UPDATED 20:11 EDT / MAY 19 2019

POLICY

Google and major chipmakers reportedly cut ties to Huawei

Troubled Chinese smartphone maker Huawei Technologies Co. Ltd. has been dealt dual hammer blows with the news that Google LLC has decided to cease doing business with it and four major chipmakers no longer will supply the company.

A report in Reuters today cited “sources close to the matter” as saying that Google will “immediately” suspend doing any business with Huawei that involves the transfer of any of its hardware or software products. What that means is that Huawei’s smartphones and other mobile devices will no longer have access to any Google services or updates on its Android platform.

The report was later confirmed by The Verge by a separate source. That source said details of the specific services affected by the suspension were still being ironed out. Huawei’s legal team is also studying the impact of the suspension, according to a spokesman from the company.

Another report from Bloomberg late Sunday said computer chipmakers, including Intel Corp. Qualcomm Inc., Xilinx Inc. and Broadcom Inc., have also decided to stop supplying Huawei with components it needs to manufacture its smartphones and other devices. Such a ban would likely “seriously cripple” Huawei, as the company is “heavily dependent on U.S. semiconductor products,” Ryan Koontz, an analyst with Rosenblatt Securities Inc., told Bloomberg.

The Google suspension means that Huawei will now be restricted to using the Android Open Source Project only, which cuts it off from essential Google apps and services such as Google Play, Gmail and so on. It also means Huawei devices won’t receive any more updates to Android itself, at least until they become available in the main open-source version.

“If the rumors are true, Google’s action would effectively hobble Huawei’s phone business outside of China,” analyst Charles King of Pund-IT Inc. told SiliconANGLE. “Losing access to the Play Store would also impact customer satisfaction in key U.S., European and Asian markets.”

The ban on chipmakers doing business with Huawei could have much wider repercussions, however. Bloomberg noted that Intel is its main supplier of server chips, while Qualcomm provides it with processors and modems for many of its smartphones. Meanwhile, Xilinx sells programmable chips used in networking and Broadcom is a supplier of switching chips, another key component in Huawei’s networking equipment. A sales ban could hurt all of these companies, too, since they’re increasingly reliant on China’s economy for growth.

The suspensions come amid increasing pressure on Huawei from U.S. President Donald Trump’s administration, which fears that its equipment could be used by the Chinese government to spy on American communications. The U.S. has previously described Huawei as an arm of the Chinese government, and its intelligence services have warned against using its products. Things came to a head last week when President Trump signed an executive order that, although not naming Huawei specifically, prevents U.S. firms from doing business with it.

“At the same time that Trump issued his executive order, the U.S. Commerce Department added Huawei to the Bureau of Industry and Securities Entity List,” King said. “U.S. businesses are required to obtain the government’s permission before they can sell or transfer technology to companies on the list. It seems safe to anticipate that such permission would not be extended to Huawei, so if Google does cut off the company, it would simply be following the law.”

Another possible reason for Google’s decision is that the search engine giant is under serious threat of being broken up due to its monopoly of many parts of the tech market, said analyst Rob Enderle of the Enderle Group.

“It’s doing anything it can to keep that from happening and I think this is part of that strategy,” Enderle said. “Huawei is arguably the most powerful tech company in China, China is the second most powerful country in the world trending to be first, and they think of Huawei as a national treasure. This is likely going to get a lot uglier before it is over.”

For its part, Huawei continues to maintain that it’s not possible for China’s government to insert a “backdoor” into its equipment to enable stealth access, and it points out that the U.S. has never provided any proof of its claims. Still, the latest setback would undoubtedly put Huawei’s mobile business at risk.

The Google suspension wouldn’t immediately affect Huawei’s current devices, and Google’s services will still work on them. But devices that have already been sold would no longer see any updates.

It would be even worse for Huawei’s future devices, though, since they would be able to ship only with a bare-bones version of Android.

Outside China, that would seem to be a death sentence for Huawei. That’s because there’s no viable alternative to Android’s ecosystem. Amazon.com Inc. has built a forked version of Android that it runs on its own devices, but seeing as it’s also a U.S. company, it’s unlikely to be able to help Huawei.

One possible option for Huawei would be to fork Android itself, though that would take a significant amount of time. Apparently the company is also said to be working on building its own independent operating system, but it’s not clear how useful this would be since it would mean losing access to Android’s vast ecosystem of apps and services.

Forking Android to create its own OS, similarly to what Amazon has done, would probably be the safest option for Huawei right now, said tech analyst Rob Enderle of the Enderle Group. The main advantage of this is that it would ensure Huawei has a foundation of apps its devices can access.

“They could swing the Asian developers and create a broad partnership to rival Google’s,” Enderle said. “It could also create its own OS much like Apple did, but that is a long road and it would need to build up a developer community from scratch.”

Holger Mueller, principal analyst and vice president of Constellation Research Inc., told SiliconANGLE that Huawei’s best bet for now would be to stick with the open-source variant of Android and simply live with the slower updates. If it does, it would at least provide some insights into whether or not most people buy Android phones for Google’s services, or for Android itself more generally, he said.

“Huawei is large enough to build its own operating system too, but that would likely be encountered with skepticism from consumers and businesses alike,” Mueller said.

As for replacing the computer chip components sold by Intel et. al., that would be an almost impossible task for Huawei, according to Patrick Moorhead, an analyst with Moor Insights & Strategy. He said the ban would cause “serious harm” to Huawei if it continues for long, because it wouldn’t be able to make the missing components by itself or source them from elsewhere.

“Huawei has its own chip arm called HiSilicon, but it doesn’t provide the performance levels or special capabilities that companies like Intel, Xilinx or Nvidia can provide,” Moorhead said.

The Android suspension would be unlikely to have such a great impact on Huawei’s devices sold in China, at least. That’s because Google barely does any business in China, and its Play Store and Google Play Services aren’t used there. Instead, China’s app store landscape is dominated by third parties such as Tencent Holdings Ltd.

Photo: Connection Japan/Flickr

A message from John Furrier, co-founder of SiliconANGLE:

Show your support for our mission by joining our Cube Club and Cube Event Community of experts. Join the community that includes Amazon Web Services and Amazon.com CEO Andy Jassy, Dell Technologies founder and CEO Michael Dell, Intel CEO Pat Gelsinger and many more luminaries and experts.

Join Our Community 

We are holding our third cloud startup showcase on Sept. 22. Click here to join the free and open Startup Showcase event.

“TheCUBE is part of re:Invent, you know, you guys really are a part of the event and we really appreciate your coming here and I know people appreciate the content you create as well” – Andy Jassy

We really want to hear from you, and we’re looking forward to seeing you at the event and in theCUBE Club.