Huawei will launch the Mate 30 Series on September 19 in Munich, Germany—its first flagship device to launch without access to the full Google Android platform on which it has built its global smartphone powerhouse. Industry analysts have forecast a plunge in sales—and yet the level of confidence within Huawei was described to me by a company insider as “shockingly high.” China is famous for playing the long game, and Huawei is firming up its view that some short-term pain will be a price worth paying, that U.S. sanctions against the company will backfire, that the real long-term hit will be borne in the state of California and not the province of Guangdong.
When the U.S. blacklist against Huawei was announced in May, there was an immediate shock to the company’s system. Execs were prepared for restrictions on 5G networking equipment—the actual rationale for the blacklist, but the impact to the consumer business took them by surprise. Despite no national security concerns, Huawei’s consumer supply chain was severed with a raft of household names torn from its supplier roster—Google, Intel, Microsoft, Qualcomm and Facebook to name but a few. With as much as $12 billion of Huawei’s $70 billion in annual procurement spent in the U.S., the impact was drastic on both sides of the Pacific.
To understand Huawei’s mindset, you need to see the technology sector from China’s perspective and you need to draw a distinction between the networking equipment sold to countries and their telco champions and the shiny devices sold to their populations. On the networking side, Huawei is supremely confident in the quality of its technology. Yes, they admit, the solidity of the code could be better and they have accepted the findings of the U.K. cyber evaluation centre—the most dedicated critics of the company’s technology. But the rest of the industry is no better, the company says, weaknesses have been found with Huawei equipment because Huawei’s equipment has been scrutinised more than anyone else’s. Go level the playing field, they say, and see what you find.
Huawei’s highly-publicised offer to license its 5G technology to U.S. competitors has to be seen in this light. This was not a bridge building exercise or a peace offering. This was a cleverly calculated move to call Washington’s bluff. Check the code for yourself, they were saying, and if you can’t find anything call off your attack. Otherwise, if you don’t take the opportunity to see for yourself, then why should the world take you at your word? And if you do enable a U.S. company to license the tech, creating an American alternative to Europe’s Nokia and Ericsson and Asia’s Huawei, ZTE and Samsung, then it will cost you billions in licenses. Win win.
Which brings us back to the Mate 30 launch. Huawei is keeping its cards closely held on what will be announced on Thursday [September 19]. It has already launched HarmonyOS—its (one day maybe, but not quite yet) alternative to the Android operating system. And it has launched a chipset and a range of services to power its devices, to un-Americanize as its parlance goes. But, in reality, it can also just extend what has worked in China to secure almost 40% of the domestic market—an unlicensed version of Android with Huawei’s top and tail. And if the company can deliver easy to use and secure shortcuts to after-market installs of Google’s software and services, as well as those from Facebook and Microsoft and others, then it can neutralise the threat. This was certainly the impression left by the company’s consumer boss Richard Yu when he talked to the media about “workarounds.”
The prize for Huawei if it can pull off this feat, weaning millions from full-fat Android to a Huawei alternative—either HarmonyOS or a Huawei-badged AOSP—is huge. And, make no mistake, it has every chance of carrying the other Chinese manufacturers along with it, as well as others. Huawei has said that the time is right for an alternative to traditional Android and iOS, and if Huawei can control that “third way,” then it can build its own ecosystem and infrastructure, it can license its software as well as sell its hardware. Echoes of the 5G licensing offer come to mind.
There are multiple reports of intense lobbying taking place in the U.S. as the country’s hardware and software developers plead with the government to soften restrictions on Huawei before it’s too late. Because, despite the long-term opportunity, Huawei’s rhetoric until recently has all been around business as usual. But that has now changed. There is a real sense that the technology “splinternet” being driven by the technology Cold War and the action against Huawei could be the best thing for the company. That securing its independence with a raft of good will from those around the world who feel that the U.S. has gone too far could be a one-time opportunity.
Uniquely, Huawei has the reach and resources to try to pull this off. It won’t be easy, and it won’t be quick, but it can count on government support and a strong and patriotic domestic market to soften any immediate pain. And it can use price to pry users in the hardest to crack European markets away from the old and onto something new. Europe will be tough—but Asia, Africa and the Middle East less so. And with other Chinese manufacturers onboard, the overall market changes direction.
The tectonic plates are shifting in the global consumer tech sector for the first time in a decade. China has evolved from imitator to innovator, and now wants to go the last mile to dominator. Control of the leading non-U.S. operating system and ecosystem, just as the world launches full-scale into 5G and IoT and AI, would be well-timed.
When the U.S. extended the temporary reprieve on Huawei’s supply chain blacklist until November, the list was expanded to include more entities and the signals were clear that November was a real line in the sand. Huawei was being boxed in, given no choice but to respond with drastic changes to its business. In retrospect, that was a turning point. Huawei’s rhetoric since then has been resolute and sanguine. No more uncertainty and fear of the unknown. The mood appears calm. The company knows what’s coming and is prepared for a tough few years as it targets a future where no-one will be able to do this to them again.
If the Mate 30 launches without any U.S. tech onboard and doesn’t fall flat, if its hard landing is softened, if analyst and media reports are at all positive and consumer polling is at least open-minded, then a significant threat now hanging over Huawei will be removed. And so ten years down the road, the global technology sector may look back on these few weeks as a major turning point for the industry. What is clear is that a Chinese-led alternative to Google and Apple’s lock, one that does not rely on any U.S. tech, is seriously bad news for California. And it will almost certainly lead to further changes as the cosy arrangements of the last ten years begin to fall away.
All Rights Reserved for Zak Doffman