Huawei Technologies is facing an immediate test of Google's move to curtail some business with the Chinese telecoms giant in the wake of it being placed on a US blacklist, as its budget brand Honor prepares to launch a new handset model in the UK on Tuesday.
The Chinese company has not yet changed plans for the grand launch of the Honor 20 Series on May 21 in London, which comes 10 days ahead of the unveiling of the same product in the domestic market in Shanghai on May 31, two people familiar with the matter said, who wish to remain anonymous as the information is private. They added that the launch plan could change at any time.
The development comes after Google said it is looking to comply with the Trump administration's move to add Huawei and 70 affiliates to the US Commerce Department's Entity List last week, which restricts the company from buying parts and components from US companies without government approval.
"We are complying with the (US) order and reviewing the implications. For users of our services, Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices," a Google spokeswoman said in a statement, without specifying what it means for future Huawei devices.
Google's statement follows reports on Monday that the US internet giant had halted business that requires the transfer of hardware, software and technical services to the Shenzhen-based firm. Huawei is currently the world's second-largest smartphone supplier behind Samsung and reliant on Google's Android operating system.
Google's app store will continue to work for current Huawei devices
Meanwhile, a queue of top US corporations including chip-makers Intel, Qualcomm, Xilinx and Broadcom have told their employees they will not supply Huawei until further notice, according to a Bloomberg report citing people familiar with their actions.
The news adds to fears that a cold war is beginning between the US and China in the technology sector with profound implications for Huawei, which is currently in the eye of the storm.
Android is an open source operating system for mobile devices led by Google " but using this does not automatically give Huawei devices access to Google apps and services. Google's compliance with the US order could mean that future Huawei devices will lose access to popular Google services including the Google Play app store, as well as apps such as Gmail and YouTube " meaning overseas buyers may think again before buying a new Huawei handset.
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"This looks like the worst nightmare a company could imagine in having its supply chain disrupted," said Kiranjeet Kaur, senior research manager at IDC Asia-Pacific. "Huawei can still go on (with open-source Android) and build its own apps and services on top of it but that's not going to happen overnight."
Kaur added that Huawei had been gaining volume across many countries with its flagship models, the Nova series and Honor phones, but that demand for these devices would decline if Google services are not available on Huawei's future products.
"Huawei has made substantial contributions to the development and growth of Android around the world. As one of Android's key global partners, we have worked closely with their open-source platform to develop an ecosystem that has benefited both users and the industry," Huawei said in a statement on Monday.
The company "will continue to provide security updates and after-sales services to all existing Huawei and Honor smartphone and tablet products, covering those that have been sold and that are still in stock globally."
Huawei has said previously that it has developed a proprietary operating system for smartphones and computers as a "plan B", should US restrictions jeopardise its business relationship with Google.
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The Chinese telecoms giant has high hopes for the Honor 20 Series in Europe, one of its biggest markets outside China. Huawei had a combined 23.6 per cent share of the European market in the fourth quarter of 2018, a sharp rise from 14.8 per cent a year earlier. Shipments to the region by rivals Samsung and Apple both declined in the fourth quarter of 2018, according to a Canalys report in February.
While lack of access to the Google Play Store for users in China is not an issue " Google services such as these are banned in the mainland " it would become a big issue in Western markets if blocked.
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Jean Baptiste Su, principal analyst with consultancy Atherton Research, said Huawei may be able to mitigate the problem by partnering with non-US companies to provide apps.
"Huawei could keep selling smartphones outside of China but only if they run their own version of open source Android " the same one used in their smartphones in China," said Su. "But Huawei and Honor devices would need to be significantly better, and cheaper, than Samsung or other Chinese brands such as Oppo, Xiaomi and OnePlus, to convince people to use a device without the Google apps and app store."
Huawei shipped a total of 206 million smartphones in 2018, 105 million of them to mainland China, IDC data shows, which means roughly half of Huawei's smartphone business could be affected by the potential loss of Google services in future.
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Huawei now finds itself in a similar situation to that of rival ZTE last year, which faced a nearly 3-month ban from doing business with US companies after it was found to have breached terms of a US sanctions settlement. ZTE's reliance on US components meant that operations virtually ground to a halt.
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