Tech

Google cuts ties with Huawei. That may be a 'kill switch' for the Chinese firm's global smartphone ambition

Key Points
  • Google has suspended business activity with Huawei that involves the transfer of hardware, software and key technical services.
  • That means Huawei will not be able to license the Android operating system complete with Google services and will instead have to use an open-source version.
  • Analysts said that could cause big problems for the company internationally, where nearly half of its smartphone shipments go.
  • Other Huawei suppliers, including Qualcomm and Intel, reportedly told employees they will not sell to the Chinese firm until further notice.
VIDEO6:0006:00
Chip stocks fall after Google restricts business with Huawei — Six experts on what's next

Google's move to stop licensing its Android mobile operating system to Huawei could deal a huge blow to the Chinese tech giant's ambitions to become the top player in smartphones globally.

The U.S. tech conglomerate has suspended business activity with Huawei that involves the transfer of hardware, software and key technical services. Google made the move in order to comply with Washington's decision to put Huawei on the so-called Entity List, meaning American firms need to get a license to sell products to the Chinese firm.

It means Huawei can no longer license Google's proprietary Android operating system and other services that it offers. Instead, Huawei is now only able to use a public version of Google's operating system through the Android Open Source Project. It means future Huawei phones will not have the Google services that users have come to expect on Android devices.

"We are complying with the order and reviewing the implications," a Google spokesperson said Monday. "For users of our services, Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices."

VIDEO6:4906:49
What is Huawei?

A Huawei spokesperson told CNBC that the company is "evaluating the possible impact of this U.S. government action on consumers."

"Huawei has made substantial contributions to the development and growth of Android around the world. As one of Android's key global partners, we have worked closely with their open-source platform to develop an ecosystem that has benefitted both users and the industry," the spokesperson said.

"Huawei will continue to provide security updates and after sales services to all existing Huawei and Honor smartphone and tablet products covering those have been sold or still in stock globally. We will continue to build a safe and sustainable software ecosystem, in order to provide the best experience for all users globally."

It's a huge blow to the Chinese firm, which relies heavily on Android for the smartphones it sells outside of China. Within China, the company uses a modified version of Android that doesn't have Google apps preinstalled because the search giant's services are blocked there. But in markets outside of China, Huawei's smartphones run Android complete with Google apps.

Just over 49%, of Huawei's smartphone shipments in the first quarter of 2019 were to international markets outside of mainland China, according to Canalys. Huawei was the second-largest smartphone maker by global market share in the first quarter. The company has previously laid out its ambitions to become the top player in smartphones by 2020. But the latest move by Google could put a dent in that.

"It will be like an instant kill switch for Huawei's ambition to overtake Samsung in the global market," Nicole Peng, vice president of mobility at Canalys, told CNBC by phone on Monday.

VIDEO4:4104:41
Why the US thinks Huawei is a massive national security threat

Huawei relies on key components from several other American suppliers for everything from smartphones to its networking equipment. It counts over 30 American firms among its core suppliers. Some of those suppliers, including Qualcomm and Intel, have told employees they will not sell to Huawei until further notice, according to a Bloomberg report on Monday.

Is Huawei prepared?

Huawei says it has been preparing for the sort of situation it now faces. In March, the company said that it had developed its own operating system for its consumer products if there came a time it was not able to use Google's or Microsoft's.

And just last week, the Nikkei Asian Review reported that Huawei told some suppliers six months ago that it wanted to build up a year's worth of crucial components to prepare for any issues related to the U.S.-China trade war. Huawei has been developing its own chip technology, as well.

While Huawei has been able to reduce its reliance on American suppliers for some components, experts said that might not be enough because it still needs other parts from U.S. firms. And analysts have also cast doubt on the viability of Huawei's own operating system.

Neil Shah, a research director at Counterpoint Research, said Huawei will have to rely on third-party Android app stores outside of China because Google Play will not be installed by default. That could be a problem.

"This makes a clear disadvantage for Huawei's own (operating system) vs the Android (operating system) shipped on Samsung or other phones firstly in terms of lack of all the apps available on the Google Play store, quality of apps (some might be dated), potentially less secure as they will not be screened by Google or follows Google's monthly secure patches and overall user-experience of the store," Shah said.

"So all the apps from US players will not be available out of the box and users will have to sideload it or Huawei will have to make it available via third party or own branded Android compatible app store which is going to be a humongous task for Huawei," he added.

Each morning, the “Beyond the Valley” newsletter brings you all the latest from the vast, dynamic world of tech – outside the Silicon Valley.

Subscribe:

By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.