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Huawei has a chance to get its smartphone business back on track. It won’t be easy

Huawei has a chance to get its smartphone business back on track. It won’t be easy

CNN News Source

Huawei has a chance to regain lost ground in the battle for smartphone supremacy after President Donald Trump reversed course on a campaign against the company that was hurting global sales.

Trump said over the weekend that he would lift some restrictions that barred American firms from selling critical tech and components to Huawei without a US government license.

“US companies can sell their equipment to Huawei,” as long as the transactions don’t present a “great, national emergency problem,” Trump said at the G20 summit in Japan on Saturday.

Huawei sold more smartphones than Apple in the first three months of 2019 and had ambitions of overtaking Samsung as the world’s largest smartphone maker by 2020.

But the US administration’s restrictions, imposed on May 16, caused an immediate dent in the Shenzhen-based company’s international business. CEO Ren Zhengfei said earlier this month that Huawei’s global smartphone sales plummeted 40% between May 17 and June 16, compared to the previous 30-day period.

“We acknowledge the US president’s comments relating to Huawei [on Saturday] and have no further comment at this time,” the company said in a statement.

While it remains unclear which US companies will be allowed to sell to Huawei, analysts say the most important supplier for the company’s smartphone business right now is Google. The Silicon Valley tech firm restricted Huawei’s access to its Android operating system and apps last month to comply with Washington’s restrictions.

“Assuming that Google is not really a problem and gets the license to sell to Huawei, that’s a huge sigh of relief for Huawei,” said Bryan Ma, an analyst with research firm IDC.

Like most of the world’s smartphones, Huawei devices use Google’s Android operating system, which includes popular apps and services like Google Maps and Gmail.

Without access to that ecosystem, Huawei’s smartphones would be a lot less attractive to users outside of China, where most of Google’s popular products are banned. Roughly half of Huawei’s smartphone sales last year came from outside China, according to research firms Canalys and IDC.

For the last six weeks, international retailers and consumers were concerned about whether Google services and security updates would continue to be available on Huawei phones, according to Ma.

“Consumers obviously don’t want to buy a phone that doesn’t give them the service they want, and retailers don’t want to take on a bunch of inventory that can’t sell,” he said.

Google declined to comment for this article, referring to an earlier statement noting that the company is “engaging with the Department of Commerce to ensure we’re in full compliance with its requirements.”

Existing Huawei smartphones, which still have access to Google systems and software updates, could also be losing their resale value in key markets.

One of Huawei’s latest phones, the P30 Pro, sells for €999 ($1,130) in Europe. After Huawei was blacklisted, most traders were offering only €100 ($113) to buy back the phone, according to Ben Stanton, an analyst with research firm Canalys.

“A lot of customers were quite keen to return devices or switch brands after learning the device in their pocket had dropped in value,” Stanton said.

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Users “are now paranoid about those devices,” he added. “There’s a lot of brand building Huawei will have to do.”

Beyond Google’s suite of services, Huawei phones also rely on US suppliers like Qualcomm, Broadcom, Qorvo and Skyworks for the latest generation of tech that converts information and data to radio signals.

Huawei has said it started stockpiling tech and components last year, anticipating Washington would slap it with an export ban.

At a press conference last week, rotating CEO Ken Hu said: “in terms of where Huawei stands right now, our overall supply is not affected.”

Even if the company is able to buy all the US tech and software needed for its smartphone business, the US-led pressure campaign against Huawei will have lasting effects.

“Those retailers and consumers, their confidence is shaken. Now there’s second-guessing, there are question marks around Huawei, is (a US export ban) going to become a problem again?” said Ma.

“The damage to Huawei, the scar, is still there,” he said.

 

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