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Losing Google support would irreparably damage Huawei's global smartphone business
Even a company as big and influential as Huawei doesn't stand a chance in the open market without Google services.
ANDREW MARTONIK
20 May 2019
30
It took less than two days after the announcement of President Trump's executive order to increase scrutiny of business dealings between foreign and U.S. technology companies for the first major shoe to drop: Huawei is expected to fully lose access to Google apps and services, as well as future Google-approved Android updates. And unlike previous government intervention that only affected Huawei's ability to sell its smartphones in the U.S., this decision has ramifications for the company's global operations — and if it comes to fruition, will irreparably damage Huawei's smartphone business.
It simply isn't reasonable in 2019 for any company to launch a phone outside of China without Google services.
Huawei, just like every other company successfully selling Android phones, relies on support from Google. Android is open source, yes, but as has been shown time and time again, an "Android" phone without Google apps and services isn't something that consumers want. (This is, coincidentally, exactly what the European Commission and Google are constantly fighting over.) Last week's actions by the U.S. government have made it so that Google simply cannot provide certification or apps and services to Huawei. And as such, Huawei seems destined to have to retreat to only selling phones in China, where it doesn't have access to Google services as it is, and certain very specific market and price segments where Google services aren't as important.
Many companies have tried to make Android devices without the Play Store, and while there are a number of success stories across the technology space in general, there's nothing but a long line of failures when it comes to smartphones. It simply isn't reasonable in 2019 for any company to launch a phone outside of China without Google services and expect it to actually sell. It can have the best cameras, hardware, specs and core operating system we've ever seen, but unless it has Google's apps, and crucially the Play Store, effectively zero people will be interested in buying it. I'm sure Huawei can (and does) make a fine phone with all of its own services — but if it intends to compete in a market filled with 100% of phones having access to Google services and the Play Store, it has to have them as well.
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It can be tough to break out of our U.S. perspective and realize just how big of a deal Huawei is in the smartphone world. Though its phones are effectively a non-factor here, Huawei's global smartphone market share is approaching 20%, which is now above Apple. It built most of that market share on providing value-minded consumers around the world get phones with solid specs and capabilities at exceptional prices. But even in high-income countries, Huawei has finally managed to make inroads in the highly competitive flagship phone space. It's a real competitor in most major countries around the world, and a leader in some. Now, it's destined to lose all of that momentum.
Even if the ban were only in place for a short period, only to be reversed by some sort of specific deal with China or a future U.S. administration, the damage would already be done. Consumers are, ultimately, fickle — the first time someone goes to buy a Huawei phone and finds that it doesn't have Google services on it, the Huawei brand name will be tarnished and you can bet they won't be looking to Huawei the next time they upgrade. It will ultimately be extremely difficult to make back that ground lost with even a short period of attempting to sell phones without Google services; and things would be no better by Huawei missing out on a year or two of not being in the market with new devices of any kind.
Huawei's global smartphone business will be damaged beyond repair if this ban fully goes into effect.
Huawei, of course, has a history of making phones for China without Google services or support. And there are over 1.3 billion people in China — that's a healthy marketplace in its own right. Huawei has nearly 30% market share there as it is. It has built up its own operating system, services and partnerships to make its phones competitive in China, and this would lead you to think it could theoretically do the same globally. But there are clear differences that make that idea a non-starter, namely the history of Google services never being available in China meaning Huawei been competing on even footing with other companies building their own ecosystems and not adopting Google's superior one.
You can bet Huawei's market share in China will grow if it's effectively its only market to invest in. But considering its strong global market share and sales, only selling in China would mark a dramatic reduction in its smartphone operations. A consolation prize.
The question remains just how quickly Huawei will choose to wind down, or pause, its smartphone development outside of China. We thankfully know that existing Huawei devices will continue to have Google support and receive updates, which will obviously keep things rolling for some time to come. But if this ban from the U.S. government on business operations goes into full effect longterm, we're only a handful of months away from Huawei having to make a very tough decision on whether it will choose to try and launch an Android phone outside of China without Google services, or put the entire operation on hold in hopes of a reversal of the decision. As painful as it would be for Huawei, my vote goes for the latter.
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Opinions Huawei
Losing Google support would irreparably damage Huawei's global smartphone business
MarkMcCoskey
Will be interesting to see how fast China gets back to the table with Trump. Trade deal plus assurances.
Mon May 20, 2019 2:02pm
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brucewayne
Nah, China will just ban US products. Trump will be the one running back to the table
Mon May 20, 2019 2:53pm
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fightcrazy
No way, China thinks if they wait Trump will give in, No, Trump will wait till 2020 when he gets elected President for 4 more yrs. If China holds out that long, China will be screwed big time. China needs US markets, US can go to India, Korea & many others. The USA is China's biggest market. Screw China, Screw Huawei.
Mon May 20, 2019 10:32pm
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brucewayne
Hahahahahaha.
Hahahahahahahahahahahahahahahahahahahahahah
Just pick up and go to India. Costs would be super minimal.
Lol.
"make America great again"
Tue May 21, 2019 8:20pm
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MartialText
China got to where it is by stealing A LOT of US intellectual property. I believe there was a lot of discussion about IP theft during the recent trade talks. When the Chinese realized they could no longer just rob us blind, they balked. Now, their major electronics manufacturer has its nuts in a vice. They will have to play ball (no pun intended) or face the consequences. Sounds like winning to me.
Mon May 20, 2019 4:29pm
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Martin Zitter
In China, you may criticize the U.S. to your heart's content. However, if you criticize China, you get sent to a re-education camp, or worse.
Mon May 20, 2019 5:37pm
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Lestat1886
Retaliation from China could be hard for everyone: boycott of Apple and other US companies (tech related or not), raising prices of raw materials used for Silicon by every manufacturer, etc.
This trade war will have no winner...
Mon May 20, 2019 2:37pm
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toukale
The Apple part will be tricky, Apple currently supports the hiring of about 1 million people in China. If China does that, they will effectively be putting 1 million folks out of work.
Mon May 20, 2019 2:44pm
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brucewayne
How many jobs would be lost due the damage this creates for Huawei? I'm fully expecting a US product ban in China forthcoming.
Mon May 20, 2019 2:53pm
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Zo Fryer
China will ban Apple in days. Google will change their mind, as they were doing Apple a solid with this nonsense anyway. Apple will get unbanned in China. It's kinda obvious that's how this is going to play out. Huawei is going to be just fine. They actually make their own phones.
Mon May 20, 2019 2:58pm
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Sapient
Google can't "change their minds" on this. This is being mandated by the US government.
Mon May 20, 2019 3:09pm
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Zo Fryer
I'm literally shorting Apple right now. China's reaction is going to be a bloodbath of historic proportions.
Mon May 20, 2019 3:00pm
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Altema22
Do you mean shopping instead of shorting? Typos happen! Anyway, if you meant shopping Apple, there's plenty of alternatives to Huawei... it's just one brand of Android phones.
Tue May 21, 2019 8:30am
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KingFisherMacD
I think Zo means shorting. It's sort of a bet on a certain stock going down.
https://simple.wikipedia.org/wiki/Short_(finance)?wprov=sfla1
Tue May 21, 2019 9:11am
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Averix
This could also spawn a 3rd ecosystem. With 20% of global phone sales so far, Huawei could opt to create their own store, services, and apps. Then Google would be facing a serious fracture that they might not recover from.
Mon May 20, 2019 3:03pm
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toukale
Creating a store is not the issue, hell a bunch of companies has tried (Microsoft, Samsung, etc...) the issue is developers and apps. Microsoft threw millions at the problem and even paid developers to do so but failed. There is no appetite for a 3rd mobile OS presently. Unless the EU does like China did and ban everything Google related there is almost zero chance of a 3rd mobile platform succeeding in the current market
Mon May 20, 2019 3:15pm
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Andrew Martonik
But the point here is that that 20% market share globally will be reduced dramatically as soon as this goes into effect. Huawei's "global" sales will soon be "China." There's a whole lot less pull there.
Mon May 20, 2019 3:26pm
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foxbat121
Samsung, LG and Moto will happy to fill up that 20% void Huawei left behind. Huawei will still dominate Chinar market unfaced.
Tue May 21, 2019 1:36pm
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Tharanis
Well I think this will backfire at US. Everywhere I see titles like what will Huawei do now? But I am just curious about one other thing that seems to be absent. What about Google and other US companies credibilities? Who can guarantee now, when that madman Trump is a president, that they won't include other company on that "black list". For the companies like Xiaomi, Oneplus and others there is no reason to trust any of american company right now. All because of this one move.
Mon May 20, 2019 3:44pm
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cbingman
Huawei is in a way different category than OnePlus or Xiaomi. Their infrastructure is much larger and much more diverse. They pose a bigger target economically. Even with the amount of the smartphone market they own, something like this could bring their 5G deployments in Europe and SE Asia to a halt due to cash on hand concerns. That could be of even greater impact to them.
Mon May 20, 2019 5:26pm
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Altema22
The other aspect is Oneplus, Xaiomi, and most other smartphone companies don't have a history of trust problems. Huawei was banned by several other countries before this incident came to a head. We embrace Samsung and have no problems with Sony because we can trust them.
Mon May 20, 2019 7:51pm
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Blake BB
The US economy can withstand far more than the Chinese.
Mon May 20, 2019 9:47pm
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finbaar
What your missing is that Trump is seeking re-election. next year. The Chinese Government are not and will not accept a loss of face. Trump is simply using this as a negotiating tactic to get his own way.
Tue May 21, 2019 1:50am
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Bishounen
Well, Trump's way is America's way. So I'm all for it. Google is, admittedly, smart to do this. They KNOW that the Trump DOJ is looking at them for possible Monopoly prosecution and removal of the Safe harbor "Platform" provision for their social media products. They are trying to ingratiate themselves by doing the right thing. (for once.) I doubt it will work for them, but still glad to see it happen.
Tue May 21, 2019 10:49am
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Prime Tambayong
Don't they have the honor brand?
Tue May 21, 2019 3:02am
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Altema22
Yes, Honor is a sub-brand of Huawei, and will also be legally affected by this.
Tue May 21, 2019 8:20am
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Bishounen
And here we see yet another reason why Google is too big and needs to be broken up. A smartphone duopoly of Apple and Google is just plain bad for consumers.
It's also bad for companies too, as we have seen as now Huawei is feeling the crunch.
If only LG would get off their butts and bring WebOS back to smartphones! We need more competition in the smart phone arena!
Tue May 21, 2019 10:46am
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pda96
I'm crying crocodile tears right now.
Tue May 21, 2019 12:16pm
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chosen1_88
It goes beyond just selling phones: The ban also applies to its other businesses like infrastructure, PCs, etc. Those are much more damaging to Huawei than the phone sales (although given how into our phones most of us are, the focus may very well be with phones).
I personally stopped considering Huawei phones after China detained Canadian citizens and sentenced them to death in retaliation for the detention of Huawei's CFO for extradition to the US. I don't think China has the guts to do anything like that to the US, even though this ban has a much more far reaching impact to more of its citizens than a single person. But if I had just bought a P30 Pro, I'd be pretty pissed right now. That said, this might lead to inventory clear outs which could lead to getting one cheap (see Essential Phone).
Tue May 21, 2019 2:04pm
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JoeinSK
Great article. Totally agree. Unless Trump lifts tariffs and ends trade war, which is highly unlikely, Huawei is toast. My fear is who will Trump come after next? When will he try to shut down Sammy? It's just a matter of time before Trump goes after Sammy. He'll find some reason to do it (probably before 2020 election) You can bet the house on it. Shutting down Sammy would be a HUGE among Trump supporters. Also, if I'm an Apple stockholder, I am jumping for joy right now with Trump in office. Trust me folks, this Huawei ban is just the beginning. Nothing is gonna stop Trump. Not Congress. Not the WTO. NOBODY!
Wed May 22, 2019 3:21am
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