Huawei’s new range of smartphones could be the company’s ‘last hurrah’ outside China, according to an industry expert, as US sanctions continue to squeeze its business.
However, the ongoing sanctions imposed on the company by the Trump administration over allegations that Huawei has ties to the Chinese state and that its products could be used to spy on the West has seen the firm’s newer devices cut off from using Google’s services as well as limiting access to US-made components.
Huawei has taken strides to react positively to the sanctions, launching its own app store and apps to compensate for the loss of the full Google ecosystem, but experts say its appeal has undoubtedly been hit by the restrictions.
Ben Wood, chief of research at analyst firm CCS Insight, said the ever-tightening sanctions could push Huawei out of the global smartphone business.
“Outside of China there is a real risk that the Huawei Mate 40 family of devices could be the company’s ‘last hurrah’ in smartphones,” Wood said. “The ever-more punitive sanctions by the US administration are making it increasingly difficult for Huawei to sustain its mobile phone business, particularly outside China.
“It is a tragedy to see Huawei’s difficulties in its smartphone division. The collateral damage from US sanctions, which were primarily aimed at reining in its infrastructure business, is resulting in market share decline for Huawei outside China.
“Having once been close to challenging Samsung as the market leader for mobile phones, the division now has a battle for survival as it finds it increasingly difficult to get components and its brand is eroded.”
The Trump administration’s security vendetta against Huawei – against the backdrop of the much broader US-China trade war – has proved devastating for the company, with global ramifications for its business. A number of major countries have already moved to block Huawei from having any involvement in their 5G networks.
In July this year, the UK government made a U-turn on a decision made in January, announcing that Shenzhen-based Huawei would now not be permitted to play any part in the rollout of the UK’s 5G network. Mobile operators have until 2027 to remove all Huawei equipment from their 5G infrastructure.
Since that announcement, Huawei has also failed to reassure UK security officials that the risks of using its equipment in critical telecommunications infrastructure can be managed, according to the conclusions of the latest Huawei Cyber Security Evaluation Centre (HCSEC) oversight board report.
The HCSEC was established by the UK government and Huawei UK to assess the possible risks associated with using Huawei products in critical national infrastructure. In its report, the oversight board, which is government-led, warned that Huawei had made limited progress in addressing security issues raised in 2019 and that it could only offer “limited assurance” that security risks can be managed.
Meanwhile, the German government has reportedly been planning a stricter oversight of telecommunications network vendors operating in the country. Under the new plan, vendors will be scrutinised through assessments by the German cyber-security regulator and intelligence services and will need to be approved by key government departments in order to provide any 5G equipment. Whilst stopping short of an outright ban on Huawei, the move would make it harder for the company to retain its place in the German market.
The US ‘Entity List’ restrictions have caused Huawei supply chain issues, with South Korean electronics companies Samsung and SK Hynix both forced to halt their sales of semiconductors to Huawei. Huawei had already been stockpiling as much silicon as possible ahead of US sanctions coming into effect, as it does not yet have the capacity to manufacture its own high-end chips for its products.
There was at least some relief for Huawei in September, with the company’s presentation of its own HarmonyOS, which is scheduled to ship on new model Huawei smartphones in 2021. The company was obliged to develop its own OS and apps after the Trump White House’s actions against the Chinese firm saw it barred from working with key US technology partners such as Google.
It also emerged in September that Intel had received licences from US authorities to continue shipping certain products to Huawei, becoming the first company to be granted such a licence under the new restrictions.
The Trump administrations’s aggressive moves to cut off silicon supplies from Huawei and other Chinese technology companies may ultimately backfire on the US, with the Chinese government reportedly now planning a $1.4tn investment in chipmaking technology of its own, as part of its next five-year plan, in order to become much less reliant on foreign suppliers and also to gain a crucial technological advantage.