Li Jun/Wen Xielirong/Editor, Special Writer of Finance and Economics
After the U.S. government placed Huawei on the trade control list on May 20, Google said it would comply with the U.S. governments orders to cut off Huaweis support for Android hardware and software as soon as possible, and no longer license Huawei to provide Googles mobile applications.
The news shocked the industry. At present, Googles Android operating system is almost the only choice for smartphones. Huaweis Android operating system is used in all models of mobile phones sold in China and overseas markets.
What impact will the complete termination of Googles business cooperation with Huawei have on Huaweis mobile phone business?
Googles Android operating system is the core of Huaweis mobile phone. Android operating system is an open source software based on Linux, which is developed by many hardware and software manufacturers. Of course, Google has played the most important role in the development of Android operating system versions, but this does not allow Google itself to prohibit any vendor from using Android operating system commercially in an open source framework. Thats why Google established AOSP (Open Source Project) to unify the development and core applications of Android operating system under the open source framework.
Another part of Googles core is mobile applications based on Google Platform Services, which we commonly call Apps, including Google Search, Google Browser Chrome, YouTube, Google PlayStore, Google Maps, Google Cloud Storage, Google Mail, Google Music and more than a dozen other services. Google packages these mobile applications into a single Google Mobile Services licensed to mobile partners. For Google and Huawei to terminate business cooperation, the biggest impact is this part.
On May 20, the U.S. government announced that it would suspend the ban on Huawei for 90 days until August 19. Huawei has 90 days more valuable time window to turn around.
It should be said that the obstacles to Huawei caused by Googles blockade are enormous, but Huawei also has a multi-level response.
Before talking about coping strategies, we need to be clear: in overseas markets, whether the end-users of mobile phones or providers and operators of mobile communication services, are third parties unrelated to Huawei.
In other words, as long as Huawei has completed the sales of mobile phone hardware, the subsequent application installation and configuration, and even the work at the operating system level, can be completed by a third-party partner. Under the existing restrictive framework of the U.S. government, as long as Huawei is based on the status of mobile phone hardware and operating system provider, or even strips the operating system to provide only mobile phone hardware, the U.S. government can not completely block Huaweis living space.
The first is to find local partners.
Huawei provides mobile terminal hardware, customizes the Android operating system by local partners, and purchases application licenses from Google for mobile services. Possible partners are preferred mobile operators.
In fact, the mode of mobile operators customizing Android operating system is not uncommon in the early stage of smartphone development. In the 3G era, many mobile operators have provided mobile terminals and customized operating systems adapted to their own network environment, and even embedded their own mobile applications to obtain new business revenue. In addition to mobile operators, overseas terminal retailers and even an independent third-party service provider can serve as a bridge between Huawei and end users, assuming the responsibility of customizing the Android operating system, purchasing Google mobile service application licenses, and even serving Huawei mobile end users.
This kind of cooperation is the most convenient way for Huawei to operate, but to Huaweis disadvantage, it is necessary to abandon the operating system and its application software and step back to become a pure mobile hardware supplier. It is difficult to guarantee the corresponding corporate profits and the optimal use of mobile phones in the combination of hardware and software.
The second is Huaweis partnership with third-party App Stores.
Although Google App Store has an overwhelming share of the download market on Android platform, many mobile phone manufacturers and even independent third parties have not given up developing their own App Store. Whether Samsung, Huawei, Millet or Meizu have their own independent application stores. Huawei can provide the operating system, and the third-party application store provides download and installation services for all applications except Google Mobile.
After overseas users own Huawei mobile phones, the main body of purchasing and installing mobile applications becomes the end user, which has nothing to do with Huawei. The purchase and installation of such software does not violate the current U.S. government commercial ban against Huawei. It should be pointed out that although third-party application stores can not provide Google mobile applications, some functions can be completely replaced by other applications, such as Tomtom Maps, third-party mail applications supporting general mail protocols, UC browsers, third-party YouTube applications NewPipe and even Bing search.
The biggest challenge of this approach is that it will affect some customer experience in the short term, but Huawei can firmly grasp the initiative at the operating system level and optimize the system by combining hardware and software.
The third way is more radical, that is, Huawei completes itself from hardware, software to application stores, and eventually builds a mobile application system that rivals Google Mobile Apps.
Under this system, Huawei can further improve its consumer cloud services, develop its own mobile payment, and even provide streaming media services and application partitioning architecture. Once the mobile application system becomes large, it will have a strong impact on Googles existing monopoly architecture based on the Google App Store, and divert part of the revenue from Android applications in the Google App Store.
In fact, as early as 2011, Amazon launched its own App Store and competed with Google App Store. At present, Amazon App Store has entered more than 200 countries, with 450,000 apps on the shelves.
Considering that Huawei is relying on Chinas huge mobile Internet market, it is very attractive for overseas mobile application developers to enter China to go on the shelves in Huaweis application store, so the direct competition between Huawei and Google at the application store level is not without opportunities.
But it should also be noted that besides affecting Google, the U.S. governments business ban may also affect other mobile application providers in the United States. If all the applications of American companies are not available in Huawei App Store, it is a big obstacle for Huawei to develop its own App Store.
Before we talk about the fourth road, we need to popularize the concept of Android forks.
Android is an open source mobile terminal operating system. The so-called open source means that the core source code is open. Any third party can modify and customize the source code published by Google according to its own needs. These non-original, or variant, Android systems, modified by other companies, are collectively referred to as Android Bifurcations, just like the side branches that bifurcate on the trunk of a tree.
Does a bifurcation have to be a lateral branch? Of course not. In the case of sufficient nutrients, the thriving lateral branches may replace the original main branches and become new ones.
The earliest source of Unix operating system which was once popular in the world was AT&TUnix developed by Bell Laboratory of AT&T in the 1970s. Over time, AT&TUnix has evolved several parallel bifurcated versions, such as FreeBSD, Solaris, AIX, HP-UX, etc. Linux and Apples MacOS, which are still in use today, are inextricably linked to AT&T Unix. It can be said that AT&TUnix bifurcation has no obvious trunk, or there are many trunks at the same time.
The European Union issued a $5 billion fine to Google in July 2018 to punish Google for forcibly bundling its search service and Chrome browser using the market monopoly of the Android operating system. One of the three allegations of antitrust fines is that Google has taken measures to prevent mobile phone manufacturers who want to pre-install Google apps from selling devices that run Googles unauthorized version of the Android operating system, the Android Bifurcation.
By binding its own market-dominant Google mobile services, Google has tightly restricted mobile manufacturers to its own Android upgrade path, and completely strangled any Android Bifurcation growth prospects.
On the other hand, by controlling the Android upgrade, Google has further strengthened the market advantage of its mobile services. Thats why the EU has imposed a sky-high ticket on Google.
The EU ultimately wants to unlock Googles binding advantage between the Android operating system and Googles mobile services, prohibit Google from forcing mobile phone manufacturers to pre-install Googles mobile services, and allow Android mobile platforms to grow freely in full competition.
So the fourth road is the most revolutionary one. Although the Android kernel is open source, the future direction of development is still dominated by Google. If Huawei has been using the open source Android platform for limited customization, it will face the dilemma of following the Android version upgrade in the future.
If Huawei completely abandons the strategy of following Android core version upgrade, develops a new Android Bifurcation on the existing Android platform, promotes the development and upgrading of subsequent versions, and even develops a new open source mobile operating system, it will completely overturn Googles dominance over Android and make the global mobile operating system competitive. Major changes have taken place.
This path seems to be the hardest one at the moment, but once it gets through, its the hardest blow for Google.
Huaweis Android-based operating system will be the most influential Android Bifurcation and will greatly change the monopoly position of Googles mobile applications in various fields. This fishing net breaking approach will be the EUs most willing to see.
If time goes backwards for a year, the fourth road will be condemned as delusional by the industry. But with the U.S. government pressing for Huawei, Yu Chengdong, Huaweis consumer business CEO, admitted in an interview with the German media WELT that Huawei had prepared its own operating system: Once something happens that we cant use these operating systems (from Google and Microsoft), we need to be prepared. This is Plan B. This shows that Huawei has made a lot of preparations for the fourth road and is ready for the worst.
On May 21, Ren Zhengfei, founder of Huawei, responded to the Chinese medias comment on whether Trumps ban would disrupt the worlds communications supply chain, saying he believed that Europe would not follow the United States. In fact, since the establishment of the Five-Eye alliance led by the United States, the attitude of major European countries such as Britain and Germany towards Huaweis participation in the 5G construction has begun to relax. Faced with the aggressive attitude of the United States, I believe the European Union will think that if China falls down in the field of Internet, the monopoly position of American companies will be more stable. If Huawei chooses to cooperate with third-party enterprises in the EU, it will have a good chance to circumvent the existing restrictions of the US government.
Source: Responsible Editor of Financial Journal: Wang Fengzhi_NT2541