133,079 views|May 14, 2020,03:34pm EDT
[SIZE=7]Why Huawei’s New Update Will Lose Millions Of Android Users[/SIZE]
Zak DoffmanContributor
Cybersecurity
I write about security and surveillance.
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Happy birthday, blacklist. Set against the backdrop of a global pandemic and heightened tensions between Washington and Beijing, with the Chinese even accused by the U.S. of hacking its hunt for a vaccine, the sanctions imposed on China’s leading tech player move into their second year tomorrow, May 15.
On the surface, little has changed in recent months: Google is still missing from Huawei’s new devices; U.S. officials still lobby hard for other governments to exclude Huawei from their 5G plans; the Commerce Department is expected to extend the temporary license for maintaining legacy products—again; and the tech giant keeps growing the lock on its domestic market to keep revenues on track.
But dig deeper and you’ll find significant change underway. Huawei has adjusted, it has a new long-term strategy with no turning back. You can assume that every one of its actions is thought through and deliberately timed. And that should be the lens through which you view this month’s surprise update of the P30 Pro smartphone, a year-old device that predates the blacklist and still carries Google.
Huawei is milking the P30—part cash-cow and part stop-gap, its hope is that it can carve out some international sales before millions of users outside China turn to competing brands—Samsung, yes, but more irritatingly Xiaomi also. The new P30 is an admission that international smartphone sales are unlikely to recover in any meaningful way for years. And that is very bad news for millions of brand loyalists.
My colleague David Phelan has written an excellent review of the P30 itself. It is likely to sell well at a keen price point, with some new features and design touches. But it’s not a new phone. And the Mate 30 and P40, Huawei’s genuinely new post-blacklist devices have sold poorly outside China. The company is now suffering record sales drops in key overseas markets where once it was on a tear.
Take a different view of the new P30 though—timed to coincide with the first anniversary of the blacklist, perhaps a taunt of sorts, threading its way through Google’s contractual conditions to maintain its year-old software license. But, much more importantly, it runs counter to everything Huawei is doing strategically. It is an admission of defeat for the Mate 30 and P40. It heralds a new era. And with U.S. President Trump confirming that the blacklist will run for another year, there is little chance of a new flagship device succeeding outside China anytime soon.
Meanwhile, Huawei is doing two things. First, it is piling time and resource into a new alternative to Google and its software and services. Since the earliest days of the blacklist, the company’s management has admitted that developing a viable alternative to Google will take years. That work is underway. It may or may not succeed—realistically its biggest challenge is Xiaomi, which is seeking to replicate the cut-price quality reputation Huawei used to build its overseas brand.
But, more notably, Huawei is also piling into other areas—cars and wearables, cloud and AI, silicon and IoT. Its recipe remains the same—build a leading position at home, then export with its now “un-Americanized” supply chain. And in those other areas there is no “Google factor” to contend with. It has an open field.
Early last year, Huawei had reinvented itself from equipment to consumer device manufacturer. I said at the time that this carried huge risk—rock solid business sales evolving into fickle consumer demand. But the company’s growth and profits were coming from consumer above all else. Since the blacklist, Huawei’s exposure has grown more acute. Not just overly dependent on consumer, but now overly dependent on consumer [I]just[/I] in China—its international hedge reversed. Forays into new fields need to plug today’s revenue shortfall, but more critically hedge against any kind of drop-off at home, which currently would be a disaster.
There has been a major PR push from Shenzhen ahead of the blacklist anniversary. We have seen a focus on cloud and IoT, greater media exposure of the new automotive business unit, and striking 5G contract wins at home. When blacklisted Huawei and blacklisted China Mobile 5G-enabled Mount Everest, you can bet that was intended to send a message. As was the latest news that 120 Chinese car makers have signed up for 5G enabled vehicles. All of which is intended to say—we have a 5G lead over the U.S. and will continue to invest to widen the gap.
A year ago, Huawei had completed its reinvention from equipment maker to smartphone maker. That has been undone—it is only a matter of time before the effects are more publicly visible. Millions more consumers will move away from the brand while HMS, HarmonyOS and the AppGallery continue to develop and find their feet—perhaps those consumers will come back, perhaps not.
The question for Huawei now is whether it can bridge investments in areas where it is successful at home into other markets at the same scale it achieved with phones. And, perhaps even more critically, how the company is affected by the heightening tensions east and west, which will widen the accelerating technology split.
Huawei has consistently described 2020 as a year for survival—that is tongue in cheek. It is too well funded, successful at home and supported in Beijing to suffer any material shock. But 2020 is a year of reinvention. The irony is that the pandemic is changing companies and industries at an unprecedented rate and scale—Huawei’s shift to new territories will be simply one among many.
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Zak Doffman
I am the Founder/CEO of Digital Barriers—developing advanced surveillance solutions for defence, national security and counter-terrorism. I write about the intersection
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