Google and Huawei are two of the most prominent name in the tech industry which has been involved in strategic alliance with one another. The companies combining their resources have been able to collectively achieve monumental growth and success. But the recent ban on Huawei by USA has distorted the seemingly successful partnership between Google and Huawei, thus, creating a potential disruption in the global competitive landscape for smartphone while plunging Huawei’s future into uncertainty.
The Ban on Huawei, although abrupt, had been building for years as the company had been facing litany of accusation for alleged theft. Earlier, Motorola had accused Huawei of stealing trade secrets while Cisco and T- Mobile had also made allegations of wrong doing. And now stressing on the danger of spying and espionage by Huaweion behalf of Chinese Government, The U.S. Commerce Department haslisted the company in its “Entity List” thus banning the company from maintaining business relation with US companies.
Prior to the ban, Huawei was well poised to take over the global smart phone market. The company had retained number 2 spot as a smartphone maker, shipping 52 million handsets and grabbing 14.6% of the smartphone market share in Q3 2018. The telecom giant had further carried the momentum forward in Q1 2019 with increase in its shipment of smartphone to 59.1 million and growth of 50%, while most of its competitors were experiencing drastic decline. It was also forecasted that Huawei could become the global leader in smartphone by as early as year 2020 if it maintained its current growth rate. But the imposed ban that separates it from one of its prominent partner in smartphone business i.e. Google, could halt the company’s progress and derail its ambition of being a top global player in smartphone segment.
However, the withdrawal of services by Google might not directly affect the operating system of Huawei as it is based on Android Open Source Project. But it will degrade its cell phone’s value as its users will be deprived of Google services such as Gmail, YouTube, Google Map and most importantly Play Store that houses various proprietary apps. The users of Huawei will also be barred from receiving protection, securities and regular updates from Google.
Despite severity of the ban, split from Google wouldn’t hinder Huawei’s popularity in China where Huawei sells half of its total smartphone, as Google services were already banned in the country. But its markets outside mainland China, which accounts for 49% of the company’s sales, could encounter a massive struggle. The challenges could be even tougher in Europe which is Huawei’s second biggest market and a growth market for smartphone in general. The company had shipped 13.3 phones in Q1 2018 last year, which was up more than 55% in year-on-year rate in Europe. It is thus, threat of losing its valuable markets that has forced Huawei to conjure an alternative to Google services.
Following the ban, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce issued a Temporary General License (TGL) which provides a 90 days reprieve to allow American corporations to provide necessary support to Huawei handsets released before May 16, 2019. But the necessity to build alternative beyond Google still looms over Huawei.
Huawei had also been aware of the possible snub from US government. So whilst it was stating its preference to operate under the ecosystems of Google, it had been working on Operating System of its own as a “Plan B”. Richard Yu, the CEO of Huawei’s consumer division, told German publication Die Welt in a recent interview, that the company has a back-up operating system, in case it’s blocked from using U.S.-made software.
Huawei has since then trademarked various names with the European Union Intellectual Property Office, such as HUAWEI ARK OS, HUAWEI ARK, ARK, and ARK OS. All of these trademarks were filed on 24thof May 2019. Though no official statement has been made by Huawei on the final name of the Operating System and its release date, expectation has been rising towards the new OS by 2020.
Amidst excitement there has also been speculation on the overwhelming challenge Huawei can face while building its Operating System and an alternate App Store. This concern has risen due to failures of many tech giants such as Amazon, Samsung and Microsoft, to create an OS and App Store that could rival Android platform. Further, inability of Huawei to partner with US companies could prevent it from providing popular Apps such as Facebook, Snapchat, Netflix, etc. This limitation could prove to be a serious drawback for Huawei if and when it competes with Android in the global arena.
However, there also seems to be wide spread optimism around Huawei as many people believe that with technological prowess and support that Huawei enjoys at China it could survive the split from Google. If Huawei despite Google’s support could stand independently without fading into irrelevancy, it could alter the smartphone landscape and challenge Android’s global dominance.Though future seems unpredictable at the moment, the coming years could prove to be defining moment for the smartphone industry.
Sabal Shrestha, Research Analyst at A2Z Insights
