Friday, September 30, 2022

The coronavirus pandemic will cause a massive backlash for Huawei 

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The world has come to a standstill thanks to the global pandemic caused by the novel coronavirus. At the time of writing this article already more than a million people have tested positive for the virus and more than 50,000 people have died. While some technology companies like Zoom and Microsoft are thriving because of the uptake of Internet services, the smartphone space is seeing the greatest slowdown of all time. Chinese companies, in particular, will be hurt by the pandemic as globally there is an anti-China sentiment. 

The virus originated in Wuhan, in China’s Hubei province, in November and there is plenty of evidence which suggests that initially, China hid the existence of the virus which left both the world and the WHO unprepared for the impact of the virus. If the world is in the middle of the greatest slowdown since World War, many believe China has played a big role in it which is causing a big anti-China sentiment across the industries. 

The coronavirus which is called COVID19 originated in a wet market in Wuhan was triggered by a zoonotic jump from bats to the pangolin. Pangolins are consumed by the Chinese rich as a delicacy which is also known to have aphrodisiac like characteristics. The bigger issue is that this isn’t the first time a zoonotic jump from animals in a wet market as caused an epidemic originating in China — back in the early 2000s in was SARs and then later it was HIN1, also known as Swine Flu. That’s why there has been an outrage worldwide against China as these wet markets haven’t been shut despite numerous outbreaks in the past. 

While many of these Chinese companies are cash-rich and they are doing their bit to help society — a case in point Xiaomi in India which has donated Rs 25 crore to the PM relief fund, the anti-China sentiment is likely to cause a backlash for its tech majors. 

However, these days the smartphone industry is dominated by Chinese brands like Oppo, Vivo, OnePlus, Huawei and Xiaomi amongst others. Collectively these companies account for more than 50 per cent of all phones sold globally. Despite the anti-China sentiment, most of these brands will be fine, except one — Huawei. 

Huawei will be massively hurt by this virus and the anti-China sentiment it brings along with it. Huawei which recently launched its flagship smartphone — the P40 Pro is already smarting from a trade-ban imposed by the US which restricts transfer or sale of technology that’s created in the US to it. 

Huawei is one of China’s biggest tech companies is said to have close ties to the government in China with its founder Ren Zengfei being an ex Chinese army personnel, has faced issues with European and North American regulators and governments in the last 3 years. 

On the smartphone side of the spectrum, the Chinese leviathan is the second-largest seller of smartphones in the world, despite being banned in the United States for the last two years. Even in telecommunications technologies, it is one of the pioneers behind the 5G standards and his the largest vendor of infrastructure across the world with telecom operators depending on it across the world. 

But the trade-ban which is also being viewed as a part of the US-China trade-war has throttled the rise of Huawei across the world. For instance, Huawei’s smartphones which have been highly popular in mainland China and Europe can now only use an open-source version of the Android operating system which doesn’t get access to the Google Play Store for downloading applications. The deployment of Huawei’s 5G network infrastructure equipment has also been stalled as many countries in the European Union review its technology based on security concerns. 

The new P40 Pro which is also expected to be launched in India later this year has been rated as the best smartphone camera by the rating agency DXOMark, thanks to its collaboration with iconic German camera maker Leica. It is a phone which has all the hardware elements to take on the latest iPhones and Samsung Galaxy S20 smartphones — yet these phones will come hobbled out of the box because of the lack of the Google Play store. 

Yet for many enthusiasts, these could be great phones just because of the cutting edge technology in them — especially the cameras. However, once one adds the problems caused by the COVID19 pandemic then things become highly complicated for all Chinese smartphone makers, doubly so for Huawei. 

Because of the US-trade embargo, Huawei has had to completely re-do its supply chain to ensure their products don’t have any kind of US-based technology. This was a herculean task that perhaps was only achievable for a company that had the depth and wealth that Huawei has. However, this came with a huge longterm gamble of investing in things that weren’t being used by most smartphone vendors which meant that Huawei wasn’t leveraging the economies of scale that benefit the smartphone industry as a whole.

On top of this, to make its smartphone business sustainable, it also stockpiled a lot of components from vendors like Qualcomm and Intel before the trade embargo kicked in, and a lot of that stuff might go outdated as one rides the pandemic. The financial damage will be massive — more so for Huawei than any other company. 

The last, perhaps, the most unfortunate side effect of the pandemic is the racism that comes hand-in-hand with the pandemic as it originated in its home turf. Unlike brands like OnePlus and older companies like Lenovo which aren’t perceived as Chinese brands, Huawei has had a long-standing problem with its Chinese origins and the pronunciation of its name. This was one of the reasons Huawei created the Honor sub-brand for millennials. 

Its struggles have been well documented that’s why it hasn’t taken off like the way some of its peers from China have in growth markets like India. Huawei has also had itself to blame as it hasn’t fully localised management and product development to India’s needs the way Xiaomi and to a lesser degree, Vivo has done so. 

Xiaomi’s localisation is a classic example of how assimilated it has become in the Indian culture that it is being applauded for its moves around the COVID19 pandemic in India. BBK Group-owned Realme is also taken cues from the same playbook. 

On the flip side, Lenovo and OnePlus are pantheons for globalisation — something which also Huawei never managed as it built its consumer business on the backbone of its unsexy telecom business. Back in the early 2000s, Lenovo acquired IBM’s iconic ThinkPad laptop business and then a decade later it acquired iconic smartphone maker Motorola from Google. Most people don’t view Lenovo as a Chinese company — leave alone the brands it owns.

Similarly, OnePlus was a hip smartphone start-up spun out of Oppo with a product and design philosophy more American than Chinese — by 2019, it was the biggest premium smartphone brand in India and its phones get rave reviews the world over. In two weeks, it is launching the OnePlus 8 right in the middle of the pandemic but reviewers are already complaining that they will not get review units because of the pandemic — that’s how popular this brand has become. 

Huawei is bigger than Lenovo, Xiaomi and OnePlus — but it is not loved the way some of these brands are. It even has market share and lucrative business units the world over. However, reports of its employees spying on competitors haven’t lent well to its image — and the damage done by the US ban over spying concerns have caused more problems. 

This situation also led to FBI directing Canadian authorities to put Meng Wanzhou, Huawei’s CFO and daughter of its founder to be put under house arrest in December 2018, pending a court trial for extradition to the US. The last couple of years haven’t been a good look at the Chinese giant. 

But now that there is a huge anti-China sentiment, the backlash will hit its biggest smartphone maker front on as it becomes the poster-child for many of Chinese capitalism which also was purveyor for a disease that’s caused millions of people to be unemployed and killed more than 50,000. 

It is unfortunate as despite being hobbled by the trade-war, Huawei showed its resilience and excellence as one of the boldest technology companies of our times, but now this pandemic doesn’t only hurt it in ways everyone is being hurt, but potentially make it a ripe target for racism. 

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