Huawei takes a hit

Break with Google could halt phone maker’s rapid growth

Huawei could lose its grip on the No. 2 ranking in worldwide cellphone sales after Google announced it would comply with U.S. government restrictions meant to punish the Chinese tech powerhouse.

The Trump administration move, which effectively bars U.S. firms from selling components and software to Huawei, ups the ante in a trade war between Washington and Beijing that partly reflects a struggle for global economic and technological dominance.

Google said basic services would still function on the Android operating system used in Huawei’s smartphones and existing smartphone owners would not lose access to its Google Play app store or security features.

But unless the U.S. Commerce Department grants exceptions, the ban announced last week on all purchases of U.S. technology would badly hurt Huawei, analysts say.

Washington claims Huawei poses a national security threat, and its placement on the so-called Entity List by the Trump administration last week is widely seen as intended to persuade resistant U.S. allies in Europe to exclude Huawei equipment from their next-generation wireless networks, known as 5G.

“This is major crisis for Huawei. Instead of being the world’s largest handset manufacturer this year, it will struggle to stay No. 2, but probably fall behind,” analyst Roger Entner said. “How competitive is a smartphone without the most wellknown and popular apps?”

Huawei will likely use its own, stripped-down version of Android, whose basic code is provided free of charge by Google. But it’s not yet clear what other Google software and services — such as maps, Gmail or search — it will be able to use.

Entner, founder of Recon Analytics, said Google itself won’t have a large direct impact, “as consumers will shift to other Android devices. The biggest concern is not to be caught in the crossfire of two governments.”

Gartner analyst Tuong Nguyen said 48% of Huawei’s phone shipments last year were outside of China and the company will need to scramble not to lose market share.

Samsung led global smartphone sales in the first quarter of this year with a 23.1% share. Huawei was second with 19%, followed by Apple at 11.7%, according to IDC.

Huawei’s smartphone sales in the U.S. are tiny, so any impact on U.S. consumers of a Google services cutoff would be slight.

Hardware suppliers led by Qualcomm, Broadcom and Intel would also be forced to halt shipments to Huawei under the Commerce Department rule, which requires all U.S. technology sales to the company to obtain U.S. government approval unless exceptions are made.

The U.S. government says Chinese suppliers including Huawei and its smaller rival, ZTE Corp., pose an espionage threat because they are beholden to China’s ruling Communist Party. But American officials have presented no evidence of any Huawei equipment serving as intentional conduits for espionage by Beijing.

Huawei defended itself Monday as “one of Android’s key global partners.” The company said it helped to develop a system that “benefited both users and the industry.”