The controversies and issues surrounding Huawei are far from over. Just last week, the telecommunications giant from China was charged by the US government with bank fraud, obstruction of justice, and theft of technology, among others. Things are not that different in Europe according to Reuters‘ latest report.
You might have heard about Huawei getting banned in certain countries including the US and Australia. These countries have restricted the Chinese company from building next-generation mobile networks or 5G infrastructure due to concerns regarding China’s National Intelligence Law which requires Chinese companies to cooperate willingly to the government when asked.
In Europe, a similar story may soon unfold as the European Commission is considering a de facto ban on Huawei’s 5G technologies within the European Union citing comparable concerns about security.
GSMA, a mobile communications industry body, is open to discuss these issues about Huawei in their next board meeting. The agenda, which was proposed by GSMA Director General Mats Granryd, will take place in late February during Mobile World Congress (MWC) in Barcelona. MWC is the industry’s biggest annual gathering spearheaded by GSMA.
As a leader in telecommunications equipment, Huawei is already in partnership with a number of operators worldwide to put up 5G infrastructure. This means a ban will make a big impact on the 5G rollout, at least in Europe. As an example, Europe’s largest telecoms company Deutsche Telekom will have to delay their 5G plans by up to three years if they have to take Huawei out of the picture.
Huawei continuously denies the existence of any backdoor granting easy access to the Chinese government. The company and its founder also deny the allegation that they would spy for China.
Trade war: How the US played its trump card wrong
The dragon is no longer sleeping
The US and China are embroiled in a trade war and the last few months have witnessed unprecedented escalation from both sides. Tensions between the two countries are ongoing and virtually two power blocs have been created. The conflict has also changed everyone’s outlook on technology forever.
US President Donald Trump banned American companies from working with Huawei, one of China’s largest technology companies. This meant Huawei could no longer use American technology, including Android. Thankfully, an interim resolution lets Huawei transact with American counterparts right now.
However, this was a blaring reminder for China. It depends too much on the US for technology and this needs to end. For two power blocs, interdependence isn’t an option. And the US played its trump card at the wrong time, in a wrong way.
Trade war affecting free flow of tech
Technology has been freely flowing since the inception of the Internet. Everyone has been connected to a neutral medium of communication except for a few countries. The flow of information has been so fast, yet transparent. Adding to this, open-source has been a boon for everyone since technology is never restricted and everyone gets a chance to experience it.
Even if a service or product is proprietary, companies have been quick to monetize it via licensing. There are apps that are built in one country and used by citizens of another country that’s thousands of miles away. In a nutshell, we’ve always imagined modern or digital technology to be easily transferable.
But, the US proved it can stop this flow of sanctions or bans, only to reverse the decision. We can call this saber-rattling. They wanted to serve a warning and the message has been received. However, China also realized one thing, it needs to become truly independent.
The Chinese internet is different from the rest of the world’s internet. It’s guarded by a nation-wide firewall and heavily censored by the state. A few services like Google and Facebook aren’t available. This has already made way for homegrown alternatives like Baidu, Weibo, and WeChat.
Now, Huawei is gearing up for the worst. It accelerated work on its own operating system, HarmonyOS. It’s expected to roll-out slowly in the coming quarters. In a bid to challenge Google Maps, they’re also planning to unveil a mapping service known as Map Kit.
Every Chinese company would be scrambling to create a backup plan, preparing for the worst. In the short term, they’ll suffer due to sudden shortcomings. But in the longer run, the US loses its leverage.
The ban is bad for progress
The US government’s ban on Huawei is ill-timed. The company is a leader in 5G deployment due to its patents and manufacturing ability. The world needs Huawei to effectively deploy the next standard of wireless communication. If the US wants its allies to avoid Huawei, alternatives need to be available, and that’s not the case.
Even US companies aren’t very fond of getting dragged in the trade war. Trump agreed that tariffs on China will hamper Apple’s ability to compete with Samsung. Not to forget all the revenue US companies lose after sanctions are applied or the Chinese develop their own alternative.
Other countries also have only two options — get in line with the US or develop its own cushion. A territorial divide has also prompted countries like India to lobby for data localization. In case relations turn sour tomorrow, how much control do you want to give others?
These questions and hypothetical scenarios are often considered to be an exaggeration. And I don’t blame them. But the US could’ve used this trump card later, actually benefiting from it.
Trade War: China’s loss is everyone’s gain
The flow of technology remains untouched
Trade tensions between the U.S. and China have reached a stage where hostility has become a new normal. Both countries have imposed high tariffs on a substantial proportion of each other’s goods and just when we thought the war is de-escalating, President Trump announced 10 percent tariffs on a further US$ 300 billion worth of Chinese goods.
It’s not surprising that China’s technology muscle is independent to a huge extent. The country is the world’s number one smartphone maker in terms of volume, almost every company on this planet relies on components that are made in China, and giants like Baidu, Tencent, and Alibaba offer everything to the end-user.
Sure, Chinese technology giants still rely on a huge chunk of western technology and we’ve already seen how Huawei took the biggest hit. But, while all of us are busy analyzing and understanding the trade war, other countries are making moves, and they’re making them fast.
Other countries swooping in
It’s a classic story of two cats fighting for a piece of cake and a monkey swoops in, fooling both of them. The two incumbents gain nothing in the end and a third-person reap all the benefits. Obviously, a literal translation would be an exaggeration, but we’re seeing a similar anomaly with the Trade War.
According to the U.S Census Bureau, Chinese imports have dropped by US$ 31 billion in the first half of 2019. But, Southeast Asian countries like Vietnam, India, and South Korea have successfully bridged the gap. Vietnamese imports to the U.S increased by a whopping US$ 7.6 billion, followed by South Korea at US$ 3.8 billion and India at US$ 2.7 billion.
These records are a combined figure of all imports and not just limited to technology products and services. But, the tides are changing massively in this industry as well.
Companies are uncertain about their long-term investments in China and are looking for alternatives. Samsung and Intel were looking for safer options for years and currently employ 182,000 workers in Vietnam. These factories assemble smartphones, processors, and almost every component one needs.
According to Bloomberg, the Vietnamese government allowed investment licenses to 1,720 projects in the first half of 2019. Nintendo has decided to shift its Switch production to Vietnam and even Sharp has announced relocation plans.
Foxconn, the maker of iPhones in China has bought a land parcel in Vietnam and announced a US$ 200 million investment in India. Apple, in partnership with Wistron India and Foxconn, is already making iPhones in the country and recently top-of-the-line models were also being shipped out.
Samsung already has the world’s largest mobile phone factory in India that assembles top-tier variants, ready for export. While the quantity is negligible when compared to China’s output, these small steps are an indication that China is slowly losing its edge.
China is giving away cash incentives for new Huawei users
Market share soars in China
It’s no surprise that Huawei is in dire straits. For over a year, the American government has hounded the company night and day. Huawei’s situation in the US is tenuous at best. Naturally, whereas the US is hostile territory, Huawei likely enjoys a warmer reception in its homeland, China.
Now, a new Canalys report has confirmed Huawei’s success in China. According to the report, Huawei’s Chinese market share skyrocketed to 38 percent in the second quarter of 2019. (For reference, Apple — the closest American competitor — is only at 6 percent.) Almost a year ago, Huawei peaked at only 25 percent. Since then, Huawei’s success has climbed consistently.
Somewhat unsurprisingly, Huawei’s success isn’t a purely natural phenomenon. According to the same report, Chinese corporations have started giving away cash incentives for new Huawei users. For example, Xinye Lubricating Oil is offering CNY 500 to employees who switch from an iPhone to a new Huawei device. Similarly, Changsa’s Days Hotel & Suites branch is giving away CNY 200 for employees who use Huawei phones.
Obviously, these corporate pushes are stemming from a renewed patriotism in support of Huawei’s international problems. “As a patriotic company, our company strongly supports domestic brands,” Xinye Lubricating Oil said in a statement.
Unlike foreign countries, China isn’t worried about the mass hysteria surrounding Huawei’s products. For one, the potential loss of Android support doesn’t faze the country. China often relies on its own operating systems and app stores. If anything, Huawei is enjoying a resurgence in support, thanks to Trump’s prolonged trade war.
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