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Business

Huawei's European customers are on hold by US Ban




LONDON – Europe has been one of Huawei's greatest success stories. Now it is on the front page of the trade and technology war between China and the United States.

Moved by Google this week to cut Android support for phones made by Huawei, the Chinese telecom customer, will pay tribute to their European users and highlight how deep the continent relies on US and Chinese companies for gadgets, apps and internet services.

From its early days, Huawei has expanded its wireless carrier equipment to an extraordinary price in Europe, capturing more than a quarter of the smartphone market. Google's action is "potentially disastrous" for Huawei's hopes in Europe, says Ben Stanton, senior analyst at Canalys, a research firm.

Trump administration's order this month prevents US telecommunications companies from using foreign equipment that could pose a threat to national security – exactly what Washington has accused Huawei of doing – likely to have an impact on smartphone users & # 39; experience. Google Maps and other applications, for example, are not supported.

European customers are hit harder than those in the US or China. Huawei phones are largely inaccessible in the United States, and Google's services have long been blocked in China by the government.

But they are best sellers in countries like Greece, Portugal and Spain. These phones, plus robust sales of telecommunications equipment, have made the market covering Europe, the Middle East and Africa the Huawei second-largest after China. It represented 28 percent of Huawei's revenue in 2018, compared to 7 percent from the US.

The print has mounted itself. Since the administration's order, a company has successively moved to suspend business with the company, the world's second largest smartphone maker, after Samsung.

Google announced its withdrawal on Monday. The Commerce Department said it would provide a 90-day extension for businesses to figure out how to support existing mobile networks and phones, but Google said it was scheduled to comply with the government when the time expired .

Huawei won't be able to recover quickly, analysts said.

"It would be extremely unlikely that they would use their own operating system in the short term," said Dario Talmesio, telecommunications analyst at Ovum, a research and consulting firm in London. "And that means people with existing Huawei devices will gradually see devices that rely on Android, deteriorating because they fail to perform certain upgrades."

Customers who shop for a handset are not likely to buy one that does not come with Google's latest version of Android, applications like Gmail or the Play app store. The decline in demand for Huawei phones can also damage European operators who "rely heavily on quality, at relatively low cost, by Chinese entities" to get customers on the new hyper-fixed networks on the horizon, Talmesio said.

Huawei's bottom line may suffer from the loss of sales of its more expensive phones with high profit margins, said Steve Tsang, director of the China Institute at the School of Oriental and African Studies in London. And the reduced prospects in Europe can prevent Huawei's ability to expand elsewhere.

"Being able to do that in Europe means it's much easier for Huawei to do it in the rest of the world," Tsang said. "Success in Europe is important for Huawei, both in terms of revenue and future growth."

To succeed in Europe, Huawei has made a lasting effort over nearly two decades to work with network operators and allow governments to test their equipment for security errors. Huawei first made purchases by offering cheap equipment to build telephone networks in countries such as the UK, Germany, France and Poland. The company became the world's largest seller of telecom equipment, Nokia and Ericsson.

Huawei reinforced its reach as it began selling mobile devices, first as cheap alternatives to a Samsung Galaxy or an Apple iPhone and then with pricier models respected for their technology. Huawei gives operators and dealers better financial terms than rivals by letting them make money from all handset sales. Industry analysts said retailers had an incentive to show and market Huawei phones.

The strategy helped Huawei sell more than 42 million smartphones in Europe last year, according to Canalys. "Huawei has been the darling of the European smartphone industry for the past three or four years," says Stanton of Canalys.

Huawei's growth highlights how Europe's influence in technology has faded.

The European policemen have tried Finland's Nokia was once the world's largest seller of mobile phones, and Skype, founded by Scandinavians helped pioneer the current development of the global technology sector. Common ability to call over the Internet. But Europe could not keep up with Silicon Valley or Shenzhen, where Huawei has its headquarters.

For months, Washington has warned Allied security risks associated with Huawei, but several are in the trump management's threatening their intelligence relationship with Germany, Britain and other allies when Huawei attempted to build their fifth generation or 5G network. Networks promise not only faster mobile service, but also better wireless connections for "internet of things" such as autonomous cars, security cameras and industrial equipment.

Trump Administration's orders moved the debate about Huawei beyond the more obscure equipment needed to make wireless networks that phones consumers can buy and applications they can use.

"It's not in our control," Talmesio said in Ovum. "We are stuck in the midst of this commercial war and we become very much a kind of proxy war territory."

Google's decision surprised potential phone buyers in Europe, and many were hesitant. Security risk was not their concern. They wanted to know that their phones would work anywhere.

"Such programs as YouTube and Google Maps, they are important," said George Kirmizidis, an official surfing at a BASE mobile phone store in Brussels. "If I can't access them through my smartphone, what is the point of buying a smartphone at all?"

"As a customer, of course, I have the choice to choose between different products, and now Huawei is out of the market for me," Kirmizidis, 44, said. "I have a limited selection of products, which is not good if we support capitalism."

Solongo Unurbat examined a Huawei phone priced at more than $ 1,000 in the Mall of Berlin, and the 34-year-old was not worried about the loss of Google functionality.

"For me, it's about the camera," she said.

Keerthana Annamaneni contributed reporting from Brussels, and Christopher F. Schuetze from Berlin.



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