Plan B in a tech cold war, for Huawei and China

May 27, 2019 10:38
Visitors try Huawei devices during the Mobile World Congress in Barcelona in 2017. The Chinese firm will accelerate efforts to build its own ecosystem, using domestic suppliers and partners, in the wake of a US supply ban. Photo: Reuters

US President Donald Trump has banned American use of foreign telecoms company gear, taking aim at China's Huawei. In the wake of that move and other US curbs, Google has cut off Huawei's access to the Android operating system. The Huawei saga is believed to be a prelude to a US-China tech cold war.

Politics might be too complicated for ordinary people. But one thing that is uppermost in the minds of customers is whether they should continue to use Huawei products. Huawei’s founder Ren Zhengfei said in a recent interview that Huawei would be "fine" even if Qualcomm and other American suppliers suspend chipset sales to Huawei.

US politicians underestimate Huawei’s capability; the Chinese firm can make chips as good as American products, Ren said. He added that the US trade restrictions have no impact on Huawei’s 5G plans as rivals cannot catch up soon.

We should note that Huawei has built a big business empire and may have beaten the US in some technologies related to 5G equipment. Huawei also overtook Apple as the world’s second-largest smartphone maker, in terms of shipments and global market share, according to research firm IDC.

As for Google’s curbs on Huawei, since most Google apps are banned in mainland China, and the mobile app market in the country is dominated by offerings from homegrown giants such as Tencent and Baidu, the impact on Huawei’s domestic sales will be limited even if the company is blocked from using Google and Microsoft software.

In Huawei’s business beyond mainland China, Europe is the firm's key market. The Chinese giant grew fast overseas with competitive pricing, as its top-of-the-line smartphones cost much lesser than those of Apple’s iPhones, and have a comparable, or even better, spec sheet.

In the domestic market, Chinese consumers are less dependent on services of US-based tech firms such as Amazon, Facebook or Instagram. Instead, they are addicted to domestic services like Taobao, WeChat, and Douyin. Chinese web users are fine without Google’s Play Store, Gmail, YouTube, Chrome or other software and apps. They can make do with Weibo, Jinri Toutiao and other apps.

Huawei said it had a backup plan if Google were to cut off access to Android. The Chinese firm has been working on its homegrown operating system (OS) to compete with Google’s Android.

Looking beyond Huawei, China has a Plan B in relation to the mobile technology landscape. More and more Chinese tech companies would accelerate their moves to reduce reliance on foreign supply, building their own ecosystems and new supply chains.

As former Google CEO Eric Schmidt once suggested, the internet world could be split in two within a decade: One, a Chinese-led internet and the other, a non-Chinese one led by America. Given the recent developments, that scenario might well become a reality soon.

This article appeared in the Hong Kong Economic Journal on May 24

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Information Technology Federation Chairman