History as usual goes in a spiral, gaining momentum with each turn. The first test of the pen for America was ZTE, the sanctions came out of nowhere, but at that time the United States at least a little troubled itself with the evidence base. More precisely, they offered a deal, ZTE pays fines of several billion dollars, changes top management, and after that they will be allowed to work in world markets. Moreover, it was not about working in the United States, but about access to American technologies that were used by the company in its products. The story goes back to 2016, but the development of the situation is indicative: one fine, then temporary relief, and a new round of sanctions, and new fines.
When the sanctions against ZTE were first introduced, it was obvious that this was training before the attack on Huawei and its growing ambitions. No joke, the company was confidently heading towards becoming number one in the smartphone market. The opposition to Huawei grew and resulted in full-scale sanctions, about which we have published more than a dozen articles. If you briefly describe the situation with Huawei, then the company was accused of all mortal sins, but not a single proof of this was given, gentlemen need to take their word for it! The sanctions were exactly the same as for ZTE, but they were gradually expanded and adjusted to the current situation. Ultimately, Huawei was forced to sell the Honor division to a consortium of Chinese investors in the hope that this would avoid sanctions.
The official position of the United States regarding Huawei sounds simple: the company is considered a gangster and a racketeer, under one of the old laws, it is these concepts that define the largest telecom player in the world. This is an attempt to weaken the development of 5G, to achieve weakening, and ideally, the destruction of a competitor at any cost. The game is geopolitical, and this is part of the US trade war against China, in which the task is to weaken the competitor as much as possible, to throw China back many years. So far, America has failed to do this, and the collateral damage inflicted on its own economy looks unacceptable. But the printing press hides all these flaws.
The bans imposed on Huawei hurt American corporations, for example, Google is losing an important partner, the emergence of HMS was a painful blow, as it replaces the company’s services. Ultimately, the US war against China and, in particular, the same 5G became a personal matter for Google. The actions of American politicians have created a potentially powerful competitor, plus it cannot be controlled. And Google decided to help officials, identify pain points so that a new round of sanctions would not allow Huawei to create an analogue of their services in foreign markets. Google does not apply directly to the Chinese market, since it understands the whole range of restrictions and does not want to get involved there. The latest package of sanctions from the Trump team was so carefully calibrated and agreed for the first time with representatives of American IT companies, they pointed out weaknesses and pain points that the result was stunning.
Huawei is considering the possibility of not producing smartphones at all for several years. None! There is simply no way to ensure the volume of production, and only the local Chinese market remains safe, which is a lot, but clearly not enough. Honor, which they tried to save by selling to Chinese investors, is currently at a crossroads. A new line of smartphones on Google services should be released in the spring, which will give an impetus to the development of the company. In America, permits to work with the new company have not yet been issued, they were waiting for a new president to come to the White House. According to rumors from the American IT community, the new team plans to take an even tougher stance to show that Trump was previously unhappy with the Chinese. And quite naturally, there are voices that Honor is still the same, and this is just a trick to keep the team, R&D and everything else. And then one day it will all return to Huawei. But this means that the Chinese want to cheat, and it is absolutely impossible for them to do this.
The course is taken to destroy one of the key smartphone manufacturers, to burn everything to the ground. Other Chinese companies will take its place, for example, the sales growth of Xiaomi is simply amazing, the company takes off.
The outgoing Trump team finally makes Xiaomi a gift, announces sanctions, but in a very narrow version. For now, it is only necessary to withdraw American money by November of this year, to stop investing in Xiaomi. Shares naturally begin to go down, the company loses access to available money.
The charge is win-win, Xiaomi is working closely with the Chinese army. The gentlemen cannot and do not want to prove this accusation, since it is self-evident that a large Chinese company cannot but serve for the good of the homeland. And if suddenly someone starts asking questions inside the United States, then you can always find photos of Chinese soldiers with Xiaomi phones and say, they say, you see, the military uses their technologies. Sadly, this level of rhetoric was about DJI drones, as evidenced by photographs of the military using drones that are sold in any store. For example, you could buy them at the DJI brand store in New York. A photo of an American teenager with such a drone in this logic is an accurate proof of DJI’s work with local teenagers.
Xiaomi went to an American court, the demand sounds simple – to remove the company from sanctions. In the case of Huawei, there was exactly the same appeal to the court, which ended in nothing. The country’s highest interests require the courts not to grant requests from Chinese companies when a trade war is raging. I do not believe that an exception was made for Xiaomi. Moreover, this is only the first part of the sanctions.
It is easy to assume that China’s weakening implies a blow to key companies, including telecoms. The destruction of Huawei / Honor smartphones means Xiaomi is next in line. It is necessary to reduce the share of the company as much as possible, impose sanctions, and strengthen them. The logic is that there will be a strengthening of other Chinese players, they will raise their heads, invest money in the development of the direction of smartphones on Google Android. They will become strong, and it will be possible to cut them off.
The situation is such that no one wants to die and lose foreign markets. For example, Xiaomi makes it clear that they are ready to give up, in theory, from Google. The company has held talks with Huawei and is ready to adapt HMS services to its devices. At the level of China, the first steps have been taken to get working devices and firmware for key models by the third quarter of 2021. So far, this is more of a research project.
Interestingly, Xiaomi struck the gray market for the first time, with a company inside China abandoning the production of local models with support for GMS services. That is, now, when buying a smartphone in China, you will not put Google services there easily and simply. Of course, this is just an argument in this war, an attempt to show Google that we can answer you anyway. Not a very frustrating blow to Google, just a demonstration that it is possible to move away from GMS in other countries as well. But all this is written with a pitchfork on the water, the situation is changing so quickly that it is unclear what it will be even tomorrow or in a few days.
America’s game is simple – destroy big companies, weaken them. This means that the sanctions against Xiaomi are not over, the history of Huawei will repeat itself. In the extreme case, this will destroy the company, since it simply does not have a supporting business infrastructure.
But apocalyptic predictions are a thankless task, you need to think more about what the Chinese can answer. Before the appearance of their element base, they will take at least 2.5-4 years, while the lag behind the current generations of iron will be noticeable. But they will further reduce this gap. It turns out that the same Xiaomi needs to hold out for another 2-3 years, which does not look like an impossible task. And the Chinese government will clearly help with this. But most importantly, the sanctions pressure in the trade war has already exceeded the reasonable threshold, and China will soon begin to impose its own sanctions against American companies. What will it give us? The intensification of the full-scale crisis that is observed in the market today, there is simply no other way. Alas, politicians are destroying the world of technology quickly and very effectively, now the world is divided into pieces. And most importantly, all the players suddenly found themselves in a simulation of hell, where a new game level suggests that it is necessary to calculate the behavior of a monkey with a grenade, which is still a task.
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