It took less than two days after the announcement of President Trump's executive order to increase scrutiny of business dealings between foreign and U.S. technology companies for the first major shoe to drop: Huawei is expected to fully lose access to Google apps and services, as well as future Google-approved Android updates. And unlike previous government intervention that only affected Huawei's ability to sell its smartphones in the U.S., this decision has ramifications for the company's global operations — and if it comes to fruition, will irreparably damage Huawei's smartphone business.
It simply isn't reasonable in 2019 for any company to launch a phone outside of China without Google services.
Huawei, just like every other company successfully selling Android phones, relies on support from Google. Android is open source, yes, but as has been shown time and time again, an "Android" phone without Google apps and services isn't something that consumers want. (This is, coincidentally, exactly what the European Commission and Google are constantly fighting over.) Last week's actions by the U.S. government have made it so that Google simply cannot provide certification or apps and services to Huawei. And as such, Huawei seems destined to have to retreat to only selling phones in China, where it doesn't have access to Google services as it is, and certain very specific market and price segments where Google services aren't as important.
Many companies have tried to make Android devices without the Play Store, and while there are a number of success stories across the technology space in general, there's nothing but a long line of failures when it comes to smartphones. It simply isn't reasonable in 2019 for any company to launch a phone outside of China without Google services and expect it to actually sell. It can have the best cameras, hardware, specs and core operating system we've ever seen, but unless it has Google's apps, and crucially the Play Store, effectively zero people will be interested in buying it. I'm sure Huawei can (and does) make a fine phone with all of its own services — but if it intends to compete in a market filled with 100% of phones having access to Google services and the Play Store, it has to have them as well.
It can be tough to break out of our U.S. perspective and realize just how big of a deal Huawei is in the smartphone world. Though its phones are effectively a non-factor here, Huawei's global smartphone market share is approaching 20%, which is now above Apple. It built most of that market share on providing value-minded consumers around the world get phones with solid specs and capabilities at exceptional prices. But even in high-income countries, Huawei has finally managed to make inroads in the highly competitive flagship phone space. It's a real competitor in most major countries around the world, and a leader in some. Now, it's destined to lose all of that momentum.
Even if the ban were only in place for a short period, only to be reversed by some sort of specific deal with China or a future U.S. administration, the damage would already be done. Consumers are, ultimately, fickle — the first time someone goes to buy a Huawei phone and finds that it doesn't have Google services on it, the Huawei brand name will be tarnished and you can bet they won't be looking to Huawei the next time they upgrade. It will ultimately be extremely difficult to make back that ground lost with even a short period of attempting to sell phones without Google services; and things would be no better by Huawei missing out on a year or two of not being in the market with new devices of any kind.
Huawei's global smartphone business will be damaged beyond repair if this ban fully goes into effect.
Huawei, of course, has a history of making phones for China without Google services or support. And there are over 1.3 billion people in China — that's a healthy marketplace in its own right. Huawei has nearly 30% market share there as it is. It has built up its own operating system, services and partnerships to make its phones competitive in China, and this would lead you to think it could theoretically do the same globally. But there are clear differences that make that idea a non-starter, namely the history of Google services never being available in China meaning Huawei been competing on even footing with other companies building their own ecosystems and not adopting Google's superior one.
You can bet Huawei's market share in China will grow if it's effectively its only market to invest in. But considering its strong global market share and sales, only selling in China would mark a dramatic reduction in its smartphone operations. A consolation prize.
The question remains just how quickly Huawei will choose to wind down, or pause, its smartphone development outside of China. We thankfully know that existing Huawei devices will continue to have Google support and receive updates, which will obviously keep things rolling for some time to come. But if this ban from the U.S. government on business operations goes into full effect longterm, we're only a handful of months away from Huawei having to make a very tough decision on whether it will choose to try and launch an Android phone outside of China without Google services, or put the entire operation on hold in hopes of a reversal of the decision. As painful as it would be for Huawei, my vote goes for the latter.
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