American firms suspend ties with China-based Huawei

Even though this clears the fate of the existing Huawei and Honor smartphones, there is still no clarity on new devices from the company

Huawei Technologies, world's second largest smartphone maker, is in the soup now that Trump Administration has added its name in the list of blacklisted companies with whom American firms are not supposed to do business. An increasing number of American firms seem to have cut ties with the China-based company.

First, US-based Google suspended some of its Android services for Huawei. Now, reports are coming in that Qualcomm, Intel, and Broadcom have announced to break trade ties with Huawei. Although Huawei uses its own Kirin chipsets for its smartphones, Intel supplies server chips and laptop processors, unfortunately, this is not just restricted to American firms as it is being reported that even German chipmaker Infineon has suspended shipments to Huawei Technologies. According to Nikki Asian Review, the reason behind Infineon decision could be that foreign companies using a certain amount of American technology for products sold to Huawei are also subject to the same restriction.

All this could mean a big blow for the Chinese technology giant, which has been quickly closing the gap between the first (Samsung) and the second spot in the smartphone space. As per Canalys Smartphone Market Pulse Q1 2019 report, with a total shipment of 51.1 million units in Q1 2019, as compared to 39.3 million in the same quarter last year, Huawei has registered a 50.2 per cent annual growth in the said period. On the other hand, Samsung had registered a decline of 10 per cent with shipments falling down to 71.5 million units in Q1 2019 from 79.5 million units in Q1 2018.

Soon after Google's parent company, Alphabet Inc. discontinued its trade relations with Huawei, the company issued a statement clarifying the fate of its smartphones and tablets. "Huawei has made substantial contributions to the development and growth of Android around the world. As one of Android's key global partners, we have worked closely with their open-source platform to develop an ecosystem that has benefitted both users and the industry. Huawei will continue to provide security updates and after-sales services to all existing Huawei and Honor smartphone and tablet products, covering those that have been sold and that are still in stock globally. We will continue to build a safe and sustainable software ecosystem in order to provide the best experience for all users globally," the statement said.

The official Android Twitter account too clarified with a tweet, saying, "For Huawei users' questions regarding our steps to comply with the recent US government actions: We assure you while we are complying with all US government's requirements, services like Google Play and security from Google Play Protect will keep functioning on your existing Huawei device."

Even though this clears the fate of the existing Huawei and Honor smartphones, there is still no clarity on new devices from the company.   

Huawei has not been caught unaware as the company already has a backup plan. Earlier this year in March, Huawei confirmed developing its own operating system to replace not just Google's Android but also Microsoft's Windows if restricted from using the operating system. If reports are to be believed, the OS has been in development since 2012 and is not a rushed decision. There is still no clarity on whether Google services will be accessible on the new operating system that Huawei is developing, which will play an important role in the European as well as in the Indian market.

An industry expert (on the condition of anonymity) says, "What will a customer do with the operating system if it does not have access to Google Services? You cannot just switch your emails, contacts and all the data synced on Google services to some other services."

Over 50 per cent of Huawei worldwide shipments come from China, where the company has already developed an ecosystem owing to the ban on accessing Google services including Play Store and Google Search. However, Russia, Mexico, Saudi Arabia, Italy, Germany, UK, Turkey, Spain and France are the top nine markets for Huawei smartphones, where Google Services will play a key role in determining the future of Huawei's hardware business.

Research firm Canalys says, "Huawei has created highly competitive hardware but Google services and Android OS are still critical to consumers in international markets. Losing Google's mobile services will be detrimental to Huawei's smartphone business."

"Huawei Mobile had a stellar quarter in Europe in Q1 2019 with smartphone market share reaching its historic high in both Western Europe and CEE. Huawei smartphone supply freeze would trigger serious channel and market disruption," adds Canalys.

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