American Adversary: Huawei banned from working with US companies

June 4, 2019

2 min read

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What's going on here?

In the latest episode of the US-China trade battle, US President Donald Trump has signed an executive order banning Huawei from working with US companies, leading to Google, Microsoft, Intel and ARM among others cutting ties with the Chinese firm.

What does this mean?

The executive order has been made against so-called “foreign adversaries” (which includes Huawei). The ban’s rooted in concerns that the Chinese government could try to capitalise on Huawei’s technological reach to spy on American citizens and businesses. Essentially, the executive order means that US companies are forbidden from working with the Chinese tech giant on future devices. Crucially, while the ban lasts, US companies will also not be supplying Huawei with the software and components it needs, nor will they be collaborating with the brand.

What's the big picture effect?

For Huawei, this is bad news. The company loses out as it can no longer conduct business in the American market and can not make use of its US suppliers.

In the short term, Huawei could probably survive within China without Google’s software. In China, where national policy dictates that Google (along with its associated services, such as search, maps and YouTube) is banned, the main problem would be the lack of technical support from the company for troubleshooting. Outside of China, however, the absence of Google’s app store and services would be far more serious for Huawei and it is likely that the brand would need to create its own operating system to survive. This would be no small task: Apple and Android are so dominant here that, at the end of 2017, only 0.1 per cent of the smartphone market used an alternative.  In the long term, Huawei’s dependence on ARM licences for US chips poses a further threat to the company’s survival.

Much depends on how long the ban against Huawei lasts. President Trump has suggested that he might use the brand to push China towards a more palatable trade agreement with the US and, if an agreement were to be reached, business could continue as normal. However, in meantime, this has implications for the future of the smartphone market. Samsung dominates the Android market but in recent years Huawei has gained a reputation for its innovation, seamless designs and technical prowess, threatening Samsung’s position. In the first quarter of 2019, Huawei sold 59.1 million phones, but if the ban damages the firm’s image too severely, this success may be short-lived. Moreover, while the ban continues, Samsung continues to hold the upper-hand: it only has to compete, while Huawei must compete whilst preparing a potential challenge for the Android-Apple operating system duopoly and somehow trying to convince the US that China won’t use it for espionage

Report written by Anna M

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