in In the last year the USA president, Donald Trump, has started the trade war against China, but in the last weeks he focused his attention to one specific Chinese company: Huawei. He has decided to ban it, formally, for a national security problem. After this step he tried to open a negotiate with China but, with this decision he want pump in this trade war.
Like a domino, several companies, not only Americans, have decided to interrupt any collaboration and supplying with the banned company. This is the case of Google that has decided to cut any customized Android supplying. The same way was followed by the most important chip producers like Intel, Panasonic, Infineon, AMS and ST Microelectronics.
In some hours the Trump’s ban opened, literally, the hell’s gates on mobile phone and telecommunication systems divisions of the Chinese company.
Is the situation so catastrophic? Will Huawei survive at this earthquake?
Is not our intention to discuss, in this post, about the trade war from the political point of view. We won’t take a position about the correctness about these decisions, too. We’d like to offer a third point of view about the possible opportunities that can born from this situation, only.
It is known the pragmaticistic of the Chinese culture, how they can move forward even in hard events and they can use properly their resources to build up a bridge on their gaps. In this direction we see a clear opportunity, for Huawei, to accelerate the brand mutation that started few months ago.
We start from two different points: the Huawei’s CEO, after the Trump’s ban, said that, the company already started to work a proprietary OS and it could be launched at last, the first months of the next year. This could be only a political answer to the Google’s actions. It is important to know that, create a proprietary OS it isn’t easy, as it isn’t easy, normally, to swap an OS, that was built in a decade.
Our second thinking is about the last Huawei brand positionings. The Chinese brand, at the beginning, was launched on the market because it was extremely cheaper than iPhone and Samsung devices. Step by step they have conquered the market till the last year when, they decided to over pass Apple. And they did it. How? They have decided to relocate some their devices on a premium price level. In this way they took care about the material, the innovation design and, of course, the parts assembling. Now, looking a Huawei’s mobile phone we can’t define it “a Chinese product” anymore, because it is smart, innovative and fashion. Working in this direction, the Chinese company, at the beginning of this year, sold more smartphones than Apple and, before the trade war, they were focused directly on Samsung market share.
With these trade war decisions, Huawei could be forced to position its brand on a premium price market, as Apple did since the beginning. In fact, if they will be able to run a performant OS on a smart and innovative device, they will be able to create a unique mobile device. And they could run the same Apple’s strategies, with one big exception: the Chinese wide market and its opportunities. In fact, talking about Apple, we can observe that they were the first mover in the smartphone market (they created it) but, even they were been innovative, they weren’t been able to collect all the positive feedback of their action, because the mobile market, as it is today known, was only at the early stage.
Instead, if we think to Huawei, we have several plus: at first, the Chinese giant is one mobile infrastructure producer and this could help, from one side, by the interoperability between network and mobile device, and in the other, it is impossible stop the deployment of mobile devices and network infrastructures, because they run together. At today, Huawei has demonstrated that its 5G network has the best performance of the market.
The Chinese market could be a second plus. If the trade war will close the commercial China’s borders, in your opinion which products will be sell? National or foreign ones? We must consider that the internal Chinese market is only at the beginning (from the GDP point of view) and it can be boost only if the people will growth its spending power. In this direction, the central government policies could help and could push the internal consuming of goods like mobile phones. At the beginning of this year, Huawei have growth its sales by 50% y/y. With a central government economic pushing, which results they could reach? With a good device and with an enormous market ready to receive a national product, which could be the barriers that can stop the Chinese player growth?
At last, but not least: USA can isolate China in only some direction, but not with the entire world. With a premium price product Huawei can conquer other international market that are already ready for premium products like iPhone or similar.
All this about the OS issues. Looking at the chip and electronic components markets, the things shouldn’t be different. Who works in this market knows that the main street of the chip producers was the same already described here above for the generic Chinese products. At the beginning the cost was the main driver for the company’s buyers, but today we can reach more quality and more innovation from the Chinese factories.
In this direction, the Trump’s ban could have a negative reverse impact on western electronic companies: without Huawei, most of the companies will not maintain the previous balance sheets due the selling drops. Moreover, Huawei could share know how and business opportunities with the local producers, with a big positive impact for them. This could be the easiest and the fastest way to improve the Chinese electronic products, that could become competitive as western ones.
Anyway, it is clear for us, that these bans could be a good impulse for the growth of Huawei and the Chinese chip producers. The tricky point is the growth of the Chinese internal GDP. This is one of the problematic points that the central government is trying to resolve in these last years. This crisis could accelerate this evolution.
Today’s international commercial balance is hot and in continue rolling. We’ll see the next actions.