Huawei’s United States Ban Will Redesign Global Hardware Supply Chain

By Nnamdi Odumody

Chinese telecommunication equipment giant Huawei Technologies was recently banned from operating in the United States by President Donald Trump-led Government on allegations that its products was being used to spy on the United States by the Chinese Government. Largely, this suspicion had emanated owing to the ties Huawei founder, Ren Zhengfei, a former Red Army (Military) personnel, may have in his country.

This ban resulted to technology giants like Google, Qualcomm, Intel and ARM suspending partnerships with Huawei. Huawei relies on Google’s Android Operating systems for its smartphones, and on Qualcomm, Intel, Broadcom, Infineon and ARM for its semiconductors. It depends on Microsoft’s Windows Operating System for its tablets and notebooks. Google’s Android will continue to run on Huawei’s existing devices but the presidential ban means upgrades to Android’s latest versions and Huawei’s subsequent products will be affected.

Huawei seems not to be bothered about this latest development as it has been working on an Operating System which will power it’s devices according to Richard Yu, Chief Executive of its consumer division.

Huawei has been at the centre of the ongoing US-China trade war which has seen it surpassed an American consumer electronics champion (Apple) to become the world’s second biggest smartphone seller, behind Samsung. It’s Chief Financial Officer Meng Wanzhou was arrested last year on charges of financial crimes considering the fact that Iran, an enemy of the US which was hit by economic sanctions was a key market in its global sales.

According to IDC, Huawei recorded an upward sales trajectory from 39.3 million smartphones shipped in the first quarter of 2018 to 59.1 million units in the first quarter of 2019 while Apple’s iPhone shipments shrunk from 52.2 million in the same quarter last year to between 36 and 43 million in first quarter 2019.

In technological patents, according to the World Intellectual Property Organization, Huawei’s filing of 5405 patents in 2018 put it in first position, and taking the lead in the development of cutting edge technologies like Artificial Intelligence and 5G, ahead of its U.S rivals, must have made the Department of State to cut them down to size.

The casualties of this ban will be the 197 Fortune 500 companies including U.S companies which rely on their equipment. Other members of the Five Eye Intelligence Network: Canada, U.K, Australia and New Zealand are expected to follow Washington DC in preventing the Chinese ICT giant from conducting business operations in their territories.

In the long run, the Chinese might prove winners of this battle. Speed, precision and scale is why China controls the global hardware supply chain with Qualcomm and Apple heavily reliant in the Shenzhen hardware ecosystem and a retaliatory move by President Xi Jinping banning Apple, Qualcomm and other U.S, British and Canadian Technology Companies from having their products contract manufactured in China will force them to shift their production home where labour costs are expensive, affecting their competitiveness and reducing their global market share.

The Chinese consumer market is the most sympathetic to any domestic brand, no matter the advantages the foreign rivals possess. Xiaomi, Lenovo, Oppo, One Plus and Transsion Holdings which along with Huawei are the top Chinese consumer electronic brands globally might gradually migrate from the Android Operating System to a Chinese made O.S and domestic semiconductor manufacturers. The effect of this will be too difficult for Google, Microsoft, Apple, Qualcomm and other Western brands which rely on Chinese production to be competitive in their industries to bear.

The U.S China trade war is the new Cold War. It is a battle over the New Arms Race i.e. ’’Leadership in Exponential Technologies’’. Only time will tell who will emerge victorious.