Beijing - Life without Google is normal in China. About 1.4
billion Chinese people wake up each day to check WeChat instead of
Gmail, navigate with Baidu instead of Google Maps, and watch videos
on Youku instead of YouTube.
But will the rest of the world want to buy phones that use only these
Chinese alternatives?
Under a Trump administration blacklist, Huawei will have to either
persuade consumers to do that, or scale down and limit itself to the
Chinese market.
On Sunday, Google suspended business with the Chinese
telecommunications giant, following two executive orders President
Donald Trump signed last week. Those orders ban US purchase of
technology from companies deemed a threat to national security and
block Huawei from buying US products without US government approval.
That means Huawei would be cut off from crucial hardware such as
chips, processors and modems from Qualcomm, Intel and other US
companies.
Unless the ban is dropped as part of ongoing US-China trade talks,
Huawei could end up leading a "decoupling" of the US and Chinese tech
worlds that encompasses everything from supply chains to the end
user's choice of apps.
Huawei founder and CEO Ren Zhengfei scoffed at the orders on
Saturday, telling Japanese media in Shenzhen, China, that the company
would be "fine" without US components.
"We have already been preparing for this," Ren said.
Huawei reportedly has a stockpile of enough chips to keep the company
going for several months. Its subsidiary HiSilicon also designs and
supplies chips for Huawei smartphones, though industry experts say
their chips are not on par with US ones.
HiSilicon President He Tingbo wrote a letter to her staff on Friday
saying the firm has been developing backup chips for years in case an
"extreme scenario" like this one unfolded, and would help enable
Huawei to be self-sufficient.
Huawei is not a major customer for San Diego-based Qualcomm, which
supplies 50 per cent of the global market for smartphone processors.
Analysts believe the smartphone chips that Qualcomm sells to Huawei
are limited to a few models sold outside China. Huawei does license
Qualcomm's cellular patents, but the two companies are in a dispute
over how much is owed in patent fees. Investors worry that Huawei
could stop making payments.
A lack of US components for Huawei network gear could slow its
rollout of 5G cellular service, which is important for Qualcomm. "The
longer-term impact is Huawei is important for 5G infrastructure
networks, and if they're unable to ship, 5G could really grind to a
halt," said Mike Walkley, an analyst with Canaccord Genuity.
Huawei's phones run on Android and include the Google Play set of
apps in devices sold abroad. Most Google apps are not available on
models sold in China, where they are illegal.
Huawei will still have access to the open source version of Android's
operating system, but Google will not provide access or technical
support on its proprietary apps and services, the company said.
Google reassured Huawei users on Twitter on Monday that existing
phones would retain access to Google Play. But future phones will
lose access to the Google Play store, apps such as Gmail and YouTube,
and updates to the Android operating system.
Google did not respond to questions about how it would keep existing
Huawei phones' access to Google services. "We are complying with the
[Trump administration] order and reviewing the implications," the
company said in a written statement.
Huawei is the world's second-largest smartphone seller, ahead of
Apple and behind Samsung. It accounts for about a third of the
European smartphone market, but is lesser known in the US market
because carriers such as AT&T and Verizon don't sell Huawei devices.
"They were en route to become the biggest smartphone seller in
Europe, and not just in Europe but worldwide," said Francisco
Jeronimo, London-based associate vice president of IDC, a global
market intelligence firm.
The ban completely changes the picture, he said. "Without access to
Google services it's nearly impossible for them to sell smartphones
outside China."
If Google does not get a US license to sell to Huawei, the Chinese
company would struggle to sell its phones outside China and mobile
carriers might stop selling Huawei phones, hampering Huawei's
international expansion, he added.
But if Google lost the Huawei market - and potentially that of other
Chinese players - it would also threaten Android's global business.
Elliott Zaagman, co-host of the China Tech Investor podcast, said the
ban would hurt both Huawei and US businesses.
Huawei bought 70 billion dollars' worth of components for its
products last year, including 11 billion dollars from US businesses.
Zaagman said that "11 billion dollars is a lot of money and hurts a
lot of big American companies as well. You've got to believe that a
lot of lobbyists are in Washington trying to find loopholes to this
ban."
Huawei has been in conflict with the US since last year, when Chief
Financial Officer Meng Wanzhou was arrested in Canada at the request
of the US on charges of financial fraud.
Washington has pressured allied governments to ban Huawei equipment
over cybersecurity concerns, particularly that the Chinese government
will be able to access and control key infrastructure through 5G
networks built by Huawei.
Huawei denies accusations that the company has engaged in activities
threatening US national security.
In China, state and public support for Huawei have grown amid an
escalating US-China trade war, including the Trump administration's
recent move to increase tariffs on 200 million dollars in Chinese
goods to 25 from 10 per cent.
Beijing has criticized US actions against Huawei as politically
motivated.
"China supports Chinese companies defending their legitimate rights
according to laws," Chinese Ministry of Foreign Affairs spokesperson
Lu Kang said at a news conference Monday.
"In terms of what measures either Chinese companies or Chinese
government would take, please wait and see," he said.
The day after Trump's executive orders, China officially arrested two
Canadians - a former diplomat and a businessman - who had been in
custody since December, when they were detained shortly after Meng's
arrest in Canada. China has accused both of espionage.
Huawei has been developing its own operating system, but company
spokespeople said as recently as last week that it preferred to use
Android.
If no exceptions to the ban are given, however, Huawei and other
Chinese companies may move toward developing an alternative operating
system and ecosystem of apps for their phones sold abroad.
Huawei did not respond to specific questions about how it would move
forward. It will provide security updates and after-sales services to
all existing Huawei products, the company said in a written
statement.
"We will continue to build a safe and sustainable software ecosystem,
in order to provide the best experience for all users globally," the
statement said.
The idea of a smartphone with no Google may sound absurd to Western
consumers.
But China already has 43 per cent of the global smartphone market -
significant power, according to Jeronimo.
He predicted that even if the trade war ends and bans on Huawei are
withdrawn, Chinese technology companies would build an alternative
operating system within the next five years, so that they can rely
less on unstable foreign supply chains.
"It's very likely that the biggest Chinese makers, Huawei, Xiaomi,
Oppo, Lenovo, they will work with the Chinese government to build an
alternative to Android," he said. "This would completely change the
smartphone market and would open the door for other alternatives to
come up either in China or Europe or somewhere else."