The ongoing saga with Huawei is escalating. You may remember a previous article I wrote about the perceived dangers of working with Huawei given their strong ties to the Chinese government.
Well in May, the US government took major steps to curtail the use of Huawei equipment. The U.S. Commerce department added Huawei to something called the “Entity List”. This list prohibits any companies with relationships to the U.S. from supplying products to Huawei. This is a devastating blow which may just destroy Huawei in the long term.
If you look at their cell phone business alone, it’s hard to see how they’ll be able to survive.
Huawei phones use Google’s Android operating system to run. Because they’re now on the Entity List, Google are no longer allowed to supply them with this. Fortunately for Huawei, Google have Open Sourced Android – which means the code used to build it is publicly available. So, Huawei are able to take this code and build their own version of Android. However this “Hybrid” Android won’t have access to Google services such as Gmail, YouTube, Drive and the Google Search Engine etc. This isn’t such a big issue in China where competing services such as Baidu (China’s alternative to the Google Search Engine) are popular. It does however limit the international audience from buying Huawei cell phones where these services are taken for granted.
Google is just one of the suppliers affected though, and there are others with much more impact.
The processor designer “ARM Holdings” has their chip designs in most cell phones. Almost every cell phone out there is likely to be using some form of ARM processor, and now Huawei has to find a different solution (hint – there aren’t any!).
Likewise, most cell phones have modem chips designed by Qualcomm. These chips are highly specialised and difficult to design (as seen recently by Intel’s announced departure from the market).
Without these chips available to Huawei – it’s difficult to see how they’ll be able to continue manufacturing cell phones.
Google have been granted a 90 day extension to be able to continue supplying updates to Huawei. They’re contesting the ban – stating that being unable to supply updates in the future will leave existing users susceptible to security issues. “Our focus is protecting the security of Google users on the millions of existing Huawei handsets in the U.S. and around the world,” the company told the Financial Times.
The ban doesn’t just affect Huawei’s cell phone business. For example, they also make laptops – which as expected run Microsoft Windows. Not any more!
Last year, Huawei spent $70 billion on components, of which $11 billion was paid to US Businesses including Qualcomm, Broadcom and Microsoft.
What makes the situation even more confusing is the doubt over whether the ban on dealing with Huawei is based on security concerns or is simply a political play.
The official statement is “foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services, which store and communicate vast amounts of sensitive information, facilitate the digital economy, and support critical infrastructure and vital emergency services, in order to commit malicious cyber-enabled actions, including economic and industrial espionage against the United States and its people.”
However, when U.S. President Trump was recently questioned on this, he stated that the ban was based on security concerns, however it could be dropped if a trade agreement with China was agreed.
So, which is it? If the US comes to a trade agreement with China, does Huawei suddenly become safe to deal with again??