Tightening Of Restrictions Could Be The Nail In Huawei’s Coffin
If Donald Trump, or a member of his administration, were to review the effectiveness of his first attempt to ban Huawei from operating in the United States of America, he’d be forced to conclude that it could have gone better. By preventing new Huawei phones from accessing Google’s App Store on Android phones and ensuring that they came without the latest version of Android or any of Google’s standard apps, the administration hoped that they’d rendered the popular phones as good as useless. That proved not to be the case. Huawei side-stepped the ban by using an open-source Android alternative and provided access to the apps through its own app store, and the effect on Huawei’s sales was negligible.
If there’s one thing that the Trump administration is notorious for, it refuses to take defeats on the chin. Having failed in that first attempt, the administration has come back for another shot at driving Huawei out of the US market – and this new attempt might have a greater shot at succeeding. The reprieve that had been granted for users of older Huawei smartphones to continue to receive official Android updates has expired, and those phones will cease to get those updates, including security patches. Soon, they’ll become a data protection risk. That’s not the main thrust of this latest action, though. At the same time as confirming that the temporary license won’t be renewed, politicians and officials have made it considerably harder for the company to gain access to the chips it needs to build phones. They’ve done that by expanding the number of Huawei affiliates on the US blacklist.
Rather than being a new piece of legislation, this move is an expansion of a much older one. Huawei was placed on the government’s ‘entity list’ in May last year. From that moment on, companies based in the US were unable to sell technology to or do any business with Huawei. 114 known Huawei affiliate firms were added to the list at the same time to prevent the restrictions being sidestepped via those affiliates. Shipments of semiconductors from the US to Huawei’s offices in China were stopped at the same time. It appears that Huawei found a way to continue via other affiliates, though, and they’ve now also been targeted. A further 38 affiliates spread across 21 countries are now on the ‘entity list,’ and the ban on shipping semiconductors has been extended to cover any foreign company that uses American-made technology or software in the design. Huawei is running out of friends to turn to and has already announced that it’s struggling to manufacture new Kirin chipsets for its phones. It had projected that demand would outstrip supply by the end of September 2020. With this further action now implemented, the supply might run out even faster.
This latest development comes barely a month after the Chinese company was dealt a significant blow in the United Kingdom. Before July, Huawei had expected to play a prominent role in the implementation of the UK’s 5G network. The UK government had been under pressure to kick Huawei out at the end of 2019, but in January 2020, it was confirmed that Huawei would be involved in creating 5G infrastructure within the country. That changed in July when the government announced a u-turn and said that Huawei’s technology would be banned. The ban was officially introduced because the UK had concerns about Huawei’s supply chain following the US ban. Unofficially, it’s thought that President Trump exerted pressure on British leader Boris Johnson until the latter caved in and gave the President what he wanted. The move is a potentially self-destructive one for the UK as it will delay the implementation of 5G, and requires equipment that had already been installed to be removed. The financial consequences of the decision for Huawei, though, are thought to be far worse.
At this point, Huawei might do well to remind itself of a phrase that comes from an old Kenny Rogers song and is often repeated at gambling tables. The saying is that you have to know when to “hold ’em” and known when to “fold ’em.” It serves as a reminder that successful gamblers understand when they’ve taken all they can from a game, and when to walk away from the table. In more modern terms, it could be a reminder that if you’ve just hit the jackpot to play slots online, it’s not all that likely that the same online slots game is going to present you with a second jackpot any time soon. The money you spend chasing it is likely to be wasted. In the case of Huawei, which faces a problem more complex than the mathematics that drives online slots games when it comes to sourcing components, the moment to leave the table or log out of the online slots website may already have arrived. They’ve had a good time making money in Europe and the USA, but their prospects for doing so in the future appear to be poor.
This won’t be the end of Huawei as a business. While concerns about privacy and security are raised regularly in the western hemisphere, there’s no such concern in the east. Huawei sells millions of phones across Asia and India, and there’s no reason to believe that it won’t continue to do so in the future. Even if the company were forced to retreat back as far as only trading and doing business within its own country, it would still be able to continue trading. However, this is terrible news for anyone who’s employed by Huawei in the USA and the UK, and the writing is on the wall as far as their job security goes. It’s also bad news if you own and enjoy a Huawei phone because the chances are it’s the last Huawei phone you’ll ever have. The manufacturer filled a gap in the market by supplying high-quality handsets at a lower price than Samsung or Apple, but someone will fill that gap now that Huawei has shown how to do it. For the company’s dreams of global domination, though, this tightened set of restrictions is probably a death sentence.
This article has been published in accordance with Socialnomics’s disclosure policy.
