USA vs. China – Build the Wall!

The first bricks go up.

• Huawei’s migration of its smartphone business to its home-grown Harmony OS is the first concrete sign that our long-predicted Balkanisation of the Internet has begun and everyone, not just China will be poorer because of it.
• Calendar Q4 has become geopolitics season with the Department of Commerce updating the rules in October and Huawei releasing a smartphone that intends to demonstrate just how ineffective the rules are shortly afterwards.
• 2024 is no different and Huawei is expected to release a new smartphone that removes Android and replaces it with its own, in-house, operating system, Harmony OS.
• Although the media is quick to jump on this as a new event, it has, in fact, been brewing for many years (see here).
• HarmonyOS is a different type of operating system that instead of using a single piece of software as its foundation (kernel) like Android, Windows or iOS, the kernel is split up into different pieces with only a much smaller piece occurring in each device.
• This is called a microkernel OS of which two other examples are QNX owned by BlackBerry and used widely in vehicles and Fuchsia, an OS owned by Google long rumoured to replace Android at some point.
• The idea of a microkernel OS is to provide flexibility so that the OS can be used on all devices ranging from the smallest (smart ring) to the largest (PC).
• However, I have long been sceptical of the practicality of a microkernel OS and the lack of market launches and traction for this architecture outside of vehicles has, by and large, supported this view.
• It has always been Huawei’s idea to roll HarmonyOS across all of its ecosystems, and this has largely been accomplished in its low-end smartphones, smart TVs, routers, watches, and tablets.
• However, the migration of its flagship lineup, represents a permanent departure from Android finally removing a dependence on software created overseas to stand on its own two feet.
• Furthermore, Huawei’s flagships have been used as geopolitical ripostes to restrictions placed on China’s technology and are the strongest indication yet of the coming fragmentation of the technology industry.
• RFM Research and Alavan Independent have long predicted that China would seek its own technology standards to reduce its dependency on overseas technology to avoid a repeat of the ignominy that the US has inflicted on its semiconductor sector.
• We think that every standard created from here on will have a Chinese version and a Western version which are developed independently and are incompatible.
• 6G, autonomous driving, ADAS, robotics, The Metaverse and Quantum Computing are all examples where China will create its own standard as opposed to using the global standard that it has historically.
• This will have the effect of splitting the Internet into two pieces as Chinese devices and the digital services created for them will no longer so easily work on, or communicate with non-Chinese devices.
• This will create two Internets, one for China and another for everyone else.
• This means that the size of the network will become smaller as China exits, meaning that the utility of the entire network will decrease dramatically (Metcalf’s Law of Networking).
• This is why we have long forecasted that the long-term growth of the technology industry will be lower as a result of this split caused by the ideological rivalry.
• Huawei is the first to go down this route, but I am sure there will be many others over the next few years.