Are Huawei users prepared for life without Gmail or Google Maps?

Published May 21, 2019

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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."

tca/dpa

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