Telecoms

Huawei will emerge stronger after Google ban, say analysts

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The Google ban on Huawei will spur the Chinese company to fight harder for business and emerge even stronger.

This is according to analysts, commenting after Google said it would cut ties with Huawei in order to comply with Washington's decision to put China's telecom giant on a blacklist.

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.

However, the US government has since temporarily eased trade restrictions on Huawei to minimise disruption for its customers.

CNBC reports that Alphabet's Google said on Tuesday that it plans to work with China's Huawei over the next 90 days, shortly after the US temporarily eased some trade restrictions on the world's second-largest smartphone maker.

The move allows Google to send software updates to Huawei phones which use its Android operating system, through to 19 August.

Confused customers

Wee Teck Loo, head of consumer electronics research at Euromonitor International, comments that the sudden ban caused a lot of confusion among existing Huawei and Honor owners.

"As confirmed by Android's tweet, existing owners can still access Google Play (app store). However, there is no confirmation that the new Android version (P) and security patches will be made available," says Loo.

Nonetheless, he points out Huawei can easily pull source codes from Android Open Source Project (AOSP) and roll out its own version of Android OS.

According to Loo, Huawei can still rely on AOSP for security patches and even assemble its own team to ensure security patches can be rolled out to its customers faster.

"Huawei can continue to push and promote its award-winning P30 series models and the cost-competitive Honor sub-brands until the company (or Chinese government) works out a deal with the US," he notes.

Loo points out Huawei typically rolled out two flagship ranges in a year, with the P series in February and Mate series in August.

He says the P30 series was a resounding success but the launch of the Mate 30 series might be affected.

The ban also means critical and popular services like Google Maps, Google Play and YouTube will not be made available on Huawei's phones, he adds.

Domestic market

Nonetheless, Loo says sales in China are not affected as the domestic market utilises services from local Chinese companies like Baidu.

"For sales to the rest of the world, Google services are an integral part of the Android experience. The ban will dampen consumers' demand for the Mate 30 series and other new models.

"Companies like Samsung and Huawei have had their own app store for years. Huawei has the financial muscle and clout to ink deals with individual app developers to increase its offerings on Huawei AppGallery (its app store)."

Loo adds that Huawei can bake in Here WeGo as an alternative to Google Maps. The Here WeGo app is by Here Technologies, which is a map navigation company first started by Nokia, with major ownership now residing with the major German automotive manufacturers (Audi, BMW and Daimler).

"The loss of the YouTube app will be a major blow to Huawei, but users can easily access YouTube via the browser, which is a minor inconvenience but not a deal-breaker. Huawei might even ink deals with premium content providers like Netflix and Spotify to entice buyers and soften the blow at the loss of Google services. The Google ban will spur the Chinese company to fight even harder and emerge even stronger."

Slight buffer

Meanwhile, Nancy Bambo, an equity analyst at Momentum Securities, notes the move by Google is likely to have a negative effect on the company, and Huawei may lose some customers.

"That said, there may be a slight buffer of customer retention given the rollout of Huawei phones using its own operating system should the ban persist.

"Further customers may be lost should other countries follow the US's decision to not use Huawei products in their networks," says Bambo.

So far, Australia, New Zealand and Japan have banned Huawei usage on their networks.

Bambo says 48% of Huawei's revenue comes from the consumer segment, which is the segment likely to be most affected by the US ban. It is also the biggest revenue segment, she notes.

According to Bambo, it's hard to tell whether Huawei's counteractions will be successful as it ultimately depends on customer satisfaction regarding the product offering.

"In anticipation of the US ban, Huawei had already developed its own operating system, and sources only 17% of its smartphone chips from Qualcomm, (73% from Huawei and 10% from a Taiwanese firm MediaTek)."

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