Huawei is experiencing a horrible week. Last Thursday, the Trump administration placed the Chinese technology conglomerate on a list of entities, preventing US companies from doing business with it. And now we are seeing companies based in Europe fleeing from Huawei, perhaps in an attempt to avoid running into US authorities.
Based in the leafy Cambridge for all the 28 years of its existence, and owned by the Japanese SoftBank, Arm Holdings projects form the basis of every existing smartphone processor. According to a memo obtained by the BBC, ARM Holdings is instructing staff to suspend business with Huawei, regarding projects that contain technology of US origin.
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Although the US embargo on Huawei has been temporarily suspended for 90 days, the BBC claims that ARM agents were not told they could resume working with Huawei. This, of course, is a defeat scenario for Huawei and ARM Holdings, and I'm sure neither side is happy with the situation.
The long arm of the law
In the case of ARM Holdings, it receives generous license payments for its ARM processors, as well as the Mali GPUs that form the basis of Huawei's HiSilicon chipsets. Huawei is the second smartphone manufacturer in the world (and this is not saying anything about its IoT and tablet activities, which are also significant). Respecting this order, ARM Holdings waives huge Piece of revenue.
There are also long-term repercussions for Arm Holdings. This incident will encourage China to redouble its efforts to build a domestic semiconductor industry. This is an important part of the Made in China 2025 initiative, which will see the country replace high-tech products produced in the West with national alternatives.
China is a huge telephone market. In addition, it boasts many successful global brands, such as Xiaomi, OPPO and OnePlus, as well as Huawei. In the long term, we could see ARM lose its monopoly for an uprising Asian rival.
Make no mistake, this was on the cards for a while. However, Huawei's current business interruption could greatly accelerate this process.
As for Huawei, losing access to ARM could pose a serious threat to its long-term innovation.
Although the upcoming HiSilicon Kirin 985 is not considered to be affected by this ban, it is not the case with future chipsets. If the embargo against the company lasts for a prolonged period of time, Huawei could lose measurable ground against its rivals, including Samsung and Apple. Although Huawei has devised a new architecture, it will not be officially compatible with Android if Google does not support it
Read more: Stocks are catching on after Huawei's suppliers cut ties, increasing the prospect of prolonged trade war with China
In a post published earlier this week, I argued that Huawei could counter Google's divorce by bifurcating on Android and replacing the Mountain View apps (like Google Play Store) with their alternatives. In the short to medium term, however, I don't think it could survive the body blow of losing access to ARM.
Networks are abandoning Huawei
And then we come to the next bad piece again for Huawei. I know, it doesn't stop.
While the uncertainty surrounding the turbine company, the major telephone networks in the UK are dropping the company's phones from their 5G network launches.
Vodafone and EE are two of the largest mobile networks in Britain. The first has been a fixture on the UK mobile scene since 1985, while the second, which was the Orange and T-Mobile amalgam, boasts 31 million connections through its fixed, mobile networks. ; wholesale.
Both companies plan to include the compelling Huawei Mate 20 X 5G in their initial 5G line of devices. Now, given the company's current difficulties with the US government, they are thinking twice.
In a statement sent by e-mail to TNW, an EE representative said: "At the moment we are holding back the launch of the upcoming Huawei 5G smartphones. We are working with Huawei and Google to ensure that we can take the right level of test and quality assurance, so that our customers have a great experience with all the smartphones we have in the future. In due course we will provide updates on possible future smartphones. "
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Reading between the lines, it is obvious that EE is reluctant to release a device that could be cut by important security and performance updates. Although, it is worth noting that the company continues to sell existing Huawei devices, such as the recently released Huawei P30 Pro.
A statement from Vodafone was more direct, stating: "We are pre-ordering for Huawei Mate 20X 5G in the UK: this is a temporary measure while uncertainty exists for the new Huawei 5G devices. We will keep it under control this situation."
The incredible Huawei contraction
Ultimately, this is more than just a delayed telephone launch. It always happens and most companies recover quickly.
The real problem here is that Huawei, a company intimately involved in the 5G ecosystem, will be excluded from the launch of 5G. It's an incredible dent for Huawei's prestige in the West, which has been cultivated for years.
The first users will end up buying other 5G compatible phones, including those of rivals OPPO and Samsung, which cost Huawei's crucial market share. If the company will eventually make peace with the United States, it will be trapped in a desperate effort to reach its competitors.
Broadly, this widely publicized spit with Trump is not good for Huawei's public image. It makes the phones of the company – which, for every estimate, are excellent – less interesting for the players. And according to some estimates, it is forcing people to actively cede from society.
Data from Music Magpie, a technology retailer pre-installed in the UK, showed a 25% increase in people trading in Huawei devices in the hours following Google's announcement that it was ending cooperation with the Chinese titan .
Read more: These 2 net charts show why Huawei's attempt to build a replacement for Android will fail
Although the 90-day truce gives the company some breathing space to react and respond, there is still a long-term question about how it will cope with its US suppliers. And honestly, I don't expect this situation to be resolved as quickly or accurately as when ZTE found itself under such control.
Despite the fact that there is still no concrete evidence that Huawei is a national security risk, it is worth noting that the Trump administration takes a hard line on national trade and security issues. I have no doubt that Huawei will eventually find itself in the unenviable position as a bargaining chip, or as the row of applause in a Trump political rally.
And even if Huawei receives a total pardon, will it recover? He suffered enormous damage, not only for his reputation, but for the continuity of his daily operations. Recovery will be a long and tortuous process.
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