May 20, 2019

Google suspends Huawei from Android services

Google has dealt a blow to Huawei’s fast-growing consumer smartphone business by suspending the delivery of key software and technical services to the Chinese company, according to two people familiar with the situation.

Huawei, which overtook Apple to become the world’s number two smartphone maker in the second quarter of last year, according to Gartner, relies on Google’s Android operating system for its phones — of which it shipped more than 200m last year.

Google’s move means Huawei would only have access to the basic, publicly available version of Android.

The suspension, first reported by Reuters, comes after Washington last week added Huawei to a list of 44 Chinese entities subject to US export controls because they pose a “significant risk” to US national security.

Adding Huawei to the so-called entity list — which means US groups will be required to secure a licence from the US government before selling any parts or components to the Shenzhen-based company — was the latest salvo from the Trump administration. The US has long fretted about the threat to national security posed by Huawei.

Google said on Monday: “We are complying with the order and reviewing the implications” but added that Google Play and the security protections from Google Play Protect would continue to function on existing Huawei devices.

Huawei said that, as one of Android’s key global partners, it has worked closely with Google’s open-source platform to develop an ecosystem that has benefited both users and the industry.

“Huawei will continue to provide security updates and after sales services to all existing Huawei and Honor smartphone and tablet products covering those have been sold or still in stock globally,” it said.

In a research note to clients, Citi analysts said the potential software ban “could paralyse Huawei’s smartphone and equipment business”.

Richard Windsor, an independent analyst, added that losing the Google ecosystem “is very likely to cost Huawei all of its smartphone shipments outside China” — which, according to data consultancies including Counterpoint Research, is roughly half its total.

Huawei does not break out its smartphones business but it said last year that the consumer business contributed 48 per cent of company revenue.

In the US, Huawei is also seen as a lightning rod for broader concerns including theft of intellectual property and China’s rising tech prowess. It has become entangled in the US-China trade war with the effective ban coming just days after US president Donald Trump raised tariffs on Chinese imports to 25 per cent and Beijing retaliated in kind.

While the Android operating system is open source and publicly available, Huawei will no longer be able to access proprietary apps and services from Google, according to one of the people familiar with the move.

Huawei, which uses Microsoft’s Windows on its laptops and tablets, has sought to develop its own operating systems. In an interview with Germany’s Die Welt, and subsequently confirmed by Huawei, chief executive of the consumer division Richard Yu said the company would “be prepared” in the event of any blacklisting.

“That’s our Plan B. But of course we prefer to work with the ecosystems of Google and Microsoft,” he told the German publication in March.

Microsoft declined to comment on the matter on Monday.

Other device makers have similarly sought to develop their own operating systems, but few have made much headway.

Alibaba, which runs China’s biggest ecommerce platforms, tried to build “China’s Android” but ended up locking horns with Google over just how different its Aliyun OS was from Android. Its successor, AliOS, is based on Android.

Similarly, Samsung has failed to gain much traction for its Linux-based Tizen operating system.

www.ft.com

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