Analysts said being cut off from Android was a hammer blow to a company whose smartphone business has been growing at high speed. Huawei's phone sales rose 50 per cent year-on-year to 59m in the first quarter, while its rivals Samsung and Apple dropped 10 per cent and 23 per cent respectively.
"Huawei seemed to have unstoppable momentum but with one single blow this could undermine their ambition to become the world's largest smartphone maker," said Ben Wood, principal analyst at CCS Insight.
Another telecoms consultant said that the move by Google was the clearest sign yet that Huawei's partners are "abandoning ship". He predicted that Washington would begin to "really squeeze the supply line properly now".
On Tuesday, Huawei will launch its new flagship Honor phone in London. But networks such as Vodafone and EE are reviewing whether they can press ahead with Huawei handsets at the heart of their launch strategy for 5G, the next generation of mobile internet. Both companies declined to comment on what they would do.
Google and Huawei have worked closely over the past decade in a relationship that has benefited both sides. Google has been able to build its access to the Chinese market while Huawei has quickly become a major player on the world stage.
But even if Huawei is ready with an operating system to replace Android, it will struggle to convince consumers outside of China to make the swap and lose their access to Google's suite of apps, such as Gmail, YouTube and Maps, and to the 2.5m apps in the Google Play store.
Richard Windsor, an independent analyst, said that the quality of an in-house Huawei system was irrelevant as "no one is going to buy it".
Companies including Nokia, BlackBerry, Microsoft, Intel, Palm, Firefox, Samsung and Finland's Jolla have all attempted to break the Apple/Android duopoly to little or no effect. Gartner research shows that less than 1.5m phones at the end of 2017 used an alternative operating system, a mere 0.1 per cent of the market, and most attempts to compete with Android have ended in failure.
Carolina Milanesi, an analyst with Creative Strategies, said that the issue for Huawei in using its own operating system will be whether third party developers would have any interest in supporting it and how smartphone users outside China would access Google.
"Creating a store and supporting developers is not trivial. Just ask Samsung or Amazon [about] their attempt to go head to head with Android, either with a different OS or with a fork," she said.
Last year, the European Commission fined Google €4.3bn for abusing the dominant market position of Android to entrench its dominance in mobile search and to promote its Chrome browser.
But a shift away from Android, combined with a potential backlash against US companies including Apple in China, could lead to a fragmentation of the global mobile phone market, just as 5G is introduced.
Charlie Dai, an analyst with Forrester, said: "Eventually it's no good toward consumers around the world, and it's a pity that customer value facilitated by open-source spirit is now ruined by the politics," said Dai.
That could also prove to be a problem for Google, if Android eventually loses share in China, a smartphone market bigger than Europe and the US combined, to a new operating system promoted by Chinese phone manufacturers. "I suspect Google are enraged by this," said Watkins.
Written by: Nic Fildes and Louise Lucas
© Financial Times
