2019-12-16 12:27:051970-01-01 00:00:00

U.S. Placing Restrictions on Huawei

The latest Tech war has experienced a growing momentum, of what has been deemed “the tech cold war” between the U.S. and China. So far, the world has already witnessed the U.S. government’s attempt to rally allies’ such as Google’s restriction of Chinese tech company Huawei’s use of Android and its applications. In addition, the America government trade restrictions will prevent Huawei from innovating the newly enhanced 5G mobile network.

Huawei founder Ren Zhengfei has reacted in defiance opposing the U.S. attempts to block his company’s global network vision. Mr. Ren Zhengfei has spoken to the Chinese state media in response to the United States President Donald Trump’s order, which is aimed to cripple Huawei’s business in America. The founder declared that Huawei’s 5G network will definitely not be affected. With the current condition of 5G technology, “other enterprises won’t be able to catch up with Huawei in two or three years,” said Ren Zhengfei.

These restrictions will cost Huawei its access to one of the world’s most popular mobile operating system. Huawei would still be able to freely use the public open-source version of Android, but it will lack the bundled package of efficient software called Google Mobile services that includes, Google Chrome, YouTube as well as  Google Play mobile app store. Such services are the key features for the Android system. Possessing the Huawei phone, not having these features would definitely decrease the appeal of Huawei’s future business and most likely to restrict the growth, which has led the company to the world’s second largest producer of smartphones by market shares. In light of the situation, the Chinese technology company will still have to find substitutes for the popular Google’s apps, but it is said that Huawei could adapt to a life without Google’s services.

Alternatively, Huawei could possibly adopt a publicly available version of Android to develop a long-term Huawei version of a system similar to the Android, mainly for its Uphones.

 U.S. Secretary of Commerce Wilbur Ross stated the delay would give “operators time to make other arrangements and the department space to determine the appropriate long-term measures for the states and foreign telecommunications providers that currently rely on Huawei equipment for critical services.”

Effects to the Australia Region

Huawei’s Australian Director of Corporate Affairs Jeremy Mitchell said: “We want to assure Huawei customers in Australia that the U.S. actions involving Google will not impact consumers with a Huawei smartphone or tablet. For those that are planning to buy a Huawei handset in the near future from an Australian retail outlet.” However, the nature of the abatement has inflamed speculation that the ban is more about providing the states with leverage in the trade war with China.

How other enterprises required to react to Tech war

This ban had already affected companies outside of the U.S who do business with Huawei. In this case, German Phone chip maker, Infineon Technologies AG, announced it will be terminating the export delivery to Huawei of some components originating in the US.

Lumentum Holdings, which makes optical units for smartphones, says it is going conclude delivering shipments to Huawei. In 2018, Lumentum Holdings generated about 11 percent of its revenue by performing sales to Huawei.

Meanwhile, in the US, San Diego-based Qualcomm has suspended shipments to Huawei of its integrated chips, and certain employees have been told not to make any contact with Huawei. Their chipsets are used in certain high-end smartphone models.  Huawei also designs a large number of its own chips that go with the manufacturing of the company’s phones.

Another company, Xilinx, says it also has adhered to trump administration’s order. The ban of exports to Huawei could shave off around $300 million US dollars off its annual revenue this year alone.

(All these estimates have impacted the stock prices of these suppliers)

Impact on Google

The impact on Google is much less extreme. Sources estimate a moderate hit to the sales revenues from the Play mobile app store if the conditions eventually take hold.

Since Google does not break out from play store revenue or revealing the details on exactly how android affects its financials, the whole point of Android is to put Google’s services into the hands of as many mobile users as possible. Therefore driving the growth of the business, that is now generating more than $120 Billion a year but has also shown signs of deceleration.

In the wake of the conditions surrounding the Chinese phone maker, a statement was issued by the U.S officials. The order grants the U.S companies a 90-day pardon date. This indicates that the regulation could take effect before the end of winter if national security concerns about Huawei persist or if the trade tension escalates.

By Charles Wang

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