Trump's Google - Huawei Ban, Might be Good for Consumers After All

The China-US trade dispute has spilled over into consumer electronics in a big way, and it’s changing the competitive landscape for cell-phones.

It all started at CES last January, when AT&T dropped support for Huawei phones, just as Huawei CEO Richard Yu was about to announce its new flagship phone, the P30 Pro. It really dampened the mood for Huawei, as the P30 Pro was set to hit the American market through AT&T. But more troubles for Huawei lay ahead. By May of this year, Huawei had lost the support of all the major US carriers worldwide due to a national security order from President Trump. The order didn’t just ban phones, but also the use of Huawei 5G equipment on US soil due to alleged national security concerns. The order not only restricted American telecoms access to cheaper Huawei 5G infrastructure equipment, but also lead to Google severing ties with Huawei.

Trump China Trade Strategy

Love him or hate him, President Trump is taking on Chinese trade in his own unique style. There can be no doubt it’s an issue that needed to be dealt with sooner or later. The first world has thus far been prepared to mostly overlook many of China’s shadowy business and trade practices. Access to cheap labor and the elusive promise of open-markets on Earth’s most populous nation is so seductive, most countries have let slide everything from intellectual property theft and protectionist policies to China’s blurry definition of what exactly constitutes private business. For better or worse, Trump has decided to bypass more conventional means of reeling China into amicable global trade practices. The rest of the world had hoped to use the Trans-Pacific Partnership as the legal apparatus for trade disputes with China, but President Trump backed out of the agreement that likely would have provided international leverage. But Trump’s anti-globalist agenda has forced him to take a more unilateral approach in dealing with China.

The latest salvo in China/US trade involved placing Huawei on an “entity list”, effectively a black-list that restricts business relations from US companies like Google. Google’s compliance with the order means that, after a 90-day grace period, it will globally halt Android updates to Huawei phones. And it’s not just the Android operating system that will no longer be distributed to Huawei phones, the ban includes all software apps, including Gmail, YouTube, Play Store, Maps and anything Google-owned.

So far, it looks bad for Huawei. Losing its operating system was potentially crippling to one of the world’s major phone makers, which is bad for competition overall. As consumers, regardless of our nationality, we all do better when more phone manufacturers compete in an open market to deliver better phones to customers.

Huawei Telecom

Huawei is a huge telecommunications company, to the tune of $10.689 Billion US dollars in annual operating income and almost $100 Billion US in total assets (2018). As a phone maker it's second only to Samsung, nestled between the Korean phone giant at number one and Apple, which ranks number three in annual smartphone sales.

Huawei: Just Another Online Digital Spy

The national security allegation emanating from the Trump administration is that Huawei spies on its users and could potentially employ back-doors on its wireless network infrastructure equipment to spy on rival nations. If true, all that spying isn’t limited to the private sector, we already know big data companies and electronics manufacturers collect reams of behavioral data on users. Considering Huawei's ties to the Chinese Communist Party, if the Trump administration is correct, Huawei’s spying may indeed constitute national security concerns. The Huawei spying issue is only compounded in nations that are building new  5G networks using Huawei equipment. Trump’s recent run of executive orders were meant to address these concerns.

However, the spate of security allegations could be nothing more than political posturing, liable to end at any time with business between China and US-based companies resuming as normal if a mutually beneficial trade agreement is reached between the US and China. A strong case could be made that the security concerns are no more than a misdirection. After all, it’s a pivotal time for the telecom industry as we're in the midst of a global 5G deployment. There is a lot of money at stake for companies providing the new, improved 5G network infrastructure worldwide, and US-based telecom equipment providers simply can’t compete on price against Chinese manufacturing. This is why many developing countries around the world are looking to China for less expensive alternatives. China is more than happy to invest in “helping” these developing countries with favorable deals on infrastructure to get its foot in the door. It's a bit like the generational game-console format war. When launched, Sony routinely sells its latest PlayStation at a loss to distribute its platform as widely as possible, knowing that greater gains await when its platform is the indispensable cornerstone of gaming across the global market.  

Rumors of digital “backdoors” leading to Chinese spy agencies still lacks widely accepted hard evidence, these things are difficult to prove. But the allegation isn't simply something the Trump administration made up. The French news agency La Monde reported that officials at the headquarters of the African Union in Addis Ababa, Ethiopia accused China of hacking its computer systems with Huawei equipment. It's an allegation that China denies, of course. The African Union is one of China’s key partners in what many consider China’s worldwide effort to exert soft-power around the world.

Huawei Deploys Plan B

But a Hail Mary is coming from Huawei if the trade situation stays its course. The company plans to introduce its own in-house operating system and app store, or what Huawei CEO Richard Yu calls "Plan B".

Reports from the South China Morning Post have said that Huawei has been working on its own operating system for almost a decade. The new OS is rumored to be called HongMeng OS or the Ark OS and will debut on its Mate 30 series of devices, due out this October. The rumored Huawei OS is said to be fully Android compatible. According to the Chinese government news agency, the company’s Plan B was the result of closed-door strategy meetings that called for reducing reliance on Google and Microsoft in the event of US action against the company. The report says Huawei developed the new OS to be Android app-developer friendly, and the company is already inviting Android developers from the Google’s Play store to create apps for its own app store, called AppGallery. It’s a compelling offer to build software for Huawei’s store, and its nearly 300-million users worldwide.

As Huawei scrambles to recover from the series of blows it’s taken at the hands of US trade policy, ultimately, it’s good to see Huawei has a plan to land on its feet. For consumers worldwide, it’s good to see competition in not only phones, but also in the OS and app stores. For now, smartphone users have been presented with a choice between Android or iOS. A third option from Huawei can only help make everyone more competitive across the global market.

Now, if we can only do something about all that spying! Google is the king of spying on users for its advertisers. According to revelations from Edward Snowden, we know all that data has been routinely accessed by American spy agencies. Apple has a different approach to its data-gathering. While Apple isn't completely innocent of data gathering, it's not as endemic as it is on Android because Apple is not collecting data on behalf of advertisers. Under Tim Cook, Apple has made a stand on behalf of privacy. With Huawei added to the mix, you’ll now have the option of being spied on by a foreign entity.