Huawei – Nowhere to run pt. VII.

Mate 30 Pro won’t sell without Google.

• Commentators are getting excited about the leaked specifications of Huawei’s next big launch (Mate 30 Pro) but the only thing that matters is Google as, without Google Services, no one will buy the device no matter how good the camera is.
• The Mate 30 Pro is the first major device launch by Huawei following its entry on to the US entity list meaning that this device may be unable to ship with Google’s services.
• The press is less worried about this as a recent statement from the US Secretary of Commerce (see here) has been interpreted as Huawei will be able to get access to all the US technology it needs for a temporary time.
• However, I have concluded the opposite and continue to believe that this reprieve is a reprieve in name only (see here).
• Therefore, as I have seen no sign of Google applying for a licence to supply Huawei with its software under the provisions of the entity list, I can only conclude that the Mate 30 Pro will be barebones Android with some Huawei bells and whistles added and nothing more.
• This will make the device unattractive to phone buyers.
• This is because device purchasing is now almost entirely driven by the ecosystem with an Android device purchase representing a desire to live one’s Digital Life with Google.
• Everyone else outside of China buys an iPhone.
• While there is a workaround available for this problem, it is not ideal and will not be able to completely replace what Huawei has lost.
• This workaround would be to install an icon on the home screen of the device labelled “Get Google” that when clicked, downloads and installs the APK’s for the core Google ecosystem services including the Google Play Store.
• Once logged into the store, all of the other apps that the user has in his or her profile could then be downloaded and installed.
• This solves a large part of the problem but there is more to the Google Mobile Services (GMS) software package than just the services.
• There are operating system elements, signalling and updating frameworks that allow the apps to work better and serve to enhance the overall user experience.
• These pieces will be missing meaning that the behaviour of Google services, as well as apps from the Google Play Store, will be uncertain as many of them have been written with the expectation of these bits and pieces already being installed on the device.
• Furthermore, the uncertainty that hangs over Huawei at the moment will act as a further deterrent to users purchasing its devices.
• Hence, I continue to expect substantial market share losses in its markets outside of China where Samsung is in pole position to be the main beneficiary.
• This is because it has the brand, scale and the presence to ramp up supply and distribution to ensure that there are plenty of Samsung products to meet demand as Huawei falls by the wayside.
• This has not been priced into Samsung’s shares in any way making Samsung a very interesting stock to consider.
• My portfolio remains long Samsung Electronics.