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US President Donald Trump’s campaign against China’s Huawei has yielded dividends, and the company has to deal with severing relations with US technology companies – Google, Intel, Broadcom, Qualcomm, and Xilinx, according to Bloomberg and Reuters.
What steps can Huawei do to deal with the boycott, could the American economy be affected, and when did the struggle against it begin?
Why did American technology companies wake up now?
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At the end of last week, Trump signed a presidential decree that meant a boycott of Huawei. The International Emergency Economic Powers Act gives the US president the authority to oversee trade in a national emergency that threatens the United States. The US Department of Commerce and other government agencies announced that it had added to the list that prohibits it from buying components from US companies without government approval.
What is Huawei’s fault?
The tension between Huawei and the United States stems from fears in the US that Huawei’s equipment could be used to spy on other countries and companies for the Chinese government. For this reason, the United States has taken a series of steps against the company and has even made diplomatic efforts to persuade other countries not to use the company’s equipment for fifth-generation connectivity.
How does Huawei react to the allegations against her?
Huawei repeatedly denied the allegations against her and even claimed that US actions stemmed from political motives or fear of harming the technological superiority of American companies. Huawei sued the United States following the boycott of its equipment. “Huawei has contributed a great deal to the development and growth of Android in the world, and our work with Google to develop the platform has benefited users and industry,” said Huawei, “We continue to provide security services and updates to existing Huawei products that are sold or stored in the global inventory.”
How it all began?
The struggle against Huawei did intensify during Trump’s reign, but the allegations against it began in 2012. In the same year, the Senate Intelligence Committee published a 52-page document accusing Huawei and another Chinese communications equipment manufacturer, ZTE, of threatening US national security and encouraged US companies not to buy equipment. The committee refutes the allegations against it that it can spy on companies and individuals for the Chinese government.
The United States is making intensive efforts to recruit additional countries to fight against Huawei, and efforts have been partially successful, with Australia and Japan blocking the use of the company’s equipment as a result of US efforts, but it appears that Britain and Germany not cooperate. Germany has announced that it not block Huawei but tighten security regulations for all carriers. Britain has announced that it allows Huawei to help build the nation’s fifth-generation infrastructure, but to a limited extent, even though a government agency that believes in cybersecurity has warned of increased risk from using WAVE equipment.
Should the owners of Huawei’s devices have to worry?
With the except of open source services, Google has suspended businesses with Huawei that require the transfer of hardware, software, or technical services. It means that services such as PlayStore, Gmail, YouTube, and Chrome browser cannot installed on the company’s new smartphones.
According to Google, whoever already owns Huawei’s phone can continue to use the PlayStory application store and receive application updates and security. However, device owners are not able to enjoy the update of the Android operating system.
Huawei can now use only the public version of Android, and not receive the official updates from Google to the operating system. To date, Huawei has been one of Google’s few partners, which has access to the latest Android software and features. However, Huawei was preparing for a rainy day and already announced in March that it had developed its operating system in case it prevented from using operating systems developed by American companies such as Android or Windows.
The impact on the Chinese market is expected to be minimal since most Google applications are not allowed in China, and device owners use alternatives from local competitors such as Tencent and Bidu. However, Huawei is expected to hit in Europe, the company’s second largest market.
Analysts are not optimistic about Huawei’s business situation following the boycott. Nicole Peng, vice president of Canalys told CNBC, “This will be an immediate death blow for Huawei’s ambition to bypass Samsung in the global market.”
Neil Shah, research director at Counterpoint Research, added that the fact that Huawei could not offer Google services anymore would “be a clear drawback to Huawei’s operating system compared to the Android system installed in Samsung because of the lack of all applications on PlayStore.
If Huawei has to use her own app store it would be a huge job for her.”
What does it mean to stop business relations for American chip companies?
The cessation of business cooperation will cause severe damage to both sides. Qualcomm provides Huawei with processors and modems for many of the smartphones it manufactures, Xilinx provides programmable communications chips, and Broadcom also supplies chips that are a key component of communications equipment.
The damage may not be immediate, as it is estimated that Huawei had pre-prepared for such a situation and purchased surplus stock of chips. Qualcomm and Intel are also collaborating with Huawei on the development of fifth-generation (5G) connectivity technology, and the change in policy could lead to delays in launching the network in China and globally.
According to an analysis by the Wall Street Journal of December 2018, US companies could be hurt because they enjoy high revenues in China, the second largest buyer in the US semiconductor market, and last year reached $58 billion, International trade of the United States. Huawei said in the past, that it spent $11 billion last year on components manufactured by American companies.
