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Huawei P30 Pro screen

The US government has blacklisted Huawei. As a result Google has stopped providing and supporting the Android software used on Huawei phones. American chip makers can no long supply technology to Huawei. The Huawei blacklist is part of a wider trade dispute between the US and China. 

Does the Huawei blacklist mean I have to stop using my phone?

No. If you already have a Huawei it will carry on working as normal for now.

Could China be spying on me through my Huawei phone?

Don’t be silly. If you’re like the average Android phone user you already let Facebook, Google and others spy on you. They make money that way.

If China wanted to casually spy on you it could buy data from one of those companies. If you’re a serious intelligence target for Chinese agents they’re probably able to spy on you regardless of your phone’s brand.

Is my Huawei phone a security risk?

No more than any other Android phone. Android is more prone to malware and nasty stuff than other phones, but this changes nothing in that department.

Huawei has not always been the best at providing necessary software updates and security patches in the past. The company says it will go on supporting existing customers.

I was thinking of buying a Huawei phone…

That’s probably not a great idea although if sales slump you may be able to pick up a bargain.

If you buy a Huawei phone today you’ll get updates for the current version of Android. It’s most likely you’ll get upgrades for the next version. After that things start to get tricky.

At the moment we’re on Android Pie. The next version, Android Q is due in a few months. Huawei has had all the code for both of these.

The next version, R, should turn up in about 14 months. The way things stand today Huawei won’t get that code.

Without official support, you could be cut adrift from the Android mothership in as little as 14 months. Huawei says it will continue with security upgrades, but you may struggle to run some apps once R is mainstream.

What about other Chinese Android phone brands?

How much of a gambler are you? The recent Huawei blacklist is specific to one company, but it’s part of an escalating trade war between the US and China. If you count yourself as cautious, then wait to see how the dust settles before buying an alternative Chinese brand.

Isn’t Android supposed to be open source?

Only up to a point.

Android has a number of layers. At the top there’s Huawei’s own software overlay, that’s EMUI on the premium phones. There’s a service layer which connects to things like the Google Play store, Maps and Gmail.

There’s a low level layer that connects the operating system to the hardware. The underlying Android operating system, AOSP is open source. Huawei will still be able to use that. It will be updated as normal.

However, Google usually shares this code with favoured phone makers months before the code is made public. Phone makers pay vast sums for this.

The blockade means Huawei will now get the code on release day, so users may wait months for upgrades.

This is how AOSP works for many smaller Chinese phone makers. If you’ve tried one of those phones you’ll know the customer experience often leaves much to be desired.

Yet it’s also how Huawei’s Chinese phone business works, so the company already knows how to deal with the restrictions.

The real problem is with those services or those of us living in western countries. If Google makes changes there could be problems for existing phone users.

Will I be cut off from Google services?

No. At least not for the foreseeable future. You might not get any new services introduced from next year on.

Is any of this covered by the Commerce Act?

That’s a good question. The simple answer is you probably won’t be able to use the Commerce Act as a way of getting your money back if the phone goes on working as normal. Although there’s an interesting precedent that suggests otherwise.

In the longer term you may have a case if a lack of software updates means the phone is, in effect, rendered useless before a reasonable period of time. 

If this happens, it won’t matter if Huawei is no longer active in New Zealand (see below). The phone retailer is liable, not the manufacturer.

What does this mean for Huawei’s phone business in New Zealand?

It’s possible the spat between the US and China blows over in a few weeks and things will return to normal. If not, it will soon be hard for Huawei to sell phones here. Anecdotal evidence says customers are already avoiding the brand.

That’s a shame because Huawei makes some of the best Android phones. It is the number three phone brand here. While it may not always look like it, Huawei acts to keep Samsung and Apple competitive.

Phones account for about half of Huawei’s revenue worldwide. Half of its sales are in China where losing Google isn’t a problem. So a quarter of the company’s revenue is at risk.

On the other hand, no-one knows if Huawei make much, if any, profit from phone sales. The Huawei blacklist could lead to the company exiting the phone market outside of China. If that’s the case, it could be doing Huawei a favour.

President Donald Trump’s latest attack on Huawei did not come as a surprise.

Earlier this month the US banned American companies from using equipment made by firms that pose a risk to national security. Chinese technology giant Huawei wasn’t named. It wasn’t necessary. Everyone got the hint.

At the same time, the US government asked American firms to withhold technology from those companies.

Google pulls Android Support

In the most dramatic move to date, Google said last week it would no longer supply the proprietary parts of its Android mobile operating system to Huawei.

At the same time American chip makers said they have stopped supplying the company. It turns out Huawei has been stockpiling some parts in anticipation of this move.

There has since been a temporary halt on the parts supply ban for existing Huawei products. Parts for new sales, which for a technology company come around fast, are still banned.

Billions at stake

We don’t know how Huawei’s investors reacted to the news, the company is in private ownership.

We do know that if the ban stays it will cost American firms billions of dollars in years to come. It could shut them out of the world’s largest consumer market. That’s been reflected in the share prices of Huawei’s US suppliers.

Trump, and America in general has been ratcheting up the pressure on Huawei for the best part of a year.

Things kicked-off in earnest months ago. Then, American officials warned the world that Chinese spies might use Huawei’s network hardware and phones.

It’s a story Huawei has denied often since spying accusations first emerged in Australia some years ago. Huawei also denies it has links to Chinese military.

Intelligence threat

More recently America threatened to withhold intelligence material for any ally with Huawei hardware on their networks.

It would be easy to dismiss America’s attack on Huawei as mere protectionism. That’s a clear part of what’s going on. Trump has since suggested he could clear up this spat if China cuts a new trade agreement with the US.

There is no evidence Huawei uses its network to spy on behalf of the Chinese government.

There is no smoking gun. Huawei’s accusers have not managed to dredge up any plausible documented evidence.

That speaks volumes.

Where Huawei is a threat

Still, Huawei represents a risk. That’s because Huawei dominates the telecommunications hardware market like no other company.

Telecommunications is essential, critical and strategic. It is a key infrastructure. Without it commerce and finance grind to a halt. So does almost everything else. Telecommunications touches almost every aspect of modern life.

America has suggested that while there’s no evidence of Huawei spying, it could hold countries to ransom.

Should, say, relations with a country deteriorate enough, China’s government might insist Huawei shuts networks. That would be a crippling blow to any economy.

Trade repercussions

It’s possible, but unlikely. The long-term repercussions for Chinese trade would be disastrous. Even threatening this would be fatal. After all who would trade with a partner who behaves like that?

And anyway, a shut-down would escalate matters. It could even tip relations over the brink with some countries. China can be aggressive, but there is no sign it is looking for a war.

There is more pressing long-term economic risk to America and the West. For the first time in living memory a Chinese company holds the key to an important, must have technology.

5G mobile

Huawei leads the way in 5G mobile telecommunications. Its technology is months, if not years, ahead of its rivals. The company has been the driving force behind the move to 5G for the past four or five years. Until the latest US intervention, it looked like Huawei would stay out in front.

A lot of the words and projections for 5G are hype. Yes it means more wireless bandwidth, but it is no more transformational than 4G or 3G.

Even so 5G is set to become a vital component of every country’s critical infrastructure. It’s not only about voice calls or web surfing. The technology is able to control power networks, sewage and logistics.

Huawei dominating this technology puts it in a very powerful position. By extension this could extend to China. The fear is the country could call in its favours from its home grown technology success story.

Technological dominance

We seen this kind of technology-lead dominance before. IBM was, in effect, the entire computing market until the late 1960s. It stayed in control of the sector until the 1980s. After that time Microsoft Windows and Intel processors defined the PC era.

In part these technologies contributed to America’s economic and technological pre-eminence. They helped America assert and project military power on a hitherto unseen scale.

There’s a fear Huawei and China could do the same1. Older readers may remember America had similar fears about Japanese technology. It appeared to pull ahead during the 1980s. The difference there was that Japan was never a military rival. 

Huawei already accounts for about a third of all telecommunications network hardware. Until recently it was on a growth trajectory. There is no reason to think that without intervention that proportion could climb to IBM or Microsoft levels of monopoly control.

Yet this frightens strategic thinkers in the US and other western nations.

Part of their concern is they worry about what it might mean for their industries if a Chinese company dominates a strategic market. They know how powerful this can be.

Embargoes

The US has often embargoed key technology product sales to out-of-favour countries. Indeed, an early chapter in the current Huawei spat came when the US accused it of violating Iran trade sanctions.

All this means Huawei doesn’t need to install backdoors in its 5G network hardware to be a threat. Not does it need to push out malicious code during software updates. There is no kill switch, but even if there was, it would be unnecessary. 

Huawei prepared for the US action. It stockpiled essential parts. It has its own mobile operating system under development and has worked to decouple its supply chains from the US.

Google that!

It’s hard to see how Huawei can stay competitive in phones without access to new Google software. It needs to offer Google search, Google Maps and other services that are now off limits. Chinese customers might live without them, customers in other markets demand and expect these services.

Huawei may stay competitive in network equipment in markets where it is still welcome. It may need US chips and software. China could, in theory either develop its own or source both elsewhere. That’s assuming the US doesn’t lean hard on other countries.

At this point things can go one of two ways. If it’s about the US putting trade pressure on China, things could blow over, albeit with some damage.

Huawei knock-out?

That’s the optimistic view. A more negative view is that America aimed to knock out China’s most prestigious technology company. It did so either to make a point or to stop Huawei from becoming too powerful.

This can backfire. China is powerful, rich and smart. America may have a more advanced software industry. It’s chip makers may be better, but China could view this as a wake up call to bolster its own industries.

Only a brave person would bet on China not catching up if it puts its shoulder to the wheel. America may have created the monster it had hoped to strangle at birth.

Disclaimer Huawei has flown me overseas three times in the last five years. I aim to take a balanced view of this story, but I’m only human. If you think I’m missing anything important feel free to comment.


  1. This argument forgets the UK government revelation that Huawei’s network software is a shambles. ↩︎

Research company IDC reports that year-on-year phone sales dropped 6.6 percent in the first quarter of 2019. It’s the sixth quarter in a row to see a drop and the rate of fall is picking up. This time last year sales were down 4.1 percent over the same time in 2017.

Samsung remains the leading phone brand albeit with a falling market share. It has been the top-selling brand for each of the last four quarters. During that period Apple jockeyed for second place with Huawei. The Chinese phone maker is now back in second place.

It’s been tough for everyone. Only two of the top five brands sold more phones in the last 12 months than in the earlier twelve months. Huawei and Vivo, which is not visible in New Zealand, both saw sales increase.

Samsung in the driving seat

Samsung accounts for about one phone in five sold. It’s share nudged down a tick as it sold 6.3 million fewer phones than in the previous year. While the company’s premium phone models, notably the Galaxy S10 and S10+, remain popular, Samsung is losing ground lower down the market.

Huawei is the big winner. The company continued its surge that has propelled it past Apple in terms of unit sales. Year on year sales are up 50 percent. In the twelve months to March 2019 Huawei moved to 19 percent market share. That is closing on Samsung’s 23 percent and comfortably in front of Apple’s 12 percent.

This strong growth took place before sales of the recently announced P30 and P30 Pro models could influence numbers. Based on a comparison of the P30 Pro and the Samsung S10 , Huawei may get nearer to Samsung’s share in the coming months.

Worldwide phone shipments

Company1Q19 vol1Q19 share1Q18 vol1Q18 sharechange
1. Samsung71.923.1%78.223.5%-8.1%
2. Huawei59.119.0%39.311.8%50.3%
3. Apple36.411.7%52.215.7%-30.2%
4. Xiaomi25.08.0%27.88.4%-10.2%
5. Oppo23.17.4%24.67.4%-6.0%
5. Vivo23.27.5%18.75.6%24.0%
Others72.123.2%91.927.6%-21.5%
Total310.8100.0%332.7100.0%-6.6%
Figures from IDC, numbers in millions

Apple phone sales fall

Apple’s four percent fall in market share represents something of a sea-change, but is not as dramatic as it is viewed in some quarters. The company’s share price actually rose after it announced its annual results overnight. Apparently iPhone sales were not as dire as expected. The company aims to make up some of the lost revenue from selling services.

We don’t see much of the fourth and fifth brands in New Zealand. Samsung and Apple dominate the New Zealand market with Huawei challenging for a place at the top table. After that, it’s all rats and mice.

For the record Xiaomi’s market share dropped almost half a percent to eight percent. Vivo added two percent of market share taking it to 7.5 percent. Oppo, which is active in New Zealand, was flat and is now in sixth place with a 7.4 percent market share.

Most of the analysts commenting on the results focused on the way consumers are no longer as quick to upgrade phones to the latest models. This makes a lot of sense. A phone should last from three to four years and, advances in photography aside, today’s phones are often not much better than three-year old models.

When new people enter the phone market, they are no longer coming in at the top, but are buying lower priced models from Chinese brands.

Huawei

At the New Zealand Herald Juha Saarinen writes about the HCSEC report in The real reason Huawei shouldn’t be in 5G networks:

“The report from oversight board for Britain’s Huawei Cyber Security Evaluation Centre (HCSEC) makes it clear that clever, secret backdoors in the Chinese company’s equipment is the least of anyone’s worries.

“Instead, it’s old, unsafe and bug-infested software, bad coding practices, and little or no effort by Huawei to sort out some seriously deficient processes and practices.”

Overnight, Huawei’s status went from clever enough spy on networks undetected to bungling clowns.

The report is damning. It’s not about a few weak points here and there. Bad code run through Huawei’s software like the word Blackpool in a stick of seaside rock.

The UK has known this for seven years.

Bad software is everywhere

On one level it’s not a surprise. Poorly-written software is common. It runs the world.

Some of the best-known software names have or had dodgy code including Microsoft and IBM. Enterprise software often holds together with digital chewing gum and paper clips.

Shoddy software lies behind most computer security problems. Attackers find and exploit holes in poor code.

Critical infrastructure

That’s the problem with Huawei. Its network products are part of critical infrastructure. Criminal or hostile-state-controlled coders could find their way into those networks.

Huawei network kit has always looked advanced compared with rival brands.

The NATO Cooperative Cyber Defence Centre of Excellence underlines this:

“It is currently the only company that can produce ‘at scale and cost‘ all the elements of a 5G network, with its closest competitors Nokia and Ericsson not yet able to offer a viable alternative.”

Now it looks like Huawei cut too many corners to get out in front.
The HCSEC report is a wake up call.

Hopefully everyone watching is getting their own house in order. Experience suggests otherwise.

Fixing the mess

In theory, Huawei can fix this mess. It has acknowledge the report and says it will spend $2 billion in a programme to fix the problems.

The UK’s National Cyber Security Centre isn’t confident that will happen. It also fears any fixes that Huawei makes may not make their way into products used in networks.

Huawei has had seven years to fix problems. It’s done nothing.

Last year the National Cyber Security Centre warned the company. According to the report, Huawei made “no material progress” on identified problems.

The HCSEC oversight board say it wants to see “sustained evidence” of better software engineering and cyber security “quality” before it gives Huawei a tick.

HCSEC report not about spies

None of the flaws found in Huawei’s offering is to do with Chinese state intelligence.

That was the reason for setting up HCSEC in the first place. It’s why Huawei faces more scrutiny than other equipment suppliers.

That poses an interesting thought: How would Huawei’s rivals look if they were subject to similar investigation? Until then, there’s no logical reason to assume they are any better.

I write about Huawei New Zealand’s long-term role in the nation’s mobile sector for the New Zealand Herald.

Huawei has played a central role in New Zealand’s telecommunications infrastructure for a decade. The company’s New Zealand deputy managing director, Andrew Bowater, says it started working with 2degrees four years before the telco’s network was switched on in 2009.

The 2degrees partnership played a crucial role when in 2013, Telecom, now Spark, chose Huawei’s hardware to power its 4G mobile network. Bowater says; “We wouldn’t have won that without 2degrees, we wouldn’t be here today without them.”

That relationship cuts both ways. Huawei provided 2degrees with the money needed to build its network with a vendor finance arrangement. Bowater says the two companies passed an important milestone in 2013 when a local bank bought the debt off Huawei.

Huawei’s relationship with Spark went deep. The two worked together to break new ground, they were the first to use 700 MHz spectrum for a 4G mobile network. New Zealand got that ahead of the world. Likewise, they were early getting 4.5G technology to market.


Read the full story in the New Zealand Herald.