The US said last week that it was adding Huawei to a trade blacklist because the company "is engaged in activities that are contrary to US national security or foreign policy interest." That punishment means US firms aren't allowed to sell to Huawei unless they get special approval from the government.
On Monday, the Commerce Department slightly eased the timing of the restrictions, saying it would allow some transactions to continue for 90 days, to facilitate "certain activities necessary to the continued operations of existing networks and to support existing mobile services." The temporary reprieve will allow Huawei to receive US equipment to service existing Huawei mobile phones and rural broadband networks.
The US views Huawei as a security risk because it believes the company has close ties to the Chinese government, which Huawei has denied. US officials have said Huawei could potentially tap into and monitor sensitive US communications through its network technology.
"Huawei has made substantial contributions to the development and growth of Android around the world," Huawei said in an emailed statement addressing Google's move. "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."
Tech and security experts were divided on how quickly and severely the ban could hurt Huawei.
Some said Huawei is bigger and better prepared for the blockade than its Chinese competitor ZTE was last year when the Trump administration restricted ZTE from doing business with US firms. The US later eased ZTE's punishment.
Unlike ZTE, Huawei makes some of its own semiconductor chips, and Huawei can tap alternative, non-US suppliers for some parts and technology, analysts said. "There are very few (parts) they can't just buy from Japan or Korea or France today," said Dave Burstein, a telecom analyst for STL Partners who recently began publishing Huawei Report & News.
Huawei also has about $38 billion in cash and short-term securities it can use to weather the storm, Burstein noted. And recent quarterly earnings reports from some US tech firms have suggested that Huawei may have been stockpiling parts before the White House ban, in anticipation of a possible blockade, Burstein said.
Other analysts took a dimmer view of Huawei's prospects. "They are still heavily, heavily dependent on US-based companies for multiple different technologies," said Geoff Blaber, vice president of research at CCS Insight.
Among the US products Huawei most relies on, analysts said, is a semiconductor device called a Field Programmable Gate Array, or FPGA, which Huawei uses to build 5G telecom equipment. Huawei also relies on a type of US-made software used to design high-end semiconductor chips, analysts said.
Google said it would restrict Huawei's access to future updates of its Android operating software. However, Huawei can still update Android itself because the software is open-sourced, meaning the source code is publicly available and can be accessed freely.
Existing Huawei devices that have Google apps and services should generally work normally, according to a person familiar with the matter, and updates will still be provided.
"While we are complying with all US government requirements, services like Google Play (and others) will keep functioning on your existing Huawei device," Google said in a statement on its Twitter account.
However, Google is suspending licensing agreements with Huawei for access to its Play app store, meaning future Huawei customers won't have popular Google apps like Gmail, the Chrome browser and even YouTube. That would make future Huawei handsets very unattractive with rival devices offering the full set of Google apps.
"A smartphone without an app store is a paperweight," said Roger Entner, an analyst with Recon Analytics, who focuses on wireless tech. "Huawei is extremely popular around the world, but there are many other options for consumers, so the choice to go with another handset should be easy."
Huawei has indicated that it has a proprietary operating system it could use to replace Android, which by some estimates commands nearly 70 per cent of the market for mobile operating systems globally. But Huawei would also need to persuade app developers to produce versions that would work on Huawei's proprietary system.
Huawei sold about 200 million phones last year and was on pace this year to overtake South Korea's Samsung as the world's largest seller of mobile phones. That possibility would seem more remote, however, if the most popular Google apps remain unavailable to new Huawei customers. According to data released before the US government listing, Huawei claimed 19% of the global smartphone market, research firm IDC said, trailing only Samsung's 23.1%, which was on the decline.
One former Huawei executive, who asked not to be named to discuss internal company matters, said Huawei has spent years planning for a possible US technology blockade. "When I was there, there were a lot of concerns about this throughout the company," the former executive said. "They were trying to take steps to buffer this kind of existential threat."
In addition to attempting to develop their own phone operating system to replace Android, Huawei invested heavily to design and manufacture more of its own chips, the former executive said.
Still, the US ban could be "catastrophic" for Huawei, the former executive said. "I just don't think you can properly prepare."
- Washington Post
