If you've been paying attention to what's happening in the world of Huawei and China, you know things are not especially good.
In recent days, the U.S. government has come down hard on Huawei to all but ban the company from operating in the U.S. In an executive order last week, President Donald Trump prohibited any company from "any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service" that the U.S. government considers a problem. In other words, Huawei is in the crosshairs.
Worse yet, American companies have turned their backs on Huawei in response to the government's moves. And in a strange move on Monday, Google went so far as to say that it would no longer allow Huawei phones to get Android software updates--a critical issue in a world where hackers are always lurking.
In recent days, Google and the U.S. have backed off a bit against Huawei by allowing a 90-day window for moving away from the company, but the effect is the same: Huawei is in the U.S. crosshairs. And there's a very real possibility this could get worse for the company.
But there's also much more to this than meets the eye. And while the U.S. government has been clear for years in its stance against Huawei, there's more you should know about where Huawei is, where it's been, and where it's going.
Huawei Is Really Successful
First things first, it's important to realize just how successful Huawei has become.
In a surprisingly short amount of time, Huawei has become the world's second-largest smartphone maker behind Samsung with 17 percent share of the worldwide smartphone market, according to researcher Counterpoint. That's up from 11 percent during the same period last year.
In the same period, Samsung has watched its market share fall from 22 percent to 21 percent, and Apple's market share has slid from 14 percent to 12 percent.
Needless to say, Huawei is a major presence in the smartphone market. And the latest American offensive against Huawei could have serious implications in the smartphone market.
The U.S.-China Trade War
Why now? Well, it's hard to look at this battle without acknowledging that the American offensive comes at a time when trade tensions between the U.S. and China are at an historic high.
Huawei is one of the most prominent and successful companies in China. If the U.S. wants to send a message, why wouldn't it do it by targeting Huawei?
Of course, there are legitimate concerns with Huawei and its alleged ties to the Chinese government, but keep the trade war in mind when following the Huawei saga.
A Smartphone Threat?
It's hard to put a fine enough point on how important the smartphone market is to the U.S. and China. But a Chinese company dominating the smartphone industry could be even better for China.
After all, the cash that flows through China into Apple's coffers is rather small compared to the cash that could flow from consumers to Huawei and China. More people buying smartphones from a Chinese company is undoubtedly good for China--and if that company is stealing market share from U.S. companies, bad for the U.S.
Keep a close eye on Huawei's smartphone sales over the next several quarters and see how companies and the U.S. and China respond. There's big money in smartphones and everyone knows it.
A Security Worry
At the center of the President's decision recently is American security.
For the last several years, law enforcement officials, privacy advocates, and others have sounded their concerns over the possibility of Huawei working closely with the Chinese government to spy on Americans and those living in other countries around the world.
To be clear, Huawei has denied those allegations and said that any claim it's working with the Chinese government is false. But the U.S. government and the Trump administration have their concerns. And that acted as an important foundational piece for the recent decision.
Could American Companies Be Next?
Let's not forget that because Apple, Google, and other companies rely heavily upon China to drive their business, the U.S. move against Huawei could hurt those companies in big ways.
It's possible, though unconfirmed, that the Chinese government could respond to the Huawei move with similar pushes on its own to target U.S. companies. China and the U.S. have already hurled tariffs at each other that could hurt Apple, but is more to come?
Needless to say, there's far more to the U.S.-China trade war than politics. Major businesses with a slew of smaller companies that rely on them to drive their own operations are heavily involved in this drama. And depending on how things go, companies big and small, from the U.S. to China, could feel the effects for years to come.