There is no plan B for Huawei that will work.
- If Huawei receives the same treatment as ZTE (for the same infraction), then its handset business outside of China will most likely have received a terminal blow.
- However, I think that this outcome is extremely unlikely as I suspect that the US will use Huawei as a bargaining chip in its much larger trade dispute with China in order to get a deal done.
- In an interview with German newspaper Die Welt (see here), the CEO of its consumer products division, Richard Yu, stated that Huawei already has its own handset OS in case it is no longer able to use Android.
- The problem is that while Huawei would be perfectly capable of making as many smartphones as it wants using its own OS, hardly anyone would buy them.
- This is because when users buy a smartphone, Huawei is not the first thing that comes to their minds.
- Instead, a Huawei product is a means to an end.
- This is why Huawei, Xiaomi, Oppo, Vivo etc make wafer-thin margins on their products while Apple and Google have gross margins of 40%+.
- When a user buys a new device, the key decision is: “Do I live my Digital Life within the Apple or the Google ecosystem”?
- If Google, the next question is “who gives me access to Google at the best price?”
- Until Huawei (and the others) can strengthen their brands to really drive preference, they will never make any real money and continue to participate in the breakneck race to the bottom.
- Folding screens are already showing signs of being exactly the same as all of the other hardware innovations that preceded them.
- The problem for Huawei if it loses US technology is not the loss of Android, but the loss of the Google ecosystem and for this, there can be no plan B.
- The net result is that no matter how good Huawei’s alternative might be, no one would buy it because it would not give access to the Google ecosystem.
- The one piece of good news is that its handset business in China would be largely unaffected as the Google ecosystem is not relevant there.
- Assuming that Huawei has used its own version of Android, the Chinese ecosystem services will still function.
- However, seeing around 50% of one’s global business go up in smoke, would be extremely damaging and potentially life-threatening.
- There is also the question of Huawei’s use of the intellectual property for 3G, 4G and 5G radio standards, a good part of which is owned by US companies.
- If this is also blocked, then it would deal a terminal blow to Huawei’s industry-leading infrastructure business, causing an even more serious problem.
- This is because this intellectual property is used globally meaning that 100% of infrastructure business would be affected.
- I still think that both of these outcomes are very unlikely given how they will help the US in its negotiations with China, but a deal needs to be done that includes Huawei before it will be out of the woods.
- This is a real overhang for Huawei which combined with a softening market for smartphones this year, makes the short-term outlook pretty bleak.
- Samsung needs to use this distraction to win back its market share advantage over its nearest rival, as I have long believed that this gap is fundamental to Samsung’s good profitability in Android handsets.
- This is similar to the distraction that allowed Lyft to make up ground on Uber and Samsung should not waste this opportunity.
