Google suspends activity with Huawei

In line with President Trump’s executive order blacklisting Huawei, Google has suspended the Chinese company’s access to Android updates. How would this impact the operations of Huawei in China and rest of the world.

Background 

Huawei Technologies is a Chinese multinational networking and telecommunications equipment & services company headquartered in Shenzhen, Guangdong. It is the largest telecommunications equipment manufacturer in the world. In 2018, it become the world's second-largest smartphone maker, behind Samsung. It sells more phones than Apple. 

Huawei’s 74-year-old founder Ren Zhengfei, was a technician for the People’s Liberation Army before founding Huawei in 1987. The Chinese government has invested billions of dollars in Huawei, giving it a competitive advantage in the global marketplace. Under Chinese law, companies must co-operate with intelligence services. Analysts, therefore, warned that equipment produced by Huawei compromised. 

On 1 December 2018 the chief financial officer of Huawei's deputy chair and CFO Meng Wanzhou was arrested in Vancouver at an extradition request by U.S. authorities on suspicion of violating U.S. sanctions against Iran. Ms Meng is accused of conspiring to defraud HSBC and other banks by misrepresenting Huawei’s relationship with the suspected front company, Skycom Tech.  

Analysis

Google has suspended business activity with Huawei that involves the transfer of hardware, software and key technical services. Huawei will not be able to license the Android operating system complete with Google services and will instead have to use an open-source version. Google will also stop providing technical support and collaboration for Android and Google services. 

Google made the move in order to comply with Washington’s decision to put Huawei on the so-called Entity List. “We are complying with the order and reviewing the implications,” a Google spokesperson said “For users of our services, Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices.”

Within China, the company uses a modified version of Android that doesn’t have Google apps preinstalled because the search giant’s services are blocked there. But in markets outside of China, Huawei’s smartphones run Android complete with Google apps. According to Canalys, just over 49%, of Huawei’s smartphone shipments in the first quarter of 2019 were to international markets outside of mainland China. 

Huawei relies on key components from several other American suppliers for everything from smartphones to its networking equipment. It counts over 30 American firms among its core suppliers. Chipmakers including Qualcomm and Intel have told employees they will not sell to Huawei until further notice.

Huawei responded promising to continue providing security updates and after-sale services for its smartphones and tablets. “Huawei has made substantial contributions to the development and growth of Android around the world,” it said. “As one of Android’s key global partners, we have worked closely with their open-source platform to develop an ecosystem that has benefited both users and the industry.”

A spokesman for China’s ministry of foreign affairs, Lu Kang, said Beijing would “support Chinese enterprises in defending their legitimate rights through legal methods”. Huawei has previously said it is developing its own backup operating system in case it was blocked from using US software.

Counterpoint 

Huawei has always insisted it is a privately held company, independent of the Chinese state, owned largely by its employees, and has worked supplying phone technology in the UK for 15 years without problems.

Assessment 

Our assessment is that blocking the sale of critical components to Huawei could also disrupt the businesses of American companies. We feel that Google and other companies are under pressure in part because they will lose revenue when they cut off Huawei as a customer. It can be noted that due to the dearth of competitors capable of making 5G as reliable and inexpensive, any hindrance to Huawei’s production could slow the rollout and adoption of 5G technologies. 

We feel that Huawei needs to deliver adequate app and operating system replacements if it wants to survive outside its native China. Even if Huawei is successful in developing the operating system called as HongMeng OS, it would still need to convince application developers to bring popular apps to its own store. It can also be noted that alternative chipmakers such as Infineon Technologies, one of Europe’s largest chipmakers are not subject to US restrictions. We feel that this decision could likely encourage China’s desire to build more technology within its own borders. We also feel this will lead to the Balkanisation of digital age ie two separate internet that would each require different technologies in order to use them.

 

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