Caixin
Sep 25, 2019 10:00 AM
TECH TALK

Pressured From Abroad, Huawei Looks Home for Support

In all my years of reporting on tech, I’ve seen lots of reasons for the rise and fall of companies. In China, hubris and failure to jump on the latest trends are two of the top reasons for such declines, leading to the downfall of such former climbers as Amazon imitator Dangdang, former gaming giant Shanda Games and Renren, which once billed itself as the next Facebook.

But the ongoing battle between U.S. President Donald Trump and telecom giant Huawei could take the prize as the first potential downfall of a former tech highflyer for purely political reasons. That slow-motion collapse, at least for the company’s formerly turbocharged smartphone business, was on display last week with the launch of Huawei’s latest high-end models, the Mate 30 series, at an event in Germany.

While gadget fanatics were full of praise for the latest phones, which really are top-of-the-line and can go head-to-head with the latest iPhones from Apple, more attention was focused on what the phones lacked: access to Google’s Play Store and the wide range of apps that provides for phones using the Android-based operating system outside China. Those of us in China have been used to this reality for years, since Google’s app store has long been blocked here.

That means people like me who live in China and have Huawei phones must get our apps from local app stores, which is fine if you want local favorites like video streaming app Bilibili and Baidu Maps. But when it comes to popular non-Chinese apps like the car-hailing Uber service and Whatsapp instant messaging, people like me are out of luck. To get such apps often requires Herculean efforts, though it is possible if you’re persistent enough.

Now it seems that buyers of Huawei’s newest phones outside China will be in the same boat as me, having to jump through numerous hoops just to get their favorite apps. The reason stems from Trump’s decision to cut off Huawei from its U.S. suppliers earlier this year, ostensibly as punishment for selling American products to Iran a few years back in violation of U.S. sanctions.

Trump later relented and granted Huawei a few exceptions to that ban. But apparently that didn’t apply to Google, whose free Android operating system powers nearly all of the phones bearing Huawei’s own brand and that of its lower-end Honor line of smartphones.

One source I talked to on the matter noted that gadget junkies were buzzing over the matter online the week of the Huawei announcement, with some saying they were able to successfully get the Google Play Store onto their Huawei phones, while others tried without success. Presumably they were talking about earlier models, since the company didn’t give any official launch dates for the Mate 30 series in China or elsewhere.

The only other thing we know is that models from the series will be priced quite similarly to Apple’s latest iPhone 11, with the most basic models from both priced at about 800 euros ($880). Here we should also note that Huawei’s latest phones will support newly emerging 5G services, while the newest iPhones will not.

Looking inward

I talked to quite a few smartphone-watchers for their take on things, and without exception they all said we’re likely to be heading into a new inward-looking era where Huawei focuses on its home market and sharply scales back its global aspirations, at least for smartphones. That’s not all that bad since China is now easily the world’s largest smartphone market with about 100 million handsets sold per quarter, or nearly a third of the world’s total.

That trend is already bearing out in the numbers. Some 62% of Huawei’s smartphone shipments were in China in this year’s second quarter when the U.S. first took its action, compared with 50% in the previous quarter when it was still business as normal, according to IDC.

The new inward focus has also been apparent in the Chinese market, where Huawei is trouncing domestic rivals like Xiaomi and Oppo, as well as foreign ones like Apple. Huawei boosted its share of the China smartphone market to a whopping 38% in this year’s second quarter, up 10 percentage points from a year earlier, with all other major players dropping by 10% or more, according to industry tracker Canalys. Analysts attributed the shift to a wave of patriotic buying by Chinese consumers outraged at U.S. actions, along with Huawei’s own shifting focus to its home market.

With such an inward shift, some might be scratching their heads about why the company chose the German city of Munich for its latest Mate 30 series launch. Consensus seems to be the move was at least partly a show of defiance. But one of my sources also told me the Munich launch was planned long before all the latest uncertainties, and that Huawei had perhaps been hoping for some kind of breakthrough that never came all the way up to the final product launch.

Due to the way product cycles work, Huawei is unlikely to see any huge drop-offs in its overseas sales until the start of next year, the analysts say. That’s because most of its phones before this latest Mate series supported the Google app store, and the effects of the disappearance of Google apps won’t be noticeable until those older models end their lifecycles, a process that typically takes around nine months.

At the end of the day, my industry contacts told me that Apple and Samsung are likely to benefit most from Huawei’s retreat from the higher end of the global smartphone market. At the same time, other Chinese names like Xiaomi and Oppo could benefit from any retreat at the lower end, though they pointed out consumers in those markets may care a bit less about the absence of Google apps.

Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com

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