It seems that there is a textbook in America that is taught to all politicians, young and old. When you have an enemy that needs to be destroyed, you should repeat this everywhere and always, use rhetoric at every opportunity. They took it into service with Cato with his “Carthage must be destroyed”, which entered the centuries, or spied on somewhere else, it is not so important. Almost two years of US sanctions against Huawei, and every time the telecom giant falls to its knees, America destroys its business and celebrates victory. Sometimes it seems to me that these guys just like the holidays, so you have to look for such simple reasons. A complete lack of understanding of the technology market on the part of American officials, the interaction of companies with each other, multiplied by the desire to destroy the largest player, since he is the strongest competitor. At the same time, the approach is simple: to increase the pressure and get a bigger club, so that this time it is already guaranteed to destroy the enemy. And the enemy is not only alive, but also allows himself to continue working, categorically refuses to die. An even bigger club is taken from the arsenal and the approach to the projectile is repeated. And no one comes up with the simple thought that at some point Huawei will cease to be a whipping boy and may fight back. Cornering Huawei is possible, but it will mark the end of the world as we know it. Technologies will again be divided between countries and continents, political blocs will develop their directions, and they will become independent.
These days, many are discussing the next round of sanctions against Huawei, the lack of Android security patches that the company will no longer receive. Shouts are heard: “Everything is lost, it’s time to get rid of smartphones and other equipment, to look at alternatives.” The problem with all discussions of sanctions on Huawei is very simple – people do not understand how the market works, how it can change and why what we are seeing is just the tip of the iceberg. A new world is being born before our eyes, but it is almost impossible to see it in the reflections of the trade war. And, surprisingly, it is Huawei that is becoming a key player in this world.
The probability that the company will be broken always remains nonzero, but I think that this will not happen. And so it’s high time to discuss what is happening with Huawei and what sanctions are imposed on the company, what they will mean.
We took Android away from them and they are destroyed! Act one
The first major manifestation of the sanctions was the ban on US IT solution providers from working with Huawei. The blow was dealt to the market of mobile devices and not only. It turned out that Google was not officially able to work with Huawei, provide new versions of Android and help develop software for devices. One of the key partners suddenly disappeared, and Google employees were banned from any, even informal communication with those who work for Huawei. It immediately turned out that American officials had shot themselves in the legs, since many small operators used Huawei equipment, it was impossible to replace it with something. There was no money, no similar infrastructure solutions. So the sanctions were immediately postponed for three months to give their companies much-needed respite. But since August 2019, no, no! No contacts and collaboration.
Attempts by American companies to explain to officials that these sanctions primarily hit their business, their interests, have not been crowned with success. Politicians and businessmen spoke different languages. The first said: “Look, what a club we have, we hit it like a hit, this company is already dead, wait a little.” The second ones twisted their fingers at their temples and claimed that so far they had only hit them and deprived them of their money. After all, Huawei has built itself into the global supply chain – the company has always sought to purchase components from suppliers around the world, up to a third of the costs fell on American companies. That is, it was about tens of billions of dollars on a quarterly basis. And then American companies suddenly lost this money, instantly and irrevocably.
Someone from the Silicon Valley lobby has found an elegant exit. Officials were offered to hit the sickest, take away Android, without which Huawei cannot be a competitor in mobile devices. But at the same time it will create something of its own and will sell this system in its home market. The loss of the Chinese market will not bring sorrow to the same Google, but hardware for devices will be bought from American companies, life will go on as usual, and everyone will be happy.
In 2019, no one could have imagined that Huawei would be able to create its own alternative to Google’s app store, replace their services and do it under incredible external pressure. In a short time, the company on the free version of Android created its devices with Huawei Mobile Services (HMS).
This is not just a titanic work, but something that is difficult to imagine. It can only be compared with the space race at the dawn of space flight. By straining all the resources, Huawei has created a working Android alternative with GMS. Widespread sales of smartphones with HMS in Russia began this spring, and they showed that the alternative suits buyers, they do not see much difference. The same App Gallery app store has successfully replaced the Play Store. There are many problems, however, but they are not perceived as fatal.
The actions of American officials have created a giant that is now independent of Google, moreover, it is creating its own system. In fact, the United States has lost its main tool for collecting information about residents of other countries. Huawei does not transmit anything to America about its users, and the collection of information itself is arranged differently, it is trite less. It is a matter of time before other manufacturers start connecting to HMS, they will start producing such smartphones for different countries of the world.
Arguably, Huawei has not only survived, but created an alternative to Android with GMS services. And this is already a huge achievement.
Now a couple of words about loud headlines and articles about how Google has deprived Huawei of security updates for Android and now the company’s smartphones will become leaky, they can be hacked. Not a single HMS-powered smartphone has received Android security updates anyway, the company has created them in-house. For smartphones created under the GMS, such updates came from Google, but now they are gone. What does it mean? Yes, absolutely nothing, Huawei will continue to release updates and send them to user devices. They can be found in a variety of sources, and it is impossible to prohibit a company from doing this.
More serious is the threat that SafetyNet API will not see security updates and therefore banking applications will stop working on smartphones that are released with Google services. How can I put it mildly? It’s game!
Read about this API here.
In theory, Google could use this or any other tool to hinder the operation of Huawei / Honor smartphones that came out on GMS before 2020. But why and how? Legally, there is not a single prerequisite for this. The presence of security patches does not affect these or those services in any way. For example, Android Pay, in theory, shouldn’t work without the latest security updates. In practice, it works for me on a smartphone of 2018, where there is not a single update during this time. A dual approach will not do the company any good, but will only make it harder for Google to work with partners. And it will bring even greater losses. It is enough that on Huawei smartphones Google has lost all their services and this has already affected the company’s search share and the promotion of its services.
The Google map in the game against Huawei has already been played, and it is impossible to squeeze anything else out of it. At the moment America has lost in this, Huawei was able to create an alternative to Google. It is hard, not fast, but development is going in the right direction, and it does not stop. Again, it’s a matter of time before Huawei starts distributing HMS to other players.
We took away Android, we take away the processors and destroy them again. Second act
At Huawei, everyone did not die in any way, which, of course, made people with batons unnerved. The next act was a ban on the supply of equipment for the production of processors, programs for their development, and at the same time the sale of finished products, that is, the very chipsets. It is no secret that it was America that created microelectronics, and therefore many companies from the United States occupy key positions here, in particular, in the field of software for creating the very processors.
Strong move? Certainly. Does he kill Huawei? Perhaps not, because the company repeats exactly what it did with Android. Begins to create his own solutions. It will take longer, it will be more difficult. But Huawei has time, funds and government support, which already views the private company as a victim of a US attack and provides protection at all levels. But so far it has not taken anything in response.
Let’s put the question differently to look at the situation. Could America Really Cut Off Ready Processor Shipments For Huawei? On paper, it looks exactly like this, because if someone installs the processors, then sanctions will follow, and the losses will be huge. But after all, sanctions do not work or work poorly, we know this for sure, because we live in a country whose economy was “torn to shreds,” according to the US President in 2014. We are also isolated from the rest of the world. Roughly the same thing is happening with Huawei, only on a different level.
Everything is on sale in this world, and here the only question is cost. If Huawei pays a little more for the risk, then someone will definitely start supplying processors for their devices, there is not the slightest doubt about that. Will it be legal? From the US point of view, no. And they will try to stop the sale of such processors. Will they be able to? Definitely not, since they have no influence in China. Outside of China, many countries will not support US attempts to dictate terms. And the world will be divided, this is already happening on the example of infrastructure for 5G. And so far, only American companies are losing from this, since they have lost a large client. But here everything is much more complicated. After all, now Huawei is creating its own development tools, its own equipment for production. And he begins to do it on old technical processes (for example, 28 nm), which makes you smile. Yes, this is an unconditional rollback, but it is temporary, the company has already proven that it can grow rapidly.
But you know what Huawei hasn’t done yet? She didn’t give back. After all, if the sanctions reach a situation where restrictions threaten the existence of the company, then it can formally ban the use of its patents in the field of 5G in the United States. This action is on the same level as the actions of US politicians. And formally America will have no choice but to give a damn about international agreements, the patent system and just use other people’s developments. Huawei has about a third of key patents for 5G, and the company may ban their use due to unfriendly US actions.
The entire development of the situation goes in this direction, which will ultimately lead to the destruction of the current market. For example, inside China the theft of technology will be a heroic act for the benefit of the country’s development, but exactly the same will happen in other parts of the world. Patents will stop working, and their holders will begin to lose money from royalties. It is difficult to predict where this will lead us, but the world will be shattered into fragments, somewhere the old laws will operate, but somewhere they will not. The products of those who will use other people’s technologies without deductions will become cheaper and, therefore, more popular. Some countries will begin to close their markets to these products, but the economy will eventually outweigh.
Huawei has created a lot of problems and slowed down the development of the company, there is no doubt about it. But they could not destroy the company in two years. The size of the cudgel is increasing every six months, and the impact on Huawei is getting weaker and weaker. It seems to me that as long as American politicians do not bother studying the market and at least a minimal understanding of how it works, the rake race will continue. The losses of American companies in this war so far outweigh all that Huawei has lost. But then you can repeat from time to time that the company is destroyed, it has no chance and it is “torn to shreds”. This usually means that everything will be good for the company in the future.
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