Google's decision to cut Huawei from China could cost it as much as $ 425 million in lost annual revenue.
It is the estimate of the equity research firm Nomura Instinet that shattered the numbers in response to the news that Google will no longer license its Android smartphone software to Huawei.
Google doesn't have much choice in the matter. The Trump administration placed Huawei on a blacklist this month, making it almost impossible for US companies to do business with the Chinese smartphone and telecoms machine.
This means that new Huawei devices in markets around the world can no longer run the version of Android that comes with all the latest security updates, access top Google services as an assistant, or download apps from the Google Play store.
Huawei's break up with the Google Play store, where Google usually takes 30% cuts on each transaction, is where Google will lose the most. Instinet points out the general spectrum of potentially lost Play Store sales for Google between $ 375 million and $ 425 million.
The biggest effect will be in Europe
Instinet estimates that Huawei currently has around 500 million smartphone users worldwide.
But 52% of Huawei telephones are in China, where Google Play is not available, according to Instin's estimates. So Google will only impact markets – like Europe and Asia (except China) – where it deserves app sales today.
Google generated $ 7 billion in global Play Store sales in 2018, estimates the Instinet. The portion of the $ 7 billion that comes from Huawei phones is probably around $ 388 million, according to the Institute's estimates. The biggest driver for that income is in Europe, where Google generated $ 190 million from the Play Store sales on Huawei units last year, says Instinet. Huawei users in Asia (except China) contributed around $ 137 million in the Play Store sales, the report said.
Huawei "switchers" will make a difference
This blowet will probably be softened, they wrote, because some users will switch to phones from another manufacturer to access a complete Android experience. Huawei has announced that it has developed its own operating system to replace Android on its devices, but experts are very skeptical that consumers will respond positively to the switch.
"You can build another operating system … but what should consumers do for searches, for maps, for YouTube?" Carolina Milanesi, chief analyst at Creative Strategies, told Business Insider in a recent interview. "All these things have options, but why should I do that? It's not like Huawei's phones it's amazing that I would discard all the services I've been using for years."
Read more: Google has more control over Android than we realize, and right now companies like Huawei have no choice but to accept that
Colin Sebastian, Senior Equity Research Analyst at Baird & Co ., Business Insider said he believes "most influenced [Huawei] users" will begin to see switching to entities made by other companies.
"My general assumption is that since there aren't really viable alternatives to Android / Google apps (except Apple), the most affected users will be transferring to other Android devices," says Sebastian. but my guess is that it would happen quite quickly. "
Others, as CEO of Wedbush Securities Dan Ives, believe that Huawei will lose market share in places like Europe, but that it will not be a day-to-day scenario for the world's second-largest smartphone manufacturer .
Ives estimates it will reach $ 150 million to $ 200 million annually in terms of revenue loss for Google, and for a company that brought in over $ 130 billion in revenue in 2018, Ives said these upcoming losses are a "rounding error" for the tech giant, and that "in the last case the bark can be much worse than the bit."
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