Huawei had quite an impressive result in 2019 selling over 240 million smartphones representing a 17 percent increase from 2018.
These are not withstanding the restrictions and limitations coming from the United States which argues that Huawei poses a national security threat, going as far as pressuring it’s allies to shut their doors against the company. US blacklisting Huawei has affected the company’s value chain and relationship with key partners including Google.
The United States seems to be all out to destroy the Chinese Telecom giant causing severe harm to both operations and marketing. Unable to use Google services on its devices since the May 16 2019 blacklist, the company has gone ahead to release its Mate 30 smartphone running the open source android 10 operating system but without the popular Google apps such as Gmail, Map, YouTube and others seen as the defining features of the android phones. Huawei has as an alternative designed its own app gallery promising to provide alternatives to the missing Google apps.
This move as it appears can either be the beginning of the end of Huawei or the dawn of a new day in the mobile phone competition. Only recently, Xiaomi, Huawei and BBK came together to create a Google Play Store alternative, a partnership called the Global Developer Service Alliance. These companies all together control over 40 percent of the global smartphone market share as at Q4 of 2019.
But Huawei faces yet another serious problem and that is US determination to stop Huawei from participating in the development of the $31 billion 5G market estimated to be worth $11 trillion by 2026 not only in America but in their allies countries citing concerns its gear could be vulnerable.
Though top US allies, UK and Germany intends to allow Huawei play a limited role in the 5G technology, the United States filling of superseding indictment, in which it accused the company of conspiring to violate the Racketeer Influenced and CorruptCorrupt Organisations Act and to steal trade secrets from six US technology firms to grow its business may change their decision.
Brian’s insight
These are very troubling moments for Huawei and a time to watch in the smartphone and mobile technology industry.
Recall that in 1998 Nokia was at its peak controlling 23 percent of the global GSM market. By 2005 Nokia annual revenue exceeded 29 billion euros with the company controlling 45 percent of the market in Eastern Europe, the Middle East and Africa and 63 percent of the market share in India. Nokia seemed unstoppable even as competition intensified. By 2007 as the industry had shifted to software, Nokia’s symbian operating system remained the most widely used in the world with 65 percent market share.
As the iPhone began to gain market share and the Google’s Open Handset Alliance, a consortium of 84 firms formed to develop open standards for mobile devices released the Android in 2008, the dynamics of the competition changed and the beginning of Nokia’s sad end began.
History seems to be repeating itself today with Huawei in the spotlight. The direction of the story and how it plays out will depend on the choices Huawei is able to make. The competitive knives are out, to remain standing depends on making hard choices that can restructure the industry. Tactics and operational improvements will no longer work at this time, Huawei survival and thriving is about changing the rules of the game.
Every competitive advantage can be made obsolete, but innovative products and services are unlikely to suffice at this moment. Huawei needs to take a hard, long look at its value chain and make sustainable decisions about logistics, production, and operations.
As Huawei struggles with a reputation under attack, following the path of truth and honor irrespective of the consequences could be the surest path to success. There is so far you can go with a cover up, technology theft, cyberespionage are serious issues that threaten national and shouldn’t be treated with kids gloves. If they are true, then Huawei walking the path of truth and honor by owning up and facing whatever sanctions and consequences might be the only card capable of preserving the Huawei global business interest. The effects will be catastrophic if Huawei is convicted in court.
If the US allegations are false, then superior technology, business model and product innovation and increased share of the markets outside the United States are keys to a sustainable business. Without adjusting the Huawei value chain even if the ban is lifted and Huawei is free to source inputs from the United States, the company cannot guarantee there will be no fresh charges and trade ban tomorrow especially as the trade war might take any direction.
The partnership called Global Developer Service Alliance is a good strategic move which if well executed could well change the dynamics of the competition. Another giant doesn’t have to fall but whether or not that happens depends on the choices Huawei makes.
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Brian Reuben
Dr. Reuben, business consultant, researcher and keynote speaker has influenced business leaders globally. He holds business trainings regularly in Lagos, Dubai and London with participants paying upto $10000.
