Huawei has catapulted itself to just below the global summit—despite the timing of the U.S. blacklist, the danger now for its main rivals is how much better it can do with this growth consolidated and its primary impediment—the loss of Google—removed.
In the first instance, the flagship Mate 30 Series, the first Huawei phone launched post blacklist, could see the return of Google’s software and services just in time for its staggering international sales release. And if that happens, this will go from being the best phone on the market that relatively few outside China will actually buy, to one of the fastest-selling devices around.
Huawei is on something of a tear. The company’s growth is materially outpacing that of its main rivals, Samsung and Apple. It has locked down its global number two spot—ahead of Apple and is hot on the heels of Samsung. And so it looks set to achieve its ambition and become the world’s largest supplier of smartphones by volume at some point next year. The only cloud on this shiny horizon is the Trump administration blacklist that has stripped the company of its U.S. supply chain. From a smartphone perspective, the darkest of those clouds—the loss of Google—could be about to lift. The U.S. has signaled that long-awaited blacklist exemption licenses may soon land.
For Huawei, the immediate beneficiary of such a move will be the company’s new flagship, the Mate 30, a high-quality device let down by its lack of U.S. software. And so depending on the timing of the U.S. administration’s next steps, this shift could be a serious boost for Huawei’s holiday season and will certainly help bolster consumer confidence as millions head to stores with money to spend.
Quick recap. The blacklist was put into effect in May, reflecting U.S. concerns over Huawei’s supply of 5G networking equipment, the security of which, they say, is compromised by Huawei’s alleged links to the Chinese state. Ironically, while Huawei has continued to lead the global 5G pack (read Nokia and Ericsson), signing commercial contracts around the world, the headline impact of the blacklist was more the loss of household names (read Google) from the company’s consumer business.
Despite continued smartphone growth that appears to defy the gravitational pull of the U.S. blacklist, there are impending issues to overcome. The current growth is being driven by extraordinary performance in China—where Google is banned—and by extending the lifespan of pre-blacklist devices that still ship complete with Google. Both those runways will run out at some point, devices can only persist for so long, and China is vast but not unlimited.
And so, as I have written multiple times before, what Huawei really needs is a political break, for Washington and Beijing to fudge the blacklist as part of their ongoing trade talk negotiations, for Trump to make good on his drawn-out promises to issue licenses to U.S. suppliers where national security concerns do not apply. Any such compromises will be on the consumer side rather than on the networking side.
There will be serious speculation now as to whether Huawei is about to get just such a break. On November 3, comments made by U.S. Commerce Secretary Wilbur Ross suggested reason for optimism. Alongside confidence that a “Phase One” trade deal will be finalised and signed in November, Ross told Bloomberg that licenses would “be forthcoming very shortly.” Given there have been 260 applications, “frankly more than we would’ve thought,” Ross also reminded applicants that “with entity lists there’s a presumption of denial—so the safe thing would be to assume denial, even though we will obviously approve quite a few of them.”
The two headline supply chain issues for Huawei’s consumer business have been Google and chip-maker Arm—the latter has already confirmed the continuation of its supply to Huawei, and so all eyes are now on Google. In October, Huawei’s PR chief Joy Tan told the Financial Times that the company’s international consumers are “so used to Google applications on top of their Android phones” that there is really no alternative. With the prospect of exemption licenses in mind, she also said that “many of our suppliers are talking with the U.S. government—including Google, I’m sure.”
Whether Google actually secures a license will be complex. The company is lobbying hard to ensure it doesn’t lose access to the soon to be market-leading manufacturer, and there’s recognition in the U.S. that Google losing its grip on global Android sales has implications for U.S. control of global standards and the emerging technology split East and West. The U.S. could argue that licenses will be issued where components can be sourced elsewhere—and on that basis Google is out on its own. There are alternatives to its apps and services, but they’re not globally recognized.
And so while 260 companies will be waiting to see what happens next, plus Huawei and its millions of global consumers of course, there is only really once license that matters, one license that will make all the difference. Huawei has catapulted itself to just below the global summit—despite the timing of the U.S. blacklist, the danger now for its main rivals is how much better it can do with this growth consolidated and its primary impediment—the loss of Google—removed.
In the first instance, the Mate 30 Series securing Google’s software and services would come just in time for its staggering international sales release. And if that happens, this will go from being the best phone on the market that relatively few outside China will actually buy, to one of the fastest-selling devices around. And that could have a huge impact on the all-important “holiday quarter” in the final few weeks of the year.
This news is about much more than the Mate 30, of course. What happens next could determine the shape of the top echelons of the smartphone market for years to come. In a conference room somewhere in Washington, sometime soon, a serious decision will be taken. And senior execs in California will be pushing against the political hawks to ensure that decision only goes one way.
Source: Forbes
