based Networks at MWC 2024,”Huawei Newsroom,February 29,2024,https:/ Uganda:Hana Anandira,“MTN Uganda Picks Huawei for Core Upgrade,”Mobile World Live,January 10,2023,https:/ Ukraine:Directorate-General for Communications Networks,Content and Technology(European Commission),“Vodafone Ukraine,Huawei and Nokia Begin 5G Testing in Three Cities,”Shaping Europes Digital Future(5G Observatory News),July 7,2025,https:/digital-strategy.ec.europa.eu/en/miscellaneous/vodafone-ukraine-huawei-and-nokia-begin-5g-testing-three-cities;for the United Kingdom:Department for Science,Innovation&Technology(UK),“Government Response to the Telecoms Supply Chain Diversification Advisory Council Report,”Policy Paper,March 26,2025,https:/www.gov.uk/government/publications/government-response-to-the-telecoms-supply-chain-diversification-advisory-council-report/government-response-to-the-telecoms-supply-chain-diversification-advisory-council-report.15.“U.S.charges top Chinese cellphone maker Huawei with money laundering,obstruction and other crimes,”NBC News,January 28,2019,https:/ Freifeld and Jonathan Stempel,“U.S.judge dismisses indictment against Huawei CFO that strained U.S.-China relations,”Reuters,December 2,2022,https:/ Freifeld,“US criminal case against Chinas Huawei heads toward 2026 trial,”Reuters,April 4,2024,https:/ of Commerce,“Department of Commerce Announces the Addition of Huawei Technologies Co.Ltd.to the Entity List,”press release,May 15,2019,https:/2017-merce.gov/news/press-releases/2019/05/department-commerce-announces-addition-huawei-technologies-co-ltd.html;U.S.Department of Commerce,Bureau of Industry and Security,“Addition of Entities to the Entity List,”Federal Register 84,no.98(May 21,2019):2296168,https:/www.federalregister.gov/documents/2019/05/21/2019-10616/addition-of-entities-to-the-entity-list.19.U.S.Bureau of Industry and Security,“What is the Entity List?”,https:/www.bis.doc.gov/index.php/cbc-faqs/faq/281-1-what-is-the-entity-list.20.Ina Fried,“The Chinese tech giant Trump couldnt kill,”Axios,March 29,2022,https:/ Trump administration wants a US-China commercial split,”The Economist,August 13,2020,INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 34 https:/ Huawei Threat Is the Nuclear Option to Halt Chinas Rise,”Bloomberg,May 16,2019,https:/ of Commerce,“Commerce Addresses Huaweis Efforts to Undermine Entity List,Restricts Products Designed and Produced with U.S.Technologies,”press release,May 15,2020,https:/2017-merce.gov/news/press-releases/2020/05/commerce-addresses-huaweis-efforts-undermine-entity-list-restricts.html.24.Bureau of Industry and Security,U.S.Department of Commerce,“Temporary General License:Extension of Validity,”Federal Register 85(May 18,2020):2961029611,https:/www.federalregister.gov/documents/2020/05/18/2020-10614/temporary-general-license-extension-of-validity.25.Bureau of Industry and Security,U.S.Department of Commerce,“Addition of Huawei Non-U.S.Affiliates to the Entity List,the Removal of Temporary General License,and Amendments to General Prohibition Three(Foreign-Produced Direct Product Rule),”Federal Register 85(August 20,2020):5159651629,https:/www.federalregister.gov/documents/2020/08/20/2020-18213/addition-of-huawei-non-us-affiliates-to-the-entity-list-the-removal-of-temporary-general-license-and.26.Stephen Nellis,“Qualcomm Receives U.S.Permission to Sell 4G Chips to Huawei in Exception to Ban,”Reuters,November 14,2020,https:/ Alper,Fanny Potkin,and David Shepardson,“US Revokes Intel,Qualcomms Export Licenses to Sell to Chinas Huawei,Sources Say,”Reuters,May 8,2024,https:/ Shilov,“Huaweis Microsoft Windows license for PCs expires this month,company launching PCs with Harmony OS:Report,”Toms Hardware,March 15,2025,https:/ of Industry and Security,U.S.Department of Commerce,“Authorization of Certain Items to Entities on the Entity List in the Context of Specific Standards Activities,”Federal Register 87(September 9,2022):5524155267,https:/www.federalregister.gov/documents/2022/09/09/2022-19415/authorization-of-certain-items-to-entities-on-the-entity-list-in-the-context-of-specific-standards.29.U.S.Department of Commerce,Bureau of Industry and Security,“Framework for Artificial Intelligence Diffusion,”Federal Register 90(January 15,2025):45444584,https:/www.federalregister.gov/documents/2025/01/15/2025-00636/framework-for-artificial-intelligence-diffusion.30.Mackenzie Hawkins,“Nvidia,AMD to Resume Some AI Chip Sales to China in US Reversal,”Bloomberg,July 15,2025,https:/ to Resume Some AI Chip Sales to China in US Reversal.”;Zijing Wu and Eleanor Olcott,“Huawei delivers advanced AI chip cluster to Chinese clients cut off from Nvidia,”Financial Times,April 30,2025,https:/ Yuechun,“What can we learn from U.S.-Japan trade war of 1980s?”CGTN,July 11,2019,https:/ Zhou,“Heterogeneity and Trade Dispute Comparing U.S.-Japan Trade INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 35 Friction and U.S.-China Trade and Technological Rivalry,”Journal of Current Social Issues Studies 2,no.3(March 5,2025):183192,https:/doi.org/10.71113/JCSIS.v2i3.180;Saad Hasan,“How US Prevented Japans Toshiba From Becoming No.1 Chipmaker,”TRT World,November 9,2022,https:/trt.global/world/article/12782446.33.Ibid.34.Ibid.35.Sandra Barbosu,“Not Again:Why the United States Cant Afford to Lose Its Biopharma Industry”(ITIF,February 29,2024),https:/itif.org/publications/2024/02/29/not-again-why-united-states-cant-afford-to-lose-biopharma-industry/.36.Ibid.37.Peter Starr,“US China Bashing Reminiscent of Japan in 1980s,”The Asset,April 29,2024,https:/ US Prevented Japans Toshiba from Becoming No.1 Chipmaker;”and Jiang Yuechun,“What Can We Learn From U.S.-Japan Trade War of 1980s?”CGTN,July 11,2019,https:/ Office of the President,Executive Order 12661”Implementing the Omnibus Trade and Competitiveness Act of 1988 and Related International Trade Matters,”National Archives,December 27,1988,https:/www.archives.gov/federal-register/codification/executive-order/12661.html.40.Ibid.;based on Dylan Gerstel and Matthew P.Goodman,“From Industrial Policy to Innovation Strategy:Lessons From Japan,Europe,and the United States”(Center for Strategic and International Studies,September 2020),30,https:/csis-website- Enright,“Chinas Smartphone Producers Take on the World,”Hinrich Foundation,April 16,2024,https:/ Smartphone Shipments Rebound with 7.1 Percent Growth in 2024 Amid Industry Recovery,”news release,February 6,2025,https:/ Data Corporation(IDC),“IDC Reports Global Smartphone Shipments Returned to Growth in 2024,Ending a Two-Year Slide,”news release,January 25,2025,https:/ Morris,“Huawei Defies US to Grow Market Share as RAN Decline Ends:Omdia,”Light Reading,February 21,2024,https:/ Dano,“Huawei pulls ahead of Ericsson,Nokia in overall RAN market share,DellOro Group reports,”Fierce Network,August 10,2016,https:/www.fierce- Zeng,“Huaweis Chip Company HiSilicon Market Share Down to 0%in 2022 Q3,”TechNode,December 22,2022,https:/ Research,“Global Smartphone AP/SoC Market Share by Quarter,”https:/ war:Huawei executive claims victory over US sanctions with computing,AI ecosystem.INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 36 46.Frederick Nyame,“The Rise of HarmonyOS:Disrupting the Android,One UI,and iOS Monopoly,”Gizchina,April 24,2024,https:/ Morales,“HarmonyOS replacing Windows on Huawei laptops delivers connectivity across the ecosystem,”Toms Hardware,May 8,2025,https:/ 15,2025,https:/ Shen,“Spurred by US Sanctions,China Adapts Huaweis HarmonyOS for Microsatellites,”South China Morning Post,March 13,2025,https:/ Jiang,“Huaweis HarmonyOS gains traction in China with 103 million smartphones shipped,”South China Morning Post,June 13,2025,https:/ Udinmwen,“Huawei is looking to surpass the billion-user mark with its HarmonyOS Next operating system,as it can no longer use Microsoft Windows,”TechRadar Pro,May 13,2025,https:/ Boeriu,“BMW and Huaweis HarmonyOS Join Forces for Neue Klasse,”BMW Blog,March 17,2025,https:/ Daws,“HarmonyOS Next:Huaweis Challenge to Apple and Android,”Telecoms Tech News,April 25,2024,https:/ Mishra,“Huawei Donated HarmonyOS Core Structure to OpenAtom Foundation,”Huawei Central,November 10,2021,https:/ Devanesan,“What Three Years of US Sanctions Did to Huawei,”TechWire Asia,March 28,2023,https:/ Yu,“Huawei Eyes Global Smartphone Comeback with In-House Chips,”Nikkei Asia,September 25,2023,https:/ Castro and Stephen Ezell,“Overly Stringent Export Controls Chip Away at American AI Leadership,”(ITIF,May 5,2025,)https:/itif.org/publications/2025/05/05/export-controls-chip-away-us-ai-leadership/.56.Richard Windsor,“Huawei vs.Nvidia No Contest,”Strand Consult,September 19,2025,https:/strandconsult.dk/blog/huawei-vs-nvidia-no-contest/.57.Anton Shilov,“Huawei introduces the Ascend 920 AI chip to fill the void left by Nvidias H20,”Toms Hardware,July 18,2025,https:/ Staff,“China aims to triple AI chip output,reducing Nvidia dependency,FT says,”Reuters,August 27,2025,https:/ Shepardson,“US says Chinas Huawei cant make more than 200,000 AI chips,”Reuters,June 12,2025,https:/ Kharpal,“Nvidias China chip sales slump as US restrictions bite,but company sees long-term opportunity,”CNBC,August 10,2025,https:/ TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 37 chips.html;Al Jazeera Staff,“China bans tech firms from Nvidia chip purchases:Report,”Al Jazeera,September 17,2025,https:/ Li and Brenda Goh,“Chinas Huawei Launches New Software Brand for Intelligent Driving,”Reuters,April 24,2024,https:/ Chinese Intelligent Driving Outpaced Tesla FSD,”accessed May 30,2025,https:/ Sin,“Huawei MateBook X Pro Review:So Light I Can Hold It With Two Fingers,”Forbes,May 20,2024,https:/ Williams,“Huaweis Watch D Has a More Advanced Health Feature Than the Apple Watch Series 7,”Forbes,December 24,2021,https:/ Chinas Mercantilist Policies Have Undermined Global Innovation.64.Newsweek Staff,“The Huawei Way,”Newsweek,January 15,2006,https:/ Chinas Mercantilist Policies Have Undermined Global Innovation.66.Chuin-Wei Yap,“State Support Helped Fuel Huaweis Global Rise,”Wall Street Journal,December 25,2019,https:/ Ezell,“False Promises II:The Continuing Gap Between Chinas WTO Commitments and Its Practices”(ITIF,July 26,2021),https:/itif.org/publications/2021/07/26/false-promises-ii-continuing-gap-between-chinas-wto-commitments-and-its/.67.Evan Williams,“Chinas Digital Silk Road taking its shot at the global stage,”East Asia Forum,May 9,2024,https:/eastasiaforum.org/2024/05/09/chinas-digital-silk-road-taking-its-shot-at-the-global-stage/.68.Atkinson,How Chinas Mercantilist Policies Have Undermined Global Innovation.69.Ibid.70.Ibid.71.Ian King and Debby Wu,“Huawei Building Secret Network for Chips,Trade Group Warns,”Bloomberg,August 22,2023,https:/ Hmaidi,Huawei Is Quietly Dominating Chinas Semiconductor Supply Chain(Mercator Institute for China Studies(MERICS),April 9,2024),https:/merics.org/en/report/huawei-quietly-dominating-chinas-semiconductor-supply-chain.72.Scott Livingston,“Huawei,HONOR,and Chinas Evolving State Capitalist Tool Kit”(Center for Strategic and International Studies,December 11,2020),https:/www.csis.org/analysis/huawei-honor-and-chinas-evolving-state-capitalist-tool-kit.73.Julie Zhu,“Exclusive:Huawei to Sell Phone Unit for$15 Billion to Shenzhen Government,Digital China,OthersSources,”Reuters,November 11,2020,https:/ Chinas Evolving State Capitalist Tool Kit.75.Bevin Fletcher,“Ericsson Loses Share,Nokia Secures 5G Win with China Mobile,”Fierce Network,July 19,2021,https:/www.fierce- TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 38 76.James Barton,“China Mobile Favours Huawei for 2023 5G Deployment Plans,”Developing Telecoms,June 15,2023,https:/ Chinas Mercantilist Policies Have Undermined Global Innovation.78.Arrian Ebrahimi,“China Boosts Semiconductor Subsidies as US Tightens Restrictions,”The Diplomat,September 28,2023,https:/ Gives Chipmakers New Powers to Guide Industry Recovery,”Financial Times,March 20,2023,https:/ Zhengfei declared a week after the sanctions that“business continuity is all about our Plan B,or our“spare tire”plan.Spare tires ensure that when cars break down,they can continue running after tires are replaced.We have ensured our business continuity step by step.In fact,many parts we use in our products have been put into production.”(See:Huawei,“Huawei Founder Ren Zhengfeis Interview with Chinese Media,”Huawei(Malaysia),May 21,2019,https:/ D.Atkinson,“The Huawei Export Ban:Shooting U.S.Tech Exporters in the Foot,”(ITIF,January 24,2020),https:/itif.org/publications/2020/01/24/huawei-export-ban-shooting-us-technology-exporters-foot/.82.U.S.House of Representatives,Permanent Select Committee on Intelligence,Investigative Report on the U.S.National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE(Washington DC:U.S.House of Representatives,October 8,2012),https:/intelligence.house.gov/sites/intelligence.house.gov/files/documents/huawei-zte investigative report (final).pdf.83.Eva Dou,House of Huawei:The Secret History of Chinas Most Powerful Company(New York:Portfolio/Penguin,2025),216228;Shannon Tiezzi,“Huawei Officially Gives Up on the US Market,”The Diplomat,December 5,2013,https:/ on Huaweis Annual Report for each year.Revenues from 2002 to 2005 are reported in the 2006 Annual Report.85.Based on Huaweis Annual Report for each year.Inflation is based on data from the World Bank Group.86.Based on Canalys estimates.Market share for Huawei in 2021 and 2022 is an ITIF approximation.This information is based on smartphone sales.As this report outlines,Huaweis smartphone shipments(devices produced and delivered to distributors or retailers)went to“virtually zero”after the U.S.sanctions.87.European Commission,Joint Research Centre(JRC),The 2024 EU Industrial R&D Investment Scoreboard(Luxembourg:Publications Office of the European Union,December 18,2024),https:/iri.jrc.ec.europa.eu/scoreboard/2024-eu-industrial-rd-investment-scoreboard.The results were calculated using the 2023 gross domestic product(GDP)deflator.88.Based on Huaweis Annual Report for 2023 and 2024.89.Atkinson,How Chinas Mercantilist Policies Have Undermined Global Innovation.90.European Commission,Joint Research Centre(JRC),The 2024 EU Industrial R&D Investment Scoreboard(Luxembourg:Publications Office of the European Union,December 18,2024),https:/iri.jrc.ec.europa.eu/scoreboard/2024-eu-industrial-rd-investment-scoreboard.The results were calculated using the 2023 gross domestic product(GDP)deflator.INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 39 91.Based on Huaweis Annual Reports.92.Bureau of Industry and Security,U.S.Department of Commerce,“Temporary General License:Extension of Validity,”Federal Register 85(May 18,2020):2961029611,https:/www.federalregister.gov/documents/2020/05/18/2020-10614/temporary-general-license-extension-of-validity.93.Anton Shilov,“Huaweis Microsoft Windows license for PCs expires this month,company launching PCs with Harmony OS:Report,”Toms Hardware,March 15,2025,https:/ Duryee,“Huawei Hangs Up on Windows Phone Development After Two Years of Losses,”GeekWire,August 25,2014,https:/ Tao,“Huawei Confirms It Has Built Its Own Operating System Just in Case US Tensions Disrupt Use of Googles Android,”South China Morning Post,March 14,2019,https:/ Tao and Yingzhi Yang,“Huawei Has Been Building Its Substitute to Android for a Rainy Day.Is That Day Looming?”South China Morning Post,April 27,2018,http:/ Ismail,“Huawei Announces LiteOS,a 10KB IoT Operating System,”TechNave,May 28,2015,https:/ May 30,2025,https:/ OS Developers,“LiteOS an IoT Operating System and Middleware,”Harmony Developers,April 17,2025,https:/www.harmony- 99.MM.Gan,M.Lin,and L.Liu,“Resource Scheduling Method,Apparatus,and Device”(World Intellectual Property Organization,WO 2016/201739 A1,2016),https:/ 17,2019,https:/ Dou,House of Huawei:The Secret History of Chinas Most Powerful Company(New York:Portfolio/Penguin,2025),304.101.Rick Merritt,“Inside Huaweis HiSilicon,”EE Times,May 18,2011,https:/ 980,”accessed May 30,2025,https:/ Sin,“Huaweis Kirin 980 Is the Worlds First 7-Nanometer Mobile Chipset With 5G Support,”Forbes,September 1,2018,https:/ Jiang,“Huaweis HiSilicon Says It Has Long Been Preparing for U.S.Ban Scenario,”Reuters,May 17,2019,https:/ Qualcomm in Joint Investment on SMICs New R&D Company,”Semiconductor Digest,June 2015,https:/sst.semiconductor- TECHNOLOGY&INNOVATION FOUNDATION|OCTOBER 2025 PAGE 40 105.Anton Shilov,“SMIC Begins Volume Production of 14 nm FinFET Chips:Chinas First FinFET Line,”AnandTech,November 14,2019,https:/ Patel,“Huawei HiSilicons New 14nm Kirin 710A Chip Was Manufactured by Shanghai-based SMIC,”XDA Developers,May 13,2020,https:/www.xda- Weissberger,“Huawei Investment Subsidiary Buys 40 Companies in 3 Years to Reconstruct Semiconductor Supply Chain,”IEEE ComSoc Technology Blog,July 5,2021,https:/soc.org/2021/07/05/huawei-investment-subsidiary-buys-40-companies-in-3-years-to-reconstruct-semiconductor-supply-chain/.107.Megha Shrivastava,“How Is Huawei Growing,Despite Heavy US Sanctions?”The Diplomat,July 2,2024,https:/ Hubble Invested in AI and Software Start-Ups,”news release,May 14,2025,https:/ Lee-Makiyama and Robin Baker,How Huawei Weathered the Storm:Resilience,Market Conditions or Failed Sanctions?(Brussels:European Centre for International Political Economy,February 2024),https:/ecipe.org/publications/how-huawei-weathered-the-storm-resilience-market-conditions-or-failed-sanctions/.111.Sijia Jiang and Noah Sin,“Corrected:Huawei Plans First Onshore Bonds Totalling 6 Billion Yuan,”Reuters,September 12,2019,https:/ on Huaweis Annual Reports.113.Zhang Erchi et al.,“In Depth:How Huawei Prepared for American Sanctions,”Caixin Global,June 3,2019,https:/ analysis from the Chinese consultancy firm“Guosen Securities”determined that Huawei spent$5.6 billion on U.S.semiconductor suppliers in 2015,which is over 30 percent of its operating costs.In addition,Huawei reported that in 2018 it spent$11 billion on U.S.suppliers,which is over 36 percent of that years operating cost.(See:Cheng and Li Yajun,“华为供应商汇总,”Guosen Securities Economic Research Institute,November 26,2018,https:/ Tan,“Banning Huawei Means Its U.S.Suppliers Will Lose$11 Billion Annually,”Huawei FactsNews&Opinions,2019,https:/ of Commerce,Bureau of Industry and Security,“Six Years of Enhancing Scrutiny&Expanding Controls:BIS Licensing Policy Toward the Peoples Republic of China”(20182023)(Washington:U.S.Department of Commerce,July 2,2024),https:/www.bis.gov/media/documents/7-2-2024-bis-summary-document.pdf.116.Iain Morris,“US Shuts Qualcomm Door After Huawei Has Bolted,”Light Reading,May 8,2024,https:/ Danko,“Intel Shares Slide After U.S.Revokes Huawei Chip-Sale License,”Portland Business Journal,May 8,2024,https:/ Alper,Fanny Potkin,and David Shepardson,“US Revokes Intel,Qualcomms Export Licenses to Sell to Chinas Huawei,Sources Say,”Reuters,May 8,2024,https:/ TECHNOLOGY&IN
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Business ServicesINDUSTRY REPORTFall|2025CREAT IN GM&A STRATEGIES FOR BUSINESS OWNERSSINCE 1956Business Services Industry News|Fall 2025|Page 2Table of ContentsMarket Observations .3Transaction Highlights.11Public Companies .14CFA Overview.24Business Services Industry News|Fall 2025|Page 3Market ObservationsBusiness Services Industry News|Fall 2025|Page 4Market SummaryBusiness Services Market The business services industry in the world is developing at a high rate in 2025 due to the growth in digital technology and cloud-based development.Managed services represent a strong growth area with the current market size of USD 441.1 billion this year,projected to USD 1,314.9 billion by 2035,with a current CAGR of 11.5%.The increase highlights the need for scalable IT infrastructure,cybersecurity technologies,including managed security as the 24.5%market leader,and AI-assisted operations in the cloud.The role of the USA is critical,particularly when business organizations are progressing in the field of AI,zero-trust architecture,and the use of hybrid clouds.IBM,Accenture,and DXC Technology,as market leaders,are expanding their automation-first and AI-driven offerings to address new needs.Variances in procurement demand are indicated by the shifts towards outcome-based contracts and consumption-based billing models,which are supplemented by greater emphasis on hybrid working and sustainability.PwC 2025 Global Business Services Index recorded a robust improvement in legal,digital,and education sectors,and professional service and certification services sectors reported a steady performance.The 2025 GBS Survey by Deloitte focuses on how digital transformation helps companies to create agile multifunctional services in the international business.EY points out that service providers must capitalize on new technology,re-focus the talent approach,and cope with regulatory pressures in the face of geopolitical change.All these trends form a sustainable growth and strategic innovation prospect of the business services sector,which puts the sector in a great position to develop and add value in the future.Public Company Valuation The CFA Select Business Services Index decreased by 6.1%in the third quarter of 2025,and the 12-month return on the index decreased by 3.2%.The Administrative and Support and Waste Management and Remediation Services Index saw the highest increase of 18.8%for the 12-month period,and the Rental and Leasing Services Index saw the highest increase of 2.9%for the 3-month period.The Advertising,Public Relations,and Related Services Index saw a decline of 35.4%in the 12-month period and 17.6%for the 3-month period.The Administrative and Support and Waste Management and Remediation Services Index had the highest EBITDA multiple of 16.1x and had the highest revenue multiple of 4.7x.The Rental and Leasing Services Index had the lowest EBITDA multiple of 7.7x,and Employment Services had the lowest revenue multiple of 0.4x,respectively.Mergers and Acquisitions The Business Services sector remains a vibrant part of the M&A market,where strategic acquisitions of tech-enabled companies are occurring to widen the range of service offerings and expand geographic reach.In IT service and cybersecurity,private equity is still on the move due to consistent cash flows and the scalability of its operations.The most important trends in dealings are platform-based acquisitions,foreign dealings and the smooth incorporation of digital functions into conventional services.Issues like retention and integration of the workforce continue to be experienced and are mitigated with the improved employee engagement strategy after the acquisition.All in all,the sector is being influenced by technology-driven and cross-border deals that are making it move towards sustained growth.The business services index decreased in the third quarter of 2025.Business Services Industry News|Fall 2025|Page 5Industry TrendsChanging the Role of Managed Service Providers(MSPs)as Strategic Business Partners MSPs are no longer maintaining IT machines,but are essential strategic partners who can power the business further.In 2025,organizations need more than just the management of basic infrastructure,but expect MSPs to drive the process of digital transformation,enhance customer experience,and make the process of innovation quicker.This transformation demands that MSPs provide industry-specific solutions,which are customized and integrate industry-specific knowledge with high technology expertise.Another issue that is emerging among MSPs is the escalating lack of cloud architects,cybersecurity specialists,and automation experts,leading them to invest more in the upskilling of their workforce as well as flexible work and AI-assisted service delivery.Routine activities are automated,and AI simplifies them,which means that MSPs can concentrate on proactive monitoring and predictive analytics,as well as proactive advisory services.This pattern highlights the need for MSPs to be innovative at all times,adopt agile service frames,and broaden their value propositions to be competitive and effective against changing client demands.Business Services In Global Strategy Rebalancing The days of focusing the GBS operations on a limited number of mega-centers are gone.Rather,businesses are increasingly using a multi-location approach in order to improve business continuity,reduce geopolitical risks,and get easy access to talent.The development of technology allows effective coordination of locations in geographically spread facilities with the help of smaller and more nimble centers around the world.The geographic diversification is complying with the risk management imperative,and has aided in fast reaction to the varying market demands.Firms are starting to study their GBS footprints to match business models that place emphasis on resilience,cost-effectiveness,and regulatory compliance.The existence of region-specific hubs also enables the provision of services that are more localized to customer requirements and talents complementary to services,which are more general and enhance overall quality and innovation potential.This change of strategy is part of a greater transition to agile,scalable,and risk-conscious service delivery ecosystems in a dynamic global environment.AI-Driven Business Intelligence(BI)Game-Changing Decision Processes AI is also turning the BI environment into responsive reporting to become a proactive strategic resource.Newer BI systems use AI to automate the process of pattern recognition,anomaly detection,and prediction to deliver users real-time and context-aware insights.Natural language processing facilitates intuitive querying and visualization and democratizes analytics across functions.Utilizing AI-enhanced BI features,businesses are integrating this operational workflow into operational systems like CRM and ERP,effectively making sure that intelligence is timely and actionable and provides a decision driver.Live streaming analytics is emerging as a common feature in sectors that need rapid reaction,including finance and retail.This change will transform BI from an after-the-fact analysis to an ongoing,integrated process that will add value to agility and competitive advantage.Organizations that embrace AI-based BI have greater foresight,efficiency in their operations,and better customer insights that place them at an advantage in the ever-changing market environments.Business Services Industry News|Fall 2025|Page 6Significant NewsJapans corporate service inflation perks up in AugustReuters,September 25,2025“A leading indicator of Japans service-sector inflation perked up in August,data showed on Thursday,backing up the central banks view that rising labour costs will help keep inflation sustainably around its 2%target.”Read More Services sector growth hits 15-year high in August on robust demandBusiness Standard,September 4,2025“Indias services growth accelerated to a 15-year high in August on robust demand,which also pushed prices higher at the fastest rate in over a decade,said a private survey on Wednesday.”Read More India Services PMI:Indias services sector accelerates to 60.5 in July on sharp increase in outputFinancial Express,August 5,2025“HSBC India Services PMI July 2025:Indias service providers recorded a rise in July with HSBC India Services Business Activity Index,or services PMI for the month accelerated to 60.5 from 60.4 in June.”Read More US Business Growth Hits 2025 High As Services Strength Offsets ManufacturingBloomberg,July 24,2025“US business activity expanded in July at the fastest rate this year as a strengthening in services more than offset a contraction in manufacturing.“Read More Business Services Industry News|Fall 2025|Page 7M&A MetricsBusiness Services IndustryM&A Activity in the business services sector decreased in the third quarter of 2025.The number of transactions decreased from 347 in Q2 2025 to 333 in Q3 2025.The number of sub$50 million transactions decreased from 335 in Q2 2025 to 316 in Q3 2025.The number of transactions above$100 million increased from 10 in Q2 2025 to 14 in Q3 2025.The total number of M&A transactions increased 14.4%year-on-year from 291 in Q3 2024 to 333 in Q3 2025.M&A Deal Summary Table|Count by Deal Size over TimeSource:FactSetBusiness Services Industry News|Fall 2025|Page 8Business Support ServicesM&A activity in the business support services industry increased in the third quarter of 2025.The number of transactions increased from 22 in Q2 2025 to 25 in Q3 2025.The number of sub-$50 million transactions increased from 21 in Q2 2025 to 25 in Q3 2025.The number of transactions above$100 million has decreased from 1 in Q2 2025 to 0 in Q3 2025.The total number of M&A transactions increased by 4.2%year on year from 24 in Q3 2024 to 25 in Q3 2025.M&A Deal Summary Table|Count by Deal Size over TimeM&A Metrics Spotlight SectorSource:FactSetBusiness Services Industry News|Fall 2025|Page 9Industry Metrics Industry Financial Data and RatiosFinancial MetricLast12Mo20242023CurrentRatio2.952.862.63Gross ProfitMargin66.70p.33p.53%Net ProfitMargin-0.48%-1.47%-1.67counts ReceivableDays49.755.8759.03Accounts PayableDays52.3253.2145.37Debt-to-Equity Ratio33.082.76Return onEquity36.626.88.58%Sales perEmployee$350,343$350,343$269,905Profit perEmployee$3,971$3,971$17,046SalesGrowth15.95.74.85%Profit Growth41.12A.30.56%Financial MetricLast12Mo20242023CurrentRatio3.033.173.3Gross ProfitMargin74.83q.67p.82%Net ProfitMargin18.56.04.42counts ReceivableDays86.4692.1272.94Accounts PayableDays55.3850.8938.83Debt-to-Equity Ratio3.243.33.63Return onEquity34.343.462.49%Sales perEmployee-$265,517Profit perEmployee-$11,050SalesGrowth11.36.67.25%Profit Growth21.13.91.08%Financial MetricLast12Mo20242023CurrentRatio3.073.273.19Gross ProfitMargin61.16a.84c.37%Net ProfitMargin7.54%7.04%7.08counts ReceivableDays49.5351.5450.36Accounts PayableDays49.0176.7460.57Debt-to-Equity Ratio3.312.92.76Return onEquity47.26D.51F.84%Sales perEmployee$310,724$334,412$279,874Profit perEmployee$13,517$17,138$23,431SalesGrowth5.87%3.95%4.15%Profit Growth19.37.60.21%Financial MetricLast12Mo20242023CurrentRatio3.913.884.04Gross ProfitMargin73.65t.35s.80%Net ProfitMargin9.71.39.03counts ReceivableDays28.6734.3827.58Accounts PayableDays16.8819.0817.67Debt-to-Equity Ratio2.332.452.67Return onEquity59.24a.28V.50%Sales perEmployee$169,111$155,922$191,614Profit perEmployee$10,334$2,995$8,509SalesGrowth11.01.42.59%Profit Growth32.282.44.20%NAICs 5324-Commercial&Industrial Machinery&Equipment Rental&LeasingNAICs 5182-Data Processing,Hosting,and Related ServicesNAICs 5418-Advertising,Public Relations,and Related ServicesNAICs 5419-Other Professional,Scientific,and Technical ServicesSource:ProfitCentsBusiness Services Industry News|Fall 2025|Page 10Industry Metrics Industry Financial Data and RatiosFinancial MetricLast12Mo20242023CurrentRatio3.483.083.86Gross ProfitMargin85.04.29.98%Net ProfitMargin7.81.23%9.06counts ReceivableDays81.0272.8933.07Accounts PayableDays20.3718.5115.6Debt-to-Equity Ratio2.792.982.35Return onEquity45.14F.967.73%Sales perEmployee-Profit perEmployee-SalesGrowth3.45%3.49%5.93%Profit Growth21.19.39%7.66%Financial MetricLast12Mo20242023CurrentRatio44.174.29Gross ProfitMargin44.21.55E.12%Net ProfitMargin3.69%4.29%4.72counts ReceivableDays44.8450.1247.27Accounts PayableDays7.177.468.03Debt-to-Equity Ratio1.741.751.65Return onEquity30.614.199.39%Sales perEmployee$802,452$798,867$488,662Profit perEmployee$23,497$20,642$22,768SalesGrowth0.14%0.23%1.44%Profit Growth13.49.10%-5.67%Financial MetricLast12Mo20242023CurrentRatio3.934.414.36Gross ProfitMargin73.60t.48u.31%Net ProfitMargin12.05%9.62.24counts ReceivableDays82.4574.7457.26Accounts PayableDays29.4928.940.54Debt-to-Equity Ratio2.622.732.25Return onEquity50.37F.66E.41%Sales perEmployee-$323,426Profit perEmployee-$26,573SalesGrowth10.82.71%9.83%Profit Growth16.99.84.43%Financial MetricLast12Mo20242023CurrentRatio3.883.854.09Gross ProfitMargin63.34b.91c.67%Net ProfitMargin8.47%8.44%7.69counts ReceivableDays25.2130.8123.29Accounts PayableDays17.2717.1915.28Debt-to-Equity Ratio2.52.432.72Return onEquity61.37W.37R.93%Sales perEmployee$60,631$79,264$76,471Profit perEmployee$7,723$3,385$11,310SalesGrowth11.77.68.93%Profit Growth21.75.62&.00%NAICs 5611-Office Administrative ServicesNAICs 5613-Employment ServicesNAICs 5614-Business Support ServicesNAICs 5617-Services to Buildings and DwellingsSource:ProfitCentsBusiness Services Industry News|Fall 2025|Page 11Transaction HighlightsBusiness Services Industry News|Fall 2025|Page 12Notable M&A TransactionsIn September 2025,Strata Critical Inc.,a subsidiary of Strata Critical Medical Inc.,acquired Keystone Perfusion Services PC,headquartered in Mountain Top,Pennsylvania,for$147 million in cash,stock,and contingent payout.Keystone provides medical staffing,perfusion,and autotransfusion services to hospitals and health systems,supporting the expansion of Strata Criticals business capabilities.In August 2025,Zello Group LLC,a Burbank-based investment platform,completed the acquisition of Cinelease Inc.,a leading US motion picture equipment rental company,for$100 million in cash.The deal strengthens Zello Groups production infrastructure and market relationships,with Cinelease continuing to operate as a standalone entity under the new ownership.In July 2025,Propio Language Services LLC acquired CyraCom International,Inc.,a leading American provider of language interpretation services,for an undisclosed amount.This acquisition enhances Propios prominence in healthcare interpretation,leveraging CyraComs capabilities in over-the-phone,video remote,and on-site interpretation to expand service offerings and national reach.In July 2025,Samsic Facility Management SASU of France acquired Capital Cleaning Group BV,a Dutch provider of corporate cleaning and decontamination services headquartered in Meppel.Although the transaction value was undisclosed,Capital Cleaning Group generated revenue of$76.4 million,serving clients with 2,000 employees and expanding Samsics service expertise in the Netherlands.The logos shown on this page are property of the respectiveownersBusiness Services Industry News|Fall 2025|Page 13Select M&A Transactions DateTarget NameAcquirer NameEnterpriseValue(MM)Revenue-Target(LTM)(MM)EBITDA-Target(LTM)(MM)24-Sep-2025TechnoPro Holdings,Inc.Blackstone Corporate Private Equity3,267.881,597.10211.9818-Sep-2025Summit Medical Staffing LLCCrossMed Healthcare Staffing Solutions,Inc.-24.771.8717-Sep-20257.2 MW Toronto Data CenterBuzz High Performance Computing,Inc.12.55-16-Sep-2025Equipment Finders,Inc.Synergy Equipment-16.761.5916-Sep-2025Keystone Perfusion Services,PCStrata Critical,Inc.147.0029.67-13.2211-Sep-2025Solution International Ltd.Evolear AB14.44-08-Sep-2025Bgsf Inc/Professional Division/A&M Capital Advisors LP;INSPYR Solutions,LLC99.00-04-Sep-2025Spectrum Groupe SASParquest Capital SAS;Spectrum Groupe SAS/Private Group/-37.32-02-Sep-2025Tietoevry Tech Services Czechia sroAgilitas Private Equity LLP324.27128.1911.2626-Aug-2025G2 Secure Staff LLCMenzies Aviation Ltd.315.001,254.8081.9504-Aug-2025Kantar Media UK Ltd.H.I.G Capital LLC(Private Equity)1,000.0024.257.5804-Aug-2025Marlowe PlcMITIE Group Plc496.98388.4439.2901-Aug-2025Cinelease,Inc.Zello Group LLC100.0021.114.7131-Jul-2025Danelec Electronics A/SGaztransport&Technigaz SA219.1628.090.0018-Jul-2025Neogen Corp./Cleaners&Disinfectants Business/Kersia SAS130.00-04-Jul-2025Capital Cleaning Group BVSamsic Facility Management SASU-76.395.9703-Jul-2025CyraCom International,Inc.Propio Language Services LLC-408.3368.8103-Jul-2025Global Blue Group Holding AGShift4 Payments,Inc.2,226.01526.68140.4702-Jul-2025CODA Public RelationsProlific Holdings LLC100.00-01-Jul-2025Yondr Group Ltd.Allianz Capital Partners GmbH;CDP Capital Private Equity;DigitalBridge Investment Management LLC;Yondr Group Ltd./Private Group/5,800.0056.764.76($inmillions)Source:FactsetBusiness Services Industry News|Fall 2025|Page 14Public CompaniesBusiness Services Industry News|Fall 2025|Page 15Industry PerformanceCFAW Select Business Services IndexSource:FactSetBusiness Services Industry News|Fall 2025|Page 16CompanyShareSharesMarketEnterpriseRevenuesEBITDAEnterprise Value /$USD in MillionsPriceO/SCapValue(LTM)(LTM)RevenuesEBITDAAerCap Holdings NV$121.00 177$21,365$64,892$6,937$5,725 9.4x11.3xAir Lease Corporation Class A$63.65 112$7,114$26,975$2,771$2,522 9.7x10.7xAshtead Group plc$66.84 422$28,231$38,484$10,838$4,982 3.6x7.7xAvis Budget Group,Inc.$160.58 35$5,651$34,359$11,659$5,388 2.9x6.4xAyvens$12.07 817$9,858$62,965$27,287$13,422 2.3x4.7xCintas Corporation$205.26 403$82,715$85,247$10,340$2,854 8.2x29.9xPROG Holdings,Inc.$32.36 40$1,280$1,661$2,518$1,913 0.7x0.9xRyder System,Inc.$188.64 41$7,695$16,236$12,676$3,002 1.3x5.4xUnited Rentals,Inc.$954.66 64$61,424$75,331$15,749$7,028 4.8x10.7xUpbound Group,Inc.$23.63 58$1,368-Mean$45,128$11,197$5,204 4.8x9.7xMedian$38,484$10,838$4,982 3.6x7.7xPublic ComparablesRental and Leasing ServicesSource:FactSetBusiness Services Industry News|Fall 2025|Page 17Public ComparablesData Processing,Hosting and Related ServicesSource:FactSetCompanyShareSharesMarketEnterpriseRevenuesEBITDAEnterprise Value /$USD in MillionsPriceO/SCapValue(LTM)(LTM)RevenuesEBITDAAutomatic Data Processing,Inc.$293.50 405$118,894$120,253$20,561$5,994 5.8x20.1xBread Financial Holdings,Inc.$55.77 47$2,601-Broadridge Financial Solutions,Inc.$238.17 117$27,897$30,793$6,889$1,705 4.5x18.1xDXC Technology Co.$13.63 179$2,440$5,709$12,794$1,740 0.4x3.3xEquinix,Inc.$783.24 98$76,651$93,988$8,943$3,507 10.5x26.8xFidelity National Information Services,Inc.$65.94 522$34,446$46,841$10,318$4,160 4.5x11.3xFiserv,Inc.$128.93 544$70,085-Global Payments Inc.$83.08 243$20,156$35,013$8,882$4,009 3.9x8.7xPayPal Holdings,Inc.$67.06 955$64,068$66,232$32,299$7,156 2.1x9.3xWPP Plc$4.95 1,079$5,342$12,962$18,341$2,437 0.7x5.3xMean$51,474$14,878$3,839 4.1x12.8xMedian$40,927$11,556$3,758 4.2x10.3xBusiness Services Industry News|Fall 2025|Page 18CompanyShareSharesMarketEnterpriseRevenuesEBITDAEnterprise Value /$USD in MillionsPriceO/SCapValue(LTM)(LTM)RevenuesEBITDAAdvantage Solutions Inc Class A$1.53 326$499$2,048$3,527$266 0.6x7.7xClear Channel Outdoor Holdings Inc$1.58 497$785$7,085$1,202$421 5.9x16.8xConcentrix Corporation$46.15 63$2,909$7,348$9,625$1,427 0.8x5.2xGannett Co.,Inc.$4.13 147$606$1,694$2,390$218 0.7x7.8xInterpublic Group of Companies,Inc.$27.91 366$10,222$12,915$10,345$1,701 1.2x7.6xOmnicom Group Inc$81.53 194$15,794$20,613$15,911$2,520 1.3x8.2xPublicis Groupe SA$95.97 254$24,407$27,859$18,334$3,557 1.5x7.8xThryv Holdings,Inc.$12.06 44$530$793$758$95 1.0 x8.4xTrade Desk,Inc.Class A$49.01 446$21,842$22,619$2,679$571 8.4x39.6xMean$11,442$7,197$1,197 2.4x12.1xMedian$7,348$3,527$571 1.2x7.8xPublic Comparables Advertising,Public Relations,and Related ServicesSource:FactSetBusiness Services Industry News|Fall 2025|Page 19CompanyShareSharesMarketEnterpriseRevenuesEBITDAEnterprise Value /$USD in MillionsPriceO/SCapValue(LTM)(LTM)RevenuesEBITDACalian Group Ltd.$35.69 11$405$498$539$53 0.9x9.5xCVS Group plc$16.80 72$1,205$1,561$842$170 1.9x9.2xEltel AB$0.95 157$150$330$878$48 0.4x6.9xForrester Research,Inc.$10.60 19$202$144$412$36 0.3x4.0 xIpsos SA$44.49 43$1,922$2,357$2,672$421 0.9x5.6xL.B.Foster Company$26.95 11$286$384$507$31 0.8x12.4xPerformant Healthcare,Inc.$7.73 80$622-Randstad NV$42.50 181$7,687$9,813$25,604$934 0.4x10.5xResources Connection,Inc.$5.05 33$169$108$551$13 0.2x8.6xRWS Holdings plc$1.24 370$460$525$909$135 0.6x3.9xMean$1,747$3,657$204 0.7x7.8xMedian$498$842$53 0.6x8.6xPublic Comparables Professional,Scientific,and Technical ServicesSource:FactSetBusiness Services Industry News|Fall 2025|Page 20CompanyShareSharesMarketEnterpriseRevenuesEBITDAEnterprise Value /$USD in MillionsPriceO/SCapValue(LTM)(LTM)RevenuesEBITDAAdecco Group AG$28.03 168$4,721$8,591$24,922$832 0.3x10.3xHays plc$0.76 1,598$1,209$1,401$8,644$173 0.2x8.1xInsperity,Inc.$49.20 38$1,854$1,758$6,695$91 0.3x19.3xKelly Services,Inc.Class A$13.12 32$419$578$4,496$139 0.1x4.2xManpowerGroup Inc.$37.90 46$1,754$3,188$17,540$409 0.2x7.8xPERSOL HOLDINGS CO.LTD.$1.83 2,278$4,161$4,179$9,785$601 0.4x7.0 xRecruit Holdings Co.,Ltd.$53.92 1,564$84,324$74,965$23,624$4,264 3.2x17.6xRobert Half Inc.$33.98 102$3,457$3,320$5,569$253 0.6x13.1xS&P Global,Inc.$486.71 305$148,593$163,332$14,700$7,001 11.1x23.3xTriNet Group,Inc.$66.89 49$3,250$2,777$5,093$413 0.5x6.7xMean$26,409$12,107$1,418 1.7x11.7xMedian$3,254$9,215$411 0.4x9.2xPublic Comparables Employment ServicesSource:FactSetBusiness Services Industry News|Fall 2025|Page 21CompanyShareSharesMarketEnterpriseRevenuesEBITDAEnterprise Value /$USD in MillionsPriceO/SCapValue(LTM)(LTM)RevenuesEBITDACapita plc$4.35 114$497$1,051$3,004$183 0.3x5.7xConduent,Inc.$2.80 158$442$1,124$3,112$110 0.4x10.2xDonnelley Financial Solutions,Inc.$51.43 27$1,414$1,584$755$202 2.1x7.9xGenpact Limited$41.89 174$7,300$8,168$4,927$818 1.7x10.0 xInternational Workplace Group PLC$3.00 1,000$3,005$10,421$3,735$516 2.8x20.2xISS A/S$31.67 174$5,517$7,592$12,343$838 0.6x9.1xMoodys Corporation$476.48 179$85,481$90,632$7,307$3,557 12.4x25.5xTeleperformance SE$74.42 60$4,456$9,643$11,220$2,120 0.9x4.5xTTEC Holdings,Inc.$3.36 48$163$1,092$2,144$181 0.5x6.0 xMean$14,590$5,394$947 2.4x11.0 xMedian$7,592$3,735$516 0.9x9.1xPublic Comparables Business Support ServicesSource:FactSetBusiness Services Industry News|Fall 2025|Page 22CompanyShareSharesMarketEnterpriseRevenuesEBITDAEnterprise Value /$USD in MillionsPriceO/SCapValue(LTM)(LTM)RevenuesEBITDAABM Industries Incorporated$46.12 61$2,824$4,397$8,628$428 0.5x10.3xBrightView Holdings,Inc.$13.40 95$1,272$2,571$2,699$324 1.0 x7.9xEvolent Health Inc Class A$8.46 118$994$1,901$2,196$103 0.9x18.5xGDI Integrated Facility Services,Inc.$19.83 15$294$726$1,791$94 0.4x7.7xMITIE Group PLC$1.87 1,344$2,519$2,563$6,484$380 0.4x6.8xRentokil Initial plc$5.06 2,526$12,780$17,076$6,888$1,445 2.5x11.8xRollins,Inc.$58.74 485$28,468$29,304$3,570$804 8.2x36.5xMean$8,363$4,608$511 2.0 x14.2xMedian$2,571$3,570$380 0.9x10.3xPublic Comparables Services to Buildings and DwellingsSource:FactSetBusiness Services Industry News|Fall 2025|Page 23CompanyShareSharesMarketEnterpriseRevenuesEBITDAEnterprise Value /$USD in MillionsPriceO/SCapValue(LTM)(LTM)RevenuesEBITDABooking Holdings Inc.$5,399.27 32$174,990$176,384$25,025$9,095 7.0 x19.4xClean Harbors,Inc.$232.22 54$12,455$14,788$5,942$1,099 2.5x13.5xExpedia Group,Inc.$213.75 118$25,264$25,354$14,018$2,489 1.8x10.2xRepublic Services,Inc.$229.48 312$71,647$84,743$16,366$5,215 5.2x16.3xTUI AG$9.10 507$4,616$7,916$26,316$2,062 0.3x3.8xWaste Connections,Inc.$175.84 257$45,272$53,844$9,234$2,387 5.8x22.6xWaste Management,Inc.$220.83 403$88,957$112,493$23,950$6,995 4.7x16.1xMean$67,932$17,265$4,192 3.9x14.5xMedian$53,844$16,366$2,489 4.7x16.1xPublic Comparables Administrative and Support and Waste Management and Remediation ServicesSource:FactSetBusiness Services Industry News|Fall 2025|Page 24CFA OverviewBusiness Services Industry News|Fall 2025|Page 25About CFAWho We Are/What We DoCorporate Finance Associates(CFA)is an independent inter-national investment banking firm serving middle-market businesses.For over 60 years Corporate Finance Associates has been advocating on behalf of business owners who are restructuring a company,either through divestiture,merger,acquisition or recapitalization.Combining the knowledge and leverage of a larger bank with the customer focused detail of a boutique firm,from inception to completion,our senior principals provide hands-on expertise to clients buying,selling or recapitalizing a business.This Business Services Industry Practice Group was established to draw on the experience of CFA advisors,many of whom as former business owners and CEOs,have first-hand knowledge and have completed many transactions in this industry.Working with your local CFA representative,you can be sure that the collective wealth of knowledge is available to every CFA client.Financial AdvisoryNowthatyouhavemadethedecision to raise capital for yourbusiness,choosingtherightinvestment bankeriscritical.Whether you are buying out apartner,financing an acquisition orseeking growth capital,CFA is theright choice to help you achieveyour financinggoalsExit PlanningEverybusinesswillultimatelyundergo a transferviasaleormerger,a charitable donation,atransfer to a child or relative or evenbankruptcy,liquidationordeath.Everyownershiptransfercarrieswith it a unique set of consequencesand the best consequences usuallybegin with aclearly defined exitplan.Business Valuation“What is my business worth”is aquestionweoftenhearfrombusinessownerscontemplatingabusinesssale,mergerorrecapitalization.Answeringthisquestion depends on many factors,including the business valuationmethods that are employed in thecalculation.Sell-Side AdvisoryWhether as a divestiture strategyorarecapitalizationstrategyselling all or part of a businessrequires equal parts creative think-ing,critical analysis,expert advice,soundplanningandflawlessexecution.Having the right team ofinvestment banking professionalsworking for you is critical to ensuresuccess.Capital MarketsOurcommitmenttoremainingindependent from any investmentor lending affiliates ensures that wedeliver unbiased guidance.It alsopromotesmaximumcompetitionamong lending sources,helping tofully leverage value for our clients.Our role is to help you raise the typeof capital that best fits your needs.Buy-Side AdvisoryGrowththroughacquisitionisacomplexprocess.Itinvolvesstrategy,planning,critical analysis,coordination and negotiation.Whenyou want to take advantage of thefast growth offered by a consolidation or roll-up,CFAs broadreach,sources offinancingandefficientclosingscanhelp youachieve your business growth goals.Business Services Industry News|Fall 2025|Page 26Local Service,Global Reach Where We AreWith offices across the USA and in Austria,Belgium,Brazil,Germany,Hong Kong,India,Ireland,Italy,Mexico,Netherlands,Spain and the United Kingdom providing middle-market companies with a wide range of M&A,financial advisory services and access to capital resources.Business Services Industry News|Fall 2025|Page 27Delivering Results Founded in 1956 70 Managing Directors 37 Offices Worldwide Billions in M&ATransactionsCreativityKnowledgeDriveMaking it HappenBeyond taking initiative,the CFA team embodies a competitive spirit.It is manifested in our drive to find new opportunities to get the job done.We believe that persistence and tenacity are positive values.They guide us in our work for you.Fresh SolutionsWe achieve superior results by interpreting information differently from others in our industry.In todays market it is not enough to follow precedents;one must build on the firms foundation and produce creative solutions through imaginative and original work.Sorting Out NoiseWe serve you best when we work across external and internal boundaries and use our collective knowledge from national and international offices to manage the outcome of complex transactions in your favor.Business Services Industry News|Fall 2025|Page 28Worldwide TransactionsBusiness Services Industry News|Fall 2025|Page 29Industry Practice Groups Business ServicesThe Business Services practice group is comprised of accomplished dealmakers with extensive experience in advising both public and private companies in the industry.These dealmakers offer expert service in acquisitions,divestitures,financing,and strategic planning to a wide range of companies operating in multiple subsectors including:Advertising and CommunicationPersonnel and Employment AgenciesSecurity and Alarm SystemsEngineering and Architectural ServicesEquipment and Vehicle RentalsMiscellaneous ServicesWhether you want to acquire,merge,sell,or finance,let CFAs industry knowledge,international resources and proven dealmaking skills work for you.We research,identify,qualify,advocate,negotiate and help steer you through the mine fields of due diligence to maximize your value and secure your objective.Aerospace/Defense/GovernmentAgricultureAnimal HealthBusiness Services Chemicals and PlasticsCommercial Real Estate Consumer RetailEnergy Engineering/Construction Financial Services&FinTech Food/Beverage Healthcare/Life SciencesIndustrialsMetal Fabrication Print/PackagingSemiconductors Technology/Media/TelecomTransportation/Logistics/Supply Chain Wholesale DistributionBusiness Services Industry News|Fall 2025|Page 30Recent Selected Industry TransactionsBusiness Services Industry News|Fall 2025|Page 31Recent Selected Industry TransactionsBusiness Services Industry News|Fall 2025|Page 32Recent Selected Industry Transactions
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Building theAI-Driven Bankof TomorrowRedefining theFuture of Banking02Table ofContentsForewordExecutive SummaryThe Global Race to OperationalizeAgentic and Generative AIStrategic Imperatives for the AI-Driven Bank Legacy Modernization Reimagining Digital Customer Experience Data as a Competitive Advantage Embedding Trust and SecurityInvestment OutlookThe Bank of TomorrowWhat Lies AheadMethodologyAbout Us030406102526282931Foreword03Artificial intelligence(AI)is rapidly transforming banking,becoming central to digital transformation.The AI-driven bank of tomorrow will feature hyperpersonalized customer engagement and advanced,autonomous operations.Trust and innovation will remain core values,and banking will seamlessly integrate into customers lives,making the bank itself almost invisible.We call this shift pervasive banking.This transformation to an AI-driven bank of tomorrow will not be easy.It will test leadership resolve as the technology transformation initiatives interlocks with global trends like sustainable banking and financial inclusion.This report by Tech Mahindra,based on in-depth interviews conducted by East&Partners,offers precise insights into the realignment of investments and validates what we hear from our clients every day.Tomorrows leaders will adopt technology as a cultural core,not just a strategy.They will build banks centered on trust,transparency,and human focus during major economic,regulatory,and customer changes.Global Service Line Head of Banking,Financial Services&Insurance,Tech MahindraAt Tech Mahindra,we work with global banks to modernize core systems and enable contextual,data-driven engagement that puts the customer at the center of every transformation.We have developed an AI-enabled ecosystem focused on delivering solutions and invested in patented technology to advance legacy and data platform modernization and software automation.With the right investments and expertise,Tech Mahindra helps clients create the bank of tomorrow and make pervasive banking real.This report is a timely reflection on where the industry stands and where it is headed,painting a vision of what the bank of tomorrow will look like.We hope it fosters new ideas and drives decisive actions.04Executive SummaryBased on in-depth interviews conducted by East&Partners(East)with 150 senior banking executives across the Americas,Europe,Nordics,and Asia-Pacific(APAC),this white paper explores the race to build the AI-driven bank of tomorrow.Our research confirms that AI has rapidly shifted from hype to an essential reality for staying competitive.The successful bank of the future must be intelligent,invisible,and indispensable,delivering hyperpersonalized experiences while running on autonomous,efficient operations.While banks are set to nearly double their AI investment to 17%of IT budgets by 2028,the journey is filled with challenges Leaders are grappling with modernizing legacy systems,navigating regulatory and cybersecurity risks,and proving a clear return on investment.This report highlights the key strategies separating the leaders from the laggards,focusing on the critical need to modernize core systems,harness data as a competitive advantage,and embed trust and security into the fabric of the organization.For banking leaders,the message is clear:the time to act decisively is now,or risk being left behind.05KeyTakeaways Banks must now determine how quickly and deeply to embed advanced AI capabilities to stay competitive.While AI is fuelling rapid legacy modernization,execution remains uneven.Legacy systems,unclear ROI,regulatory pressure,and cybersecurity risks continue to hinder progress.AI has swiftly moved from hype to essential reality.Unification of old systems have become imperative than ever before.Banks are exploring ways to effectively use GenAI to slash its cost and timelines to accelerate the modernization programs.Legacy modernizationis the need of the hour.Responsible AI,strong cybersecurity,and a robust integration and governance and compliance are foundational for new-age banks.Security,trust,and data governance are key enablers and essential.Decision-makers face multiple investment priorities to match the rapid changes in regulatory compliance,cybersecurity,legacy modernization,operational stability,data governance,intuitive APIs,and cloud implementation.Navigating myriad compliances can be tricky.Hyperpersonalized is the new benchmark,delivering contextual experiences across mobile,wearable,voice,or augmented reality:treating every customer as a“segment of one.”Effective digital transformation spans hyperpersonalized experiences to autonomous,intelligent operations.Delivering hyperpersonalizedcustomer experiences is paramount.06The Global Race to OperationalizeAgentic and Generative AIAgentic and generative AI(GenAI)areno longer aspirational for the bankingindustry.These technologies have already moved beyond experimentation to reshape customer experience,riskmanagement,compliance,and product innovation.The longer-term outlookconfirms that GenAI investment anddevelopment are evolving rapidly.Our research shows that over one-third of financial institutions(FIs)are already investing aggressively in GenAI tocapture an early-mover advantage(37%).This AI investment paradox between European and Americas banks suggests a smaller proportional spend can translate into a larger absolute investment as European banks seek to close the gap with Americas banks that are currently leading the overallAI investment.By region,European banks display the strongest AI investment outlook.49%of them plan to invest in AI faster than their peers over the next three years,based on their belief that it will become a strategic advantage,outpacing banks in the Americas(39%),the Nordics(32%),and APAC(26%).As highlighted in the investment outlook section of this white paper(see page 25),the current IT investment budget of Americas banks stands at US$666 million,with an average allocation of 12%to AI,that is higher than that of European banks at US$499 million and 9%,respectively.AI Outlook%of total(N:150)Investing just enough in AIInvesting substantially in AINot focused on adopting AI/OverhypedStruggling to adopt AIOther10080604020026.339.518.413.239.523.726.348.618.921.632.418.935.136.725.325.3APACAmericasEuropeNordicsGlobal07One in four banks globally are struggling to adopt new AI solutions,acknowledging that they risk being left behind(25%).One in four banks are investing just enough to keep pace with the industry(25%),while one in ten are not focused on adopting AI and risk being left behind(10%),with the highest proportion in APAC(13%).The stakes are high:banks that fail to act decisively risk not only inefficiency but out-right irrelevance.The Barriers to AI AdoptionDespite exhibiting significant enthusiasm,banks highlight significant challenges in scaling AI:Defining ROI:APAC institutions struggle to articulate clear value metrics,limiting executive buy-in.Cybersecurityand Data Privacy:European Banks cite cyber risks as thetop inhibitor to AIadoption.HighCosts:Nordics are mostconstrained by overlapping system costs and modernization expenses.RegulatoryConcerns:Americas-based banks are seeking guidance and partnerships to address compliance issues.Talent Gaps:Globally,the shortage of skilled AI and data professionals persists as a significantobstacle.08After the advent of the internet and smartphones,AI is the biggest transformation we will see.The key is not to automate minor processes.Create new revenue streams or deliver significant impact because the technology is there.The question is:do we have the right use case to deliver outcomes using the power of AI?Vaibhav Pandhari,Voya India Senior VP&Head of TechnologyGlobally,eight in 10 banks have established a dedicated AI budget(81%).On average,global banks allocate 8.5%of their IT budget to AI and GenAI initiatives,or approximately US$40 billion.The Americas(12%)and Europe(9%)lead the way,followed by APAC(7%)and the Nordics(6%).Overall,the average percentage of global banks IT budgets allocated to AI and GenAI ranges from a low of 2.5%in the APAC to a high of 18%in the Americas.Importantly,AI investment is forecast to almost double by 2028 to 17.1%or US$80 billion,led by banks in the Americas(23%)and APAC(19%).The high level of variance observed for AI highlights a key area of competitive differentiation and benchmarking focus for leading bank CIOs.Current/3Y Forecast AI Investment Budget%of total IT budget(N:150)3Y Forecast%AI InvestmentCurrent%AI InvestmentAmericasAPACEuropeNordicsGlobal051015202512.223.07.018.88.815.26.011.28.517.1Vaibhav Pandhari,Voya India Senior VP&Head of Technology,notes that while the world debates how best to use AI for clear ROI,the technology is“here to stay”and a game changer.“The velocity of AI progress is,at times,scary.What is the right ROI?”Pandhari says.09Banks Double Down on CX,Automation,and Regulatory ComplianceThe most popular use case for AI investment that is likely to hasten adoption internally is customer experience(CX),including customer service,chatbots,robotic advisory,and user personalization,ranked higher in each region over process automation,regulatory compliance,and GenAI IT productivity improvements.Process automation,encompassing multi-agent frameworks that automate development steps and processes across the value chain,is the highest rated in the Nordics(68%)and Europe(62%).Financial crime compliance,fraud,AML,sanctions,automated regulatory reporting,and risk management emerge as pressing use cases for the application of GenAI among European banks,placing the greatest emphasis on this factor(43%)relative to their counterparts in the Americas(40%),Nordics(35%),and APAC(29%).Most Popular AI Use Cases%of Total(N:150)AmericasAPACEuropeNordicsGlobal02040608010047.442.128.921.15.3Customer Experience(CX)Process AutomationGen AI Productivity ImprovementRegulatory ComplieanceUnsure/No View65.555.339.515.82.678.462.243.213.581.167.635.110.810.865.056.736.715.34.7Legacy StrategicImperativesfor theAI-Driven BankModernization01Legacy Modernization11Legacy systems continue to pose a significant challenge for global banks.When asked about their current top three IT investment focus areas,over one-third(36%)of CIOs and CTOs highlighted legacy system modernization as a core business need.While front-end systems have evolved to Software-as-a-Service(SaaS)and agile models,back-end systems largely remain slow,inflexible,and unable to support real-time personalization.This inherent misalignment has a direct impact on revenue,customer satisfaction,and overall competitive positioning.One in two globalbanks are allocating ITinvestment to enhanced regulatory compliance(51%)and improving operational stability(48%),nominated as critically important IT investment focus areas by key decision makers,as new technology needs,including cloud implementation and API deployments,are held back by antiquated systems and outdated core platforms.Over nine in 10 banks are currently running full-scale modernization programs to fully retire legacy systems across front-end and back-end applications,which are typically running on the mainframe;yet most admit to frustrating timeline overruns and cost escalations.Successful banks adopt a dual-track approach:maintaining operational stability while incrementally replacing core functions with cloud-native,composable platforms.1Preferred Full-Scale LegacyModernization Approaches-%of Total12Traditionally,the incremental steps taken to achieve successful front-end modernization before undertaking a more complex mainframe back-end migration have been excessively resource-intensive and time-consuming.GenAI is now duly accelerating this journey by converting legacy code,simulatingarchitectures,and identifying modernization pathways.New use cases are emerging where the cost and timelines of legacy modernization are being slashed as CIOs leverage an array of innovative GenAI tools.CIOs estimate it will take up to four years on average to fully retire legacyplatforms;however,history showsprogress depends on strong systems integration partnerships and clear ROIalignment with key stakeholders.Case in point:A large UK-based financial services firm shelved its mainframe modernization program four years ago due to elevated costs and timeline blow-outs.But with the application of advanced AI tooling in place,the firm is proceeding with the same program at 40%lower cost and a significantly condensed timeline.Off-the-shelf modernplatformsConsolidating workloads acrossmultiple platformsCreating API layers without disturbinglegacy platformsOptimizing legacy expenses esp.for mainframesCustom built platforms02040608010083.381.258.755.116.7Forecast Legacy SystemModernization Timeline-Years13Key legacy system modernization hurdles include difficulty defining clear ROI outcomes,excessive complexity of integrated systems,staff skills incompatibility,and high upgrade costs.Excessive costs,in general,are a major challenge for banks,particularly due to the need to operate multiple systems and the inherent redundancy costs associated with them.Sequencing indecision on where to start with front-end or back-end modernization is also a key impediment to effectively“sunsetting”legacy systems.“Our legacy systems upgrade program has consistently undershot its timelines and overshot its budgets,but were hopeful that AI is going to make a difference.Were also much more tuned to external solutions here rather than continuing to try most of the upgrade in-house.”CTO,US Tier 2 Regional Bank“Our goal posts keep shifting in response to changing market opportunities and,of course,changing technology.Were about halfway through our core replacement program,but are having to almost continually amend workflows and tools to respond to these changes really hard as a result to provide our Board with clear guidance on returns the bank is going to get.”CTO,German Top 3 LandesbankRange-HighRange-LowAverage Timeline Reported5.06.03.04.07.02.04.06.03.04.06.02.04.07.02.0APACAmericasEuropeNordicsGlobalKey Barriers to Legacy SystemModernization-%of TotalTop 3 IT Investment Focus Areas-%of Total14Overcoming costly legacy upgrade barriers enables banks to focus their resources more intently on key IT investment areas.CIOs identify enhanced regulatory compliance(51%),operational stability(48%),and cloud implementation(36%)as the top three critical IT investment areas for the business.These factors are rated ahead of data platform modernization(32%),API development and deployment(31%),and AI-enabled productivity and automation implementations(23%).Identifying clear returnsIntegrated systems complexityUpgrade costsStaff capabilitySequencing indecisionEmbedded commitmentsRunning multiple systemsRedundancy costsEstablishing clear responsibilities Management disagreement010203040506053.637.037.037.034.829.026.123.914.57.2Regulatory complianceRun the bankCloud implementationData platforms modernizationAPI developmentsCustomer experienceAI/Gen AI implementationsCore COTS implementationNew product engineeringRobotics010203040506051.348.036.032.031.326.022.719.318.714.7ReimaginingDigital CustomerExperienceStrategicImperativesfor theAI-Driven Bank02Reimagining Digital Customer Experience16The next competitive frontier is delivering personalized,contextual experiences across every touchpoint,including mobile,wearable devices,voice,and augmented reality.Nearly 70%of banks in the research identify customer experience as the most critical AI use case,ahead of process automation and compliance.Hyperpersonalization is the new benchmark:treating every customer as a“segment of one.”This requires unifying data,breaking down silos,and embedding AI-driven insights directly into customer journeys.Our research shows that enhancing retail banking CX is a crucial initiative for one in five banks globally(21%),ahead of regulatory,compliance,and risk management CXinvestments(19%)and advanced domestic and international payments capability(16%);in particular,intuitive and customer-friendly front-end functionality with robust back-end support and reliability.Misalignment between front-end and back-end systems,a common pain point for major banks with direct implications for customer churn,is primarily attributed to a lack of robust data governance and broader CX impacts overall.Without this foundational data governance layer,achieving a holistic,end-to-end customer relationshipdashboard is exceptionally difficult.“Great CX must be designed top-down but built bottom-up.Transformation itself is being transformed.”Kshitij KumarGlobal Service Line Head of Banking,Financial Services&Insurance,Tech Mahindra217Predictive AI can deliver the next-best-action at the precise moment a customer is most likely to act,which goes beyond simply looking at past behavior,building on the concept of micro-moments.Todays customers are used to an Uber experience,as in everything at a mobile click,but legacy back-end systems can take months to deliver change.Your front end can change twice a day if engineered well,but the back end might only update quarterly.This puts tremendous pressure on customer experience and time to market,potentially impacting revenue.Vaibhav PandhariVoya India Senior VP&Head of TechnologyData as aCompetitiveAdvantageStrategicImperativesfor theAI-Driven Bank03Data as a Competitive Advantage19Data is the new gold,but too few banks are mining it effectively.Only one in five institutions globally has a robust,real-time data governance framework in place.Without strong foundations,AI cannot scale effectively.One of the most important areas banks are seeking to deliver,yet are restricted by ingrained data element limitations,is an overarching end-to-end customer relationship dashboard overview.CIOs,CTOs,and CDOs globally cite this factor as a key element for attaining a competitive advantage ahead of reducing customer onboarding barriers and enhancing information flow around transactions.The possibility of delivering enhanced personalization experiences with a real-time customer dashboard and consolidated data mesh is the key to achieving superior CX.Best practice CX design must be informed by robust data governance practices that extend beyond a purely immersive,omni-channel experience.When disparate data sources are combined and presented through effective models,banks can make informed decisions about the types of cross-selling and upselling opportunities that exist and how to design campaigns effectively,resulting in highly targeted campaigns that drive more ROI.Banks are being tasked with leveraging customer data more intuitively and,crucially,enabling more personalized opportunities for customers;however,how well advanced is their organizational data management capability and maturity?Leading banks are moving from centralized data warehouses to distributed data meshes and data products,embedding governance and security while enabling flexibility.They are also embracing explainable AI and continuous monitoring to strike a balance between innovation and accountability.320Significant data management maturity variance is observed,with only one in five FIs fully establishing robust data governance to ensure the availability of high-quality,standardized data in near real-time.This is the highest in the APAC and Americas,and the lowest in Europe and the Nordics.One in two FIs globally have consolidated their data;however,governance standards and processes are not yet effectively implemented with minimal variance by region.One in three FIs have proficiently siloed their data without establishing data governance standards and practices.What strategies are banks leveraging to make their data more accessible and actionable?One in three banks has transferred data to a single platform for enhanced interoperability,management,and flexibility,the highest in the APAC region.Over one in four have integrated different sources with a third-party platform,with the most popular locations being the Americas and Europe.One in four banks are still working to determine the best approach,especially those based in the Nordics and Europe,while one in ten banks globally are using a virtual data layer.Organizational Data Maturity Level-%of TotalAPACAmericasEuropeNordicsGlobal02040608010050.023.726.342.136.821.154.129.716.245.943.210.848.033.318.7Siloed DataData ConsolidatedRobust Data Governance21Data Accessibility Strategies Leveraged-%of TotalBanks must ensure algorithms are transparent,auditable,and secure.This involvescontinuous model monitoring,fairness checks,and contingency planning for system failures and other potential issues.Embedding governance mechanisms and maintaining human oversight where needed helps balance automation with accountability.Innovation and compliance can coexist when clear governance frameworks are in place.Sandboxed environments,explainable AI,and cross-functional oversight help ensure that experimentation with emerging technologies remains within regulatory bounds.Engaging early with regulators and adoptingresponsible innovation practices allows banks to test and scale new solutions safely.The three most important components of responsible AI are algorithmic bias mitigation,transparency through explainable AI,and the importance of a human-in-the-loop model for human oversight in critical decisions.Transfer data to single platformIntegrate different sources with 3rd party platformUse visual data layerDetermining best approachNo changes needed100806040200APACAmericasEuropeNordicsGlobal7.910.523.741.17.934.231.616.232.421.66.124.337.829.225.332.415.823.729.729.710.7EmbeddingTrust andSecurityStrategicImperativesfor theAI-Driven Bank04Embedding Trust and Security23Cybersecurity is no longer a defensive function;it is a competitive differentiator.As banks adopt AI,they must guard against AI-enabled threats,from synthetic fraud to algorithm manipulation.Global banks cite heightened concerns about managing cybersecurity threats as one of the major issues slowing the adoption of GenAI.Leading CIOsestablish robust cybersecurity protocols across endpoint security,internet security,network security,and hardware security models(HSMs),as well as the comprehensive coverage of services offered for all these crucial areas.Customers and regulators alike demand assurance that AI systems are auditable,transparent,and ethical.The research indicates that cybersecurity is a key factor slowing the adoption of Gen AI among European banks compared to their global peers.Banks are increasingly turning to IT partners not only for technology delivery,but also for the co-creation of secure,compliant,and resilient operating models.Rising cyber threats,complex digitalecosystems,and evolving compliance requirements are prompting banks to reassess their traditional perimeter-based security models.Traditional perimeter-based security models are no longer suitable,prompting a strategic shift toward Zero Trust Architecture(ZTA)that enforces continuous authentication and least-privileged access.ZTA is especially critical for future-ready core banking platforms where hybrid cloud systems,third-party integrations,and open banking APIs must be protected against the rising threat of sophisticated bad actors and external cyberattacks.424As core banking platforms evolve to support real-time payments,open bankingintegrations,and cloud-native services,the potential for cyber-attacks increasesdramatically.AI safeguards critical systems by delivering predictive,adaptive,andautomated security capabilities to strengthen protection well beyond traditional rule-based defenses.Quantum technologies also represent a radical leap in processing power withunprecedented efficiency and cryptographic security.With close links to AI,quantum computing is set to revolutionize machine learning and pattern recognition across vast datasets,utilizing enormous processing power.As real-world quantum computing applications approach rapidly,which banks are truly prepared for such a seismic change?Compliance by Design is also a key imperative,embedding regulatory require-ments directly into systems and processes from the“ground up”.This proactive approach minimizes operational risk,reduces audit overheads,and enables banks to maintain continuous alignment with rapidly evolving global regulatory frameworks.25These figures highlight the growing divergence between leaders who invest boldly in technology and AI,and those constrained by incrementalism.For CTOs,CIOs,and CDOs,the path is clear:upgrading technology and embedding AI is no longerdiscretionary it is existential.IT BudgetsBanks currently spend an averageof US$466 million annually on IT,with Americas leading at over US$666 million.AI Allocation81%of banksalready allocate budget specificallyto AI,averaging 8.5%of IT spend.This is expected to nearly double to 17%by 2028Modernization:Over 9 in 10 banks have modernization initiatives currently underway,Americas Banks to move from legacy systems the fastest(3.8 years)“We have multiple tech projects about to kick off,most notably in ourbusiness onboarding,getting barriers down or smoothed out so the customers experience is enhanced and simplified,and cross-border payment services where were seeing explosive growth in volumes.”CTO,Top Tier French Banking GroupInvestment OutlookThe Bank of Tomorrow26The research offers a fascinating insight into a sector in transition,grappling with legacy systems,fragmented data,increasing regulatory complexity,and significant cybersecurity threats.Yet,leading CIOs,CTOs,and CDOs also highlight a clear ambition to become the bank of tomorrow,with 8 in 10 global banks already dedicating budgets to AI and GenAI initiatives,and many set to double their allocation to AI within the next three years.The bank of tomorrow is not just digital-it is AI-powered.This combines:This moment is not just about technology adoption;it is about redefining what a bank truly represents in the eyes of clients and how it operates.The bank of tomor-row will be an AI-driven,embedded partner seamless-ly integrated into the daily lives and financial journeys of clients.It will be proactive and intelligent enough to anticipate needs before they are expressed.SustainabilityEmbedding ESG data intodecision-making and product design.AutomationAgentic AI driving end-to-endautomation of routine processes.TrustEthical guardrails ensuringcompliance and customer confidence.AccessibilityServices delivered seamlesslyacross omnichannel ecosystems.AdaptabilityA culture of continuousinnovation and learning.CX and operational intelligence will remain part of the same fabric.AI will keep playing a pivotal role in uniting these threads by automating routine tasks,recognizing actionable insights,and enabling real-time responsiveness across interconnected banking divisions.27The vision is clear:banks that act decisively today will create intelligent,trusted,secure,and adaptive ecosystems.Banks that do not scale fast enough risk falling behind and becoming irrelevant in a world where customers expect seamless,personalized,always-on services.The next generation of industry leaders will be defined not by how much they invest,but by how strategically they aligntechnology,culture,and purpose to deliver transformation atscale and speed.Importantly,it will continually evolve through feedback,analytics,and learning.These qualities will ensure it remains relevant and resilient in an increasingly dynamic financial landscape.Quantum technologies will also represent a radical leap in processing power with unprecedented efficiency and cryptographic security.With close links to AI,quantum computing is poised to revolutionize machine learning and pattern recognition across vast datasets,leveraging enormous processing power.How far away are real-world quantum computing applications,and which banks are truly ready for such a seismic change?The bank of tomorrow will also be defined by its ability to continuously evolve Agentic AI.It will drive automation and innovation at unprecedented speed,while quantum computing will unlock new horizons for modelling,fraud detection,and risk management.Sustainability and ESG considerations will be embedded directly into product design and operational decisions,ensuring that growth is aligned with societal impact.“Organizations who embrace AI effectively will stay ahead of the race by moving as much manual processing to agent-based interactions for automation.”Kshitij KumarGlobal Service Line Head of Banking,Financial Services&Insurance,Tech Mahindra28Today,AI represents the most profound shift yet.Banks that hesitate will find themselves outpaced.Banks that act decisively will redefine the industry.To achieve this,banks are seeking IT service providers that combine technical capability with deep industry-specific insight.Demonstrated experience is crucial,with proven speed and scalability of execution highlighted as key selection criteria.Modernization,however,doesnt have to be disruptive at the expense of operational stability and resilience.Our research shows that transformation must move simultaneously on four critical fronts:This evolution is ongoing,and successful institutions are those that continuously reimagine their operating models.Looking ahead,expect an increasing convergence of AI with green technology,environmental,social,and governance(ESG)targets,and quantum computing to offset power demands,alongside full AI integration into the CX offering.The AI-powered bank begins now.The question is not whether to transform,but who you choose to transform with.What Lies AheadModernizingboldlyRetiring outdated core systems and embracing cloud-native,composableplatforms that allow for speed and scalability.ReimaginingcustomerjourneysMoving from transactional interactions to hyper-personalized,contextual engagement.Harnessing data as a competitive advantageBuilding robust governance frameworks that fuel predictive,real-time decision-making.Securingat scale Embedding ethical,explainable AI and Zero Trust security models to protect customers and institutions alike.29Sampling of these audiences was framed at a sufficient scale to ensure statistical reliability while being regionally representative.The sample size of N:150 Banks and Non-Banks enabled reporting along regional and global splits for the following:East ensured 100%of the agreed sample size was met by conducting interviews using astructured interview questionnaire developed jointly with Tech Mahindra.All interviews were executed on a direct basis using Microsoft Teams/Zoom calls.No self or online completion was used.East conducted direct interviews with a sample size of 37 Banks and Non-Banks per region,totalling 150 globally,including Commercial banks,Retail banks,Investment Banks,Asset/Wealth Management firms,and Neobanks.East ensured that 100%of the sample size was achieved.Within each financial institution(FI),the primary interviewee target was the CIO,CDO,CTO,or their equivalent within thecorresponding division,split between banks(79%)and Non-Banks(21%).MethodologyInterviews were conducted using a structured interview questionnaire developedcooperatively between Tech Mahindra and East,based on initial drafts provided by East following an initial workshop together.This consisted of a set of 18 discrete questions resulting in a 40-minute live interview.All reporting was delivered at an aggregated/segmented level,with no provision of raw data.All interviews were conducted on anon-attributable basis,with Tech Mahindras identity as the research partner and commissioning party not shared with the interviewees.These two independence principles ensure higher quality and open engagement from interviewees,avoiding any response bias.Combined with the quality of Easts fieldwork team,this approach generated completion levels in excess of 85%.While the analysis was primarily quantitative in nature,verbatim comments made during the interview were transcribed to provide additional valuable qualitative insightsAPACAustraliaIndiaIndonesiaMalaysiaNew ZealandSingaporeEuropeAustriaBelgiumFranceGermanyLuxembourgNetherlandsSwitzerlandUKAmericasCanadaMexicoUSANordicsDenmarkFinlandNorwaySweden31Tech Mahindra(NSE:TECHM)offers technology consulting and digital solutions to global enterprises across industries,enabling transformative scale at unparalleled speed.With 152,000 professionals across 90 countries helping 1100 clients,Tech Mahindra provides a full spectrum of services including consulting,information technology,enterprise applications,business process services,engineering services,network services,customer experience&design,AI&analytics,and cloud&infrastructure services.It is the first Indian company in the world to have been awarded the Sustainable Markets Initiatives Terra Carta Seal,which recognizes global companies that are actively leading the charge to create a climate and nature-positive future.Tech Mahindra is part of the Mahindra Group,founded in 1945,one of the largest and most admired multinational federation of companies.For more information on how TechM can partner with you to meet your Scale at Speed imperatives,please visit https:/About East&PartnersEast&Partners is a leading global specialist business banking market research and analysis firm.East delivers both bespoke and multi-client research programs and consulting services to client banks and financial services providers across the Institutional,Corporate,SME,Business,Investment,and Financial services markets.About UsFor more information,please visit https:/ Tech Mahindra Ltd 2025.All Rights R names,logos,taglines,service marks,tradenames and trademarks used herein remain the property of their respective owners.Any unauthorized use or distribution of this content is strictly prohibited.The information in this document is provided on“as is”basis and Tech Mahindra Ltd.makes no representations or warranties,express or implied,as to the accuracy,completeness or reliability of the information provided in this document.This document is for general informational purposes only and is not intended to be a substitute for detailed research or professional advice and does not constitute an offer,solicitation,or recommendation to buy or sell any product,service or solution.Tech Mahindra Ltd.shall not be responsible for any loss whatsoever sustained by any person or entity by reason of access to,use of or reliance on,this material.Information in this document is subject to change without notice.
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