Huawei, All or Nothing 2020
In the Crosshairs
Huawei faces extraordinary odds as it heads into 2020, being in the crosshairs of the US government has left the company rethinking how it will conquer the next decade. If there is a lesson to be learnt from Huawei’s history, it’s the Shenzhen tech giant’s ability to reinvent itself, survive and even thrive in the most difficult conditions.
The US-China trade war seems to be grinding to a halt with the signing of phase one of the trade agreement, however let us not forget the fundamental issues that started this grand de-coupling between the world’s 2 largest economies. The US side claims that China’s meteoritic rise in global trade was based on unfair trade practices and at the core of it, patent infringements particularly in tech industries. It is not a surprise that Huawei has found itself embroiled at the very center of the largest trade war in modern history.
Huawei is a symbol of China’s inevitable transition into a high-end manufacturing hub. Before the restrictive measures imposed on Huawei by US Commerce Department it was well on-course to become the world’s largest smartphone maker. A shining example of customer-led innovation providing the world with the most competitive ICT infrastructure and smart devices. Huawei’s dependence on US firms became its Achilles heel when the US Commerce department’s restrictive measures kicked into effect. It left the tech giant in a precarious position, excluded from using Goggle services and with its devices shipping with no Google Apps many analysts predicted a quick and decisive end to its global ambitions.
Eye on the prize
Huawei also faces significant challenges on other fronts, particularly US lobbying against the use of its cutting edge 5G infrastructure on the premise of national security threats albeit the lack of substantial proof to this claim. In May 2019 Huawei announced record revenue, exceeding US$100 billion for the 2018 financial year despite the US onslaught on the company. This has become more than just a ‘David Vs Goliath’ story, how Huawei will adapt to the challenges it faces will no doubt be the tech story of the next decade. To survive, Huawei must not only persevere but continue to innovate across all product categories.
Building a quality Ecosystem
Let’s take Apple for an example; Apple’s success has been built upon a well-connected ecosystem of services that keep expanding. Apple’s recent venture into financial services -Apple Card and content streaming - Apple TV+ is an example of how the tech giant is reshaping itself to take on the new decade. With the global smartphone market peaking and facing stiffer competition in emerging markets Apple is looking inward for new growth. Creating new services that keep users locked in its orbit. Apple is also planning to start manufacturing iPhones in India to provide a more cost-effective model for the world’s second most populous nation.
Clearly ecosystem thinking is at the very core of Apple’s strategy for the next decade. All you need to do is watch one episode of an Apple TV+ show, to see how much the company is trying to keep users locked in. It might not be Netflix but Apple TV+ is already making a buzz, “The Morning Show," has received multiple Golden globe and SAG nominations. Apple TV+ is the first streaming platform to receive recognition from the HFPA (The Hollywood Foreign Press Association) in its launch year. What can Huawei learn from Apple’s play book?
Well what they already know is: creating a thriving ecosystem of services and developers will not be easy. The challenge here is not technical it is more economic. How can Huawei incentivize developers enough to develop quality APPs and services for its users? In an area that has been dominated by Apple’s app store and Google’s android community is there really room for a third player. Well the answer to that is yes, well ‘kinda’. Huawei has already been shipping its smartphones without google services in the China Mainland market, where Goggle is banned. The question is can they replicate this success abroad without Google Apps? I guess we will find out. For Huawei to win the next decade it should continue to invest in R&D and its ecosystem of developers. This already seems to be the case, on January 15 2020 during the Huawei Developer Program in London the company announced its plans to further incentivize developers to create apps for its mobile ecosystem. Huawei has offered over $25 million to UK and Republic of Ireland developers in a bid to attract more quality Apps and services to its mobile ecosystem. There is more where that came from for sure. It is still too early to tell but by offering enough incentives to developers Huawei might just break Google’s and Apple’s duopoly in the mobile app market.
Globalization through synergies
The 2019 McKinsey institute global report on China’s changing relationship with the world concludes that in economic terms China is becoming less exposed to the world, despite having 111 global fortune 500 companies, less than 20% of their revenue is earned overseas. In terms of technological value chains, China is highly integrated with the world, can Huawei take advantage of this trend to create a new model for globalization for China’s top companies. By identifying local partnerships that help it overcome the legal and administrative hurdles Huawei can make significant progress in foreign markets. How would that work?
Investing in tech transfer through licensing parts of its key technological infrastructure to local companies in the global markets it seeks to enter. In September 2019 Huawei offered to license Huawei’s 5G platform to any American firm that intended to manufacture and install it. Licensing would solve a lot of Huawei’s legal hurdles and developing a framework to roll out a licensing model for its technology in other markets could make it easier to succeed abroad.
Perhaps even more crucial to Huawei’s ability to survive in the next decade is how it will lower its exposure to US tech suppliers. It cannot go it alone, but it must continue to invest in R&D to ensure it can retake control of the production of key components required for its products. However, that is a very difficult task and it takes time for R&D to yield commercially viable results, time that Huawei doesn’t have. Huawei should continue to seek new partnerships and suppliers in new markets particularly in Europe, South America and Africa.
As the UK plans to introduce 5G infrastructure there has been tremendous pressure to exclude Huawei from the process. However, most tech analysts and policy makers have reached the conclusion that it will be very hard if not impossible to offer UK citizens the best 5G infrastructure without Huawei. Again, the argument has been allowing Huawei to install its world leading 5G infrastructure would pose a significant security risk, again the burden of proof lies on the accuser. There is still no substantial evidence that this is the case. The UK has proposed to go ahead with installing Huawei 5G infrastructure in specified parts of its networks. The UK Prime minister Boris Johnson has also weighed in on the issue stating that The British public deserve to have access to the best possible technology, and those against Huawei’s 5G tech should provide suitable alternatives.
No-one knows where Huawei’s story will take us, but one thing is clear, the Chinese mobile giant is determined to press forward against all odds.