Huawei Technologies is facing a bigger threat from Google – which may stop providing Android OS and app store to its smartphones after August 19 – than the chipset ban, analysts said.
“Except Apple’s iOS, there is not any successful case that a mobile phone maker can develop a successful operating system,” Tam Tsz-wang, a telecom and technology analyst at DBS Bank (Hong Kong), told Asia Times.
“If Huawei is not allowed to use Android anymore, there is a huge uncertainty in its smartphone business,” Tam said, adding that even the one-time top phone seller Nokia had failed to run a successful OS.
There are some substitutes for Google’s apps in the markets, such as APKPure as a substitute for Google Play, but users should be reminded about the security issues, said Fred Wong, the founder and chief investment officer at eFusion Capital Ltd. If Huawei is going to launch an operating system to replace Android in its smartphones, whether such a new OS can be used on tablets and computers is another matter, Wong said.
Last week, the US Commerce Department put Huawei and its 70 affiliates onto its Entity List on security grounds. Although it granted Huawei a license to buy US goods until August 19, industry watchers are worried that Huawei smartphones cannot work without Google and US chipsets.
ARM, the UK-based semiconductor designer, has suspended business dealings with Huawei as its designs contain “US-origin technology,” BBC reported on Wednesday. Both ARM and Huawei said they were hoping for a swift resolution to resolve the matter between ARM and HiSilicon, a chip manufacturing unit of Huawei.
Some industry experts said this was a fatal blow to Huawei, which will not be able to use ARM technology to develop its Kirin chipsets any more. However, analysts said such a threat may not be instant and significant as Huawei has an inventory of chips.
“Huawei usually keeps a three-to-nine-month inventory of its core chips,” Wong told NowTV. “For some non-core chips such as DRAM and flash memory chips, it also increased its inventory by last Friday despite the falling prices of these chips.”
Wong said the ARM technology was not critical to Huawei, which has to source high-density chips such as seven-nanometer chips from outside anyway. He said Huawei can still buy the chip inventory from Taiwan’s TSMC, the world’s largest contract chipmaker, for some time.
On Thursday, TSMC said its shipments to Huawei were not affected by the US ban, Reuters reported.
“If Huawei has to use lower-grade chips in its smartphones due to the US ban, the negative impact on the company’s sales will not be very significant,” Tam said. “Most consumers won’t notice the slight difference in the performance of different smartphones.”
Overseas customers are more concerned whether they can use Google apps on Huawei smartphones, Tam said. Although Huawei plans to launch a new OS for its smartphones, it will take some time to prove its system stability and compatibility with the existing Android apps, he said.
Huawei’s new OS
Huawei will launch its own OS in China by fall this year if it were permanently banned from using Android or Microsoft’s Windows OS, Richard Yu Chengdong, the chief executive of Huawei Consumer Business Group, told CNBC in an interview on Thursday. The international version with an App Gallery will be launched in the first half of next year, he said.
Huawei’s new OS, called Hongmeng, was reportedly built on the Linux system with Huawei EROFS, a document system, and Fangzhou compiler, a code translator.
On Wednesday, two mobile phone operators in the United Kingdom – EE, which is part of BT, and Vodafone – said they had pulled Huawei’s phones from their 5G networks as the Chinese firm would be barred from using Android. Japanese mobile phone carriers SoftBank and KDDI also said they would delay the launch of a new smartphone by Huawei.
Five Taiwanese mobile phone operators said in separate statements that they would continue to sell their existing Huawei phones, but not new models. Taiwan Mobile, the third largest mobile phone carrier on the island after Chunghwa Telecom and FarEasTone, said it was concerned that Huawei smartphones don’t support Google apps.
Tam said it is too early to predict whether more telecom operators will stop selling Huawei phones. He said it depends on customers’ acceptability of Huawei’s new OS.
Sales of Huawei smartphones grew 31% from 153 million units in 2017 to 200 million units last year, about half of which were shipped overseas. In Taiwan, Huawei sold 241,000 units of smartphones last year, up from 76,000 units in 2017, according to an industry report. It ranked No 7 in the island, while Apple and Samsung were the top two players, selling 1.53 million units and 1.14 million units last year, respectively.