Why Huawei's US Troubles May Not Hurt the Chinese Firm After All

Technology

Published: August 5, 2019 11:00 am

Last Updated: January 11, 2020 7:10 am

On Friday, Chinese smartphone and network equipment maker Huawei Technologies will kick off its developer’s conference in Dongguan, a city of some 40 million people in the Pearl River Delta just north of Shenzhen and Hong Kong. The company is expected to launch a new operating system it plans to introduce to the market later this year in a low-priced handset, replacing Android in Huawei’s handsets following the company’s blacklisting earlier this year.

The ban was temporarily lifted in May and that grace period is scheduled to end August 19. The U.S. Department of Commerce’s temporary ban covered only devices made prior to May as a way to allow existing users of Huawei phones and network gear to continue using their equipment; any Huawei device released after that date will get no such accommodation. Thus, Huawei’s HongMeng operating system (expected to be called Harmony in the West).

As The Wall Street Journal reported over the weekend, Chinese buyers have rallied around their homegrown giant that dulled the impact of U.S. restrictions on sales of Huawei gear in the United States. The company’s smartphone market share jumped to 38% in China in the second quarter while dropping slightly from 19% to 18% worldwide.

Worldwide in the first quarter, Huawei posted market share of 15.7%, second only to top-ranked Samsung with 19.2%. Apple was third with 11.9%. But both Samsung and Apple lost share year over year, down 1.1 and 2.2 percentage points, respectively, while Huawei’s share rose by 5.7 points, according to industry research firm Gartner. Chinese makers Oppo and Vivo rounded out the top five.

The Chinese — the people, not just the government — see the United States as a strategic rival. Yun Sun, an analyst at the Stimson Center, told The New York Times, “China now has a No. 2 mentality. It’s only natural for No. 2 to want to pass No. 1 [the United States].” Reinforcing that mentality is not too difficult, but not pushing it too hard is the tricky bit. If the government revs up anti-American sentiment too far, the government risks limiting its negotiating options. If it downplays the danger, the people may not pay enough attention.

Whatever happens, it is pretty clear that the Chinese people are, willing or not, will accept more sacrifice to push the country’s goals than most Americans are. That’s part of the reason they are giving up their Samsung and Apple phones and buying from Huawei, Oppo and Vivo. It’s a small sacrifice to be sure, but it doesn’t take too much imagination to see how that willingness to sacrifice could play out in a protracted tussle over tariffs and trade. Americans are not the only people who can make the patriotic choice of what to purchase.