US’ moves against Huawei will spur on new tech development in China

Under pressure from the US government, Google suspended its product-sharing agreements and licenses with Chinese communications giant Huawei. But how badly will the move affect Huawei and what could it do to retaliate?

The Trump administration last week banned US companies from selling to Huawei without a government license, significantly upping the ante in the ongoing trade war between Washington and Beijing. US officials have been warning for months that Huawei could be used by the Chinese government for spying — although some critics, including Megaupload founder Kim Dotcom, accused the US of hypocrisy, slamming its own long history of “abusing technology” and “turning its entire tech sector into a spy machine.”

A Google spokesperson confirmed on Monday that the company is “complying with the order and reviewing the implications.” So far, it appears that Huawei devices which have already been bought will continue to get security and app updates, but new designs of Huawei phones will lose access to some Google apps and when the newest version of Android comes out, it may not be available on Huawei devices.

Google now, who next?

The ban has sparked speculation that Huawei's other partners will also cut their ties to the company and cripple its bid to become the top smartphone brand in the world. So far, several major US tech companies have already joined Google to implement Trump's Huawei ban.

However, it is still too early to tell if companies across Europe, Asia, and the Middle East would be willing to follow the same path of “cutting off a substantial revenue stream or foregoing the choice of a low-cost provider,” Howard Yu, a Professor of Management and Innovation at IMD Business School in Switzerland told RT.

The US’s concerns over Huawei may still represent “a very different reality from the perspective of other nations,” he said.

Washington will likely continue to pressure other nations to impose similar bans on Huawei, but that will be more difficult to do today than in the past, Yu said, given “many countries already harbor a certain distrust” toward the US “because of the many trade barriers Washington has simultaneously erected or threatened to put up.”

Yu also said Trump might be using the Huawei ban as a “bargaining chip” in an effort to force China to open its markets further. But a Western government handpicking one particular company and effectively trying to shut it down on the basis of vague “national security” threats “rather than open evidence” is unusual and unfortunate, he added.

It shouldn't be a problem for Huawei to find other Chinese and non-American suppliers, independent political analyst Alessandro Bruno told RT, pointing out that the North American market is already saturated and most new growth is in China and other parts of Asia anyway. People in those regions may even choose to buy Huawei phones now “as a political statement.”

Trade war escalation?

The latest Trump administration moves mean there is now “a real danger of a full-blown and highly destabilizing trade war breaking out” between the two countries, Dr David O'Brien, an assistant professor at the University of Nottingham Ningbo China, told RT.

O'Brien said that Trump is “in election mode” but the Huawei issues and China trade talks are problematic for him. On the one hand, while Trump wants to be seen as a great dealmaker, there are still “influential forces within his administration who believe a strongly anti-China position may be an electoral asset,” he said.

Beijing will be considering how far they want to push the Huawei issue and how much they want to be associated with the company in the event that other companies followed Google and cut ties. “China operates on the narrative of success and there may be a tipping point” if Huawei was “no longer seen as a success,” he said.

If the trade war heats up further, both Trump and Chinese President Xi Jinping will “will not want to be seen to back down” and that could lead to further instability and uncertainty, he said.

What will Huawei and China do next?

Beijing will now likely “corral all other Chinese tech giants into an industry consortium to develop all the missing component technologies,” Yu said, recalling that the US has used such a strategy during wartime to accelerate technological development. Huawei itself is “unlikely to retaliate” directly, he said.

If the Chinese government does respond by pushing leading industry players to new levels of cooperation and development, Trump may find that his extreme crackdown on Huawei backfired and “could paradoxically accelerate technology advancement from a country that [the] US fears the most.”

Bruno said China could also theoretically block Chinese manufacturers from supplying American companies, which ironically use chips and other components made in China in their devices.

He believes Google “will not come [out] of this unscathed” and noted that Huawei has its own operating system which it could adapt for the international market. If that works, Huawei could even “end up breaking [Google's] virtual monopoly,” he said.

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