The trade war between the United States and China is taking a new turn with Huawei. As a result of Donald Trump’s latest decision, Huawei’s Chinese devices will no longer be developed under Android.
The second biggest brand of smartphones in the world was operating until now under Android, an operating system developed by Google.
Now considered “at risk” by the American administration, Huawei was blacklisted and is to be part of the list of companies that will no longer have access to collaborations with US companies.
Later this week, other U.S giant tech announced they would being to cut off vital supplies to Huawei, such as Microsoft, Qualcomm and Dell.
According to several sources, Huawei would have anticipated this situation and secretly developed, for two months, its own operating system internally. However, experts are skeptical it could be operational on time.
A vivid Wall Street reaction
Earlier this week, the U.S Department of Commerce established a list of Chinese companies “at risk”. Huawei was part of it.
This means that the Chinese smartphone manufacturer, who has been working with American companies to build its mobile devices, will not be able to buy supplies from American companies anymore.
Earlier this week, chipmakers such as Intel, Qualcomm, Xilinx and Broadcom told their employees they would not supply Huawei “until further notice”. Alphabet, one of Google’s companies, confirmed that it would cut off the supply of both hardware and software services to the Chinese giant.
— CBS News (@CBSNews) May 20, 2019
The reaction of Wall Street was immediate. While Intel only generates 1% of its yearly revenue from Huawei, its stocks fell by 2% last Monday. According to Bloomberg, Qualcomm, who only makes 2.6% of its revenue from the Chinese phone manufacturer was down 4.8%. Last but not least, Broadcom, which makes 5.3% of its revenue with Huawei orders, fell 4.4%.
“Huawei is heavily dependent on U.S. semiconductor products and would be seriously crippled without supply of key U.S. components,” said Ryan Koontz, an analyst with Rosenblatt Securities Inc. “The U.S. ban may cause China to delay its 5G network build until the ban is lifted, having an impact on many global component suppliers”, he shared to Bloomberg.
An alternative version for 2020
As a yearly revenue report was shared, U.S media shared that Google’s average wage has significantly increased between 2018 and 2019. However, the U.S-China trade war might have a colossal impact on Google employees.
— Reuters (@Reuters) May 25, 2019
Indeed, if Android is no longer available on Huawei, applications such as YouTube or Chrome will no longer be pre-installed on smartphones. A considerable shortfall for the American giant as several million users were using these applications daily from their Chinese device.
As a response, Huawei’s consumer business CEO Richard Yu, gave an interview to CNBC and declared that “an international version of the operating system could then be ready for international markets by the first or second quarter of 2020.”
According to European experts, such as Patrick Moorhead, senior analyst at Moor Insights & Strategy, it would take at least a “decade” for China to recover.
In the interview he gives to the magazine Fortune, Moorhead explained that it would be nearly impossible for the Chinese company to launch a 100% operational system within a year.
In the meantime, Huawei’s numbers are expected to drop drastically in Europe and in northern America.
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Will the trade war end soon?
For many experts, Huawei’s ban represents a sort of test to see if the U.S-China trade war could affect the American economy.
Some anonymous sources revealed to Bloomberg that Google employees were concerned about a possible lay-off because of the end of the collaboration with Huawei. “I think it will also not only be bad news for us, but also bad news for the U.S. companies because we support the U.S. business”, concluded Richard Yu during the interview for CNBC.
— Alessio Germinario (@nightboy89) May 25, 2019
As a matter of fact, it seems that it might also slow down some European manufacturers; as Huawei is generating 30% of its yearly revenue on the Old Continent, several German suppliers have seen their revenue decline already.
Moreover, experts worry that the trade war between Washington and Beijing could slow down the United States in expanding the 5G, which is only available in a few American cities at the moment.
All in all, it seems that more than Huawei needs U.S tech services, U.S tech also needs Huawei. In a globalized world, manufactured goods are meant to be designed with multiple parts coming from all around the world, in order to guarantee a solid balance and a strong global economical peace between giants.