Trump blacklist sees Google restrict some Huawei business

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Huawei's smartphone business outside of China could be in for some serious trouble, as upcoming Huawei phones will not have access to updates for Google's Android operating system.

This is according to a Reuters report that Google has suspended business with Huawei that requires the transfer of hardware, software and technical services except those publicly available via open source licensing.

This after the Trump administration last week added Huawei to a trade blacklist, enacting restrictions that will make it very difficult for the company to do business with US companies.

A source familiar with the matter told Reuters the Chinese tech giant will immediately lose access to updates to Google's Android operating system, and future versions of Huawei smartphones, which run on Android, will also lose access to popular services, including the Google Play Store and the Gmail and YouTube apps.

However, users with current Huawei smartphones that have Google apps will continue to be able to use and download app updates provided by Google, a Google spokesperson told Reuters.

Arthur Goldstuck, MD of World Wide Worx, believes this is "a massive blow to Huawei".

"Until now, it could carry on blithely in the face of a sales ban in the US, knowing it is dominant in the rest of the world in both 5G equipment and in handset sales. However, its smartphone leadership is founded on a particularly good implementation of Google's Android ecosystem. Losing that means it has to go back to the drawing board in developing and evolving its own operating system and even apps environment. It can do it, but it will lose years of development to Apple and Samsung," Goldstuck adds.

Independent analyst Dr Charley Lewis agrees it's "a devastating blow to Huawei and perhaps explains their rush to get the P30 out".

"It looks like it won't have an immediate consumer impact though, but new phones without Android, Google, Gmail, Google Maps and the Play Store will be hard to sell," Lewis says.

"It could wipe out much of the appeal of Huawei handsets, as its users have bought into the Android ecosystem as much as into the Huawei brand," Goldstuck adds.

The impact in the Chinese market, however, is expected to remain minimal as most Google mobile apps are already banned in China.

In the crosshairs

Huawei seems to remain firmly in the crosshairs of a US-China trade war as US president Donald Trump tries to get other countries to follow his lead in banning the use of their technology products and services due to "national security threats" linked to their close ties to the Chinese government and Chinese intelligence.

Last week, Trump issued an executive order, declaring a national emergency over ICT threats "posed by the unrestricted acquisition or use in the United States of information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries".

The US Department of Commerce then officially placed Huawei and 70 of its affiliates on the Bureau of Industry and Security's (BIS) "entity list", effectively banning the company from buying components from US companies without government approval.

The commerce ban does not stop US companies from buying Huawei gear, but instead bans Huawei from obtaining its supply chain components from US companies, which could be a major issue for the Chinese company which relies on US companies for components for its gear.

Huawei spends more than $1 out of every $7 of its annual $70 billion procurement budget buying components from American companies, according to The Washington Post.

In a statement on the ban, Huawei said the decision by the BIS "is in no one's interest".

"It will do significant economic harm to the American companies with which Huawei does business, affect tens of thousands of American jobs, and disrupt the current collaboration and mutual trust that exist on the global supply chain."

Huawei is the second biggest smartphone maker in the world behind Samsung. It recently overtook Apple, which is now number three in the smartphone market. Huawei is also the world's biggest telecommunications equipment-maker, leading in technologies like 5G.

In another statement, Huawei said the US ban "will not make the US more secure or stronger; instead, this will only serve to limit the US to inferior yet more expensive alternatives, leaving the US lagging behind in 5G deployment, and eventually harming the interests of US companies and consumers".

"In addition, unreasonable restrictions will infringe upon Huawei's rights and raise other serious legal issues," it said.

Huawei said it was "ready and willing" to engage with the US government and come up with effective measures to ensure product security.

Chipping away at chipmakers

Some US chipmakers have also been forced to freeze the supply of critical software and components to Huawei to comply with the US clampdown. According to Bloomberg, chipmakers including Intel, Qualcomm, Xilinx and Broadcom have all told their employees they will not supply Huawei until further notice.

However, last week Huawei founder and CEO Ren Zhengfei told Japanese media that Huawei would continue developing its own chips to lessen the impact of the ban.

According to the Nikkei Asian Review, Ren said Huawei would be "fine" even if Qualcomm and other American suppliers would not sell chips to Huawei.

"We have already been preparing for this," he said.

Huawei's chip arm, HiSilicon, has reportedly been preparing for quite some time for a scenario where it could be banned from purchasing US chips and technology.

However, Ren said he was expecting that Huawei's growth may slow due to the ban "but only slightly".

Goldstuck believes the ban has vast implications across the technology and smartphone industry.

"Qualcomm will lose a significant customer for its Snapdragon chips, and Google will lose a major foothold in the world's most populous country. It will be a blow to both companies, symbolic of how a trade ban can hurt the country imposing the ban. It also casts a dark shadow over world trade, and is a shameful example of how Trumpism wrecks so much in its path," Goldstuck says.

"It will be counter-productive for the US sector too, not only in terms of immediate loss of sales revenue for chips and software, but also in the future if Huawei is forced to develop its own alternatives. They may never get those sales back even when the ban is lifted," Lewis adds.

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