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It’s been coming—and now we’re almost there. U.S. President Trump and his administration have a set of decisions to take that will be critical for Huawei, for the U.S. campaign against Chinese technology firms and for the tech giants back home. We have just entered a pivotal few days and all eyes are now on what happens next.
Everyone fully understands that the most serious impact of Huawei’s blacklisting by the U.S. has been the loss of Google from its smart devices. Everything else can be “un-Americanized,” but the company has admitted that there’s no real alternative to Google outside China, and the plan to bolster its own Huawei Mobile Services as an alternative sounds great in theory but will be challenging in practice.
Google was only one of many American firms that saw their links to the Shenzhen tech giant severed when the U.S. announced its blacklist in May. Since then we have seen a support and maintenance exemption for existing products extended twice, and now the U.S. Commerce Department finally issuing long-awaited licenses for regular supplies to resume. In the main, this is intended for mass-market components that are theoretically available elsewhere and which carry no particular security risks.
And that’s the crux. Google’s full-fat Android is a mass market product, it carries no particular security risks and it’s available everywhere. The fact it’s “unique” is a market traction point and is not built around any particular technology USPs.
And so when the Commerce Department began issuing licenses, Google was the only word on analysts’ lips—would they or wouldn’t they? Well, is this a sign of things to come? “On November 20,” Microsoft told Reuters, “the U.S. Department of Commerce granted Microsoft’s request for a license to export mass-market software to Huawei.”
The department seems to be approving around half of the license applications, despite saying previously that the assumption would always be to reject. And whether or not Google has already been processed, no-one is saying. Neither is there any detail on what exactly Microsoft’s license covers, “Microsoft declined to comment beyond its statement on which products had been approved,” Reuters reported, “and the Commerce Department declined to comment.” But there is speculation that it will likely include software for smart devices as well as other components.
And that gives the U.S. an optics challenge. There is no real difference between Microsoft and Google, except for the devastating impact the loss of Google has on Huawei. And that means that refusing Google a license is punitive rather than rooted in any specific security concerns. And that presents a political challenge outside the U.S. and within the exec corridors of tech giant Google.
Google has been lobbying hard to continue supplying Huawei—the world’s number two smartphone supplier, trailing only Samsung, with growth putting it on course to reach the number one slot next year. For Google, though, the issue is that if Huawei is forced to replace GMS with HMS, then others might opt for this as a cheaper alternative. Google would lose its absolute control of the Android market and the U.S. would lose its dominance of global mobile software standards with the introduction of a third way alternative to full-fat Android or iOS.
And if Huawei does secure Google’s return, that presents an issue for Apple and Samsung. The Chinese giant has not fallen off any kind of sales cliff in the last six months, it is well primed for growth, and if the Google hurdle is removed that will make it much tougher to compete with. Huawei continues to shore up sales using its balance sheet. The long-awaited Mate 30 launch in Europe is beginning, and comes with steep discounts to incentivise users away from Google. The Mate 30 launch in Spain includes a €299 ($330) rebate for buyers to spend in Huawei’s store. What is essentially a smartphone price war would not be good news for either Samsung or Apple, where such high-end flagships are concerned.
Huawei Spain
But if the U.S. does opt for a Google license, the political backlash in the U.S. that has already started over the latest exemption extension and the supplier licenses will intensify significantly—as it will with the Microsoft news. Microsoft President Brad Smith publicly warned that U.S. action on Huawei needed to be rooted in logic and law, and one can imagine how hard his company has lobbied behind the scenes to secure their license. Google is doing the same. But the politics is complicated.
In the meantime, there is skepticism in Shenzhen as to whether Google’s lobbying will be successful. It is a genuine game-changer for the blacklist and for Huawei’s efforts to carve out an alternative. Those efforts that have taken further recent twists, with Huawei execs warning Google and the U.S. that they will need to make a decision on replacing Google fairly soon. The latest of these warnings came this week, with an exec exec suggesting (albeit implausibly) that HMS will match GMS by early 2020.
And so we find ourselves at a crucial pivot point in this long-running war of words and wills. It is likely that the U.S. has another week or two at most in which to make its position on Google clear. And whichever way it jumps, the stakes are seriously high.
