Trump Ban Puts Huawei's Smartphone Plans in Jeopardy

Bloomberg
Huawei Technologies Co. made a pitch to app makers last year: Build software for a new Huawei app store outside China, and we'll help you inside the world's most populous nation.

Huawei Technologies Co. made a pitch to app makers last year: Build software for a new Huawei app store outside China, and we'll help you inside the world's most populous nation.

The app store plans, which haven't been previously reported, underscore how important Europe is for Huawei. The company has been all but shut out of the U.S. phone market due to longstanding security concerns. But now even its designs for Europe are in jeopardy -- along with HuaweiGs hard-won status as the worldGs second-largest smartphone maker.

Without Google's participation, HuaweiGs app store plan has a dim future. That's because the Chinese company continues to rely on Android to power its smartphones globally, and relies on Google's most popular apps to win mobile phone shoppers. Trump's ban is also a setback for the U.S. search giant, which relies on device-makers like Huawei to put its lucrative web services in peopleGs hands. Representatives for the Chinese company didn't have immediate comment when contacted for this story.

That will make it very hard for Huawei to compete with smartphone rivals like Samsung Electronics Co. and Apple Inc. Samsung retains unfettered access to the Play store and other Google services, while Apple built its own successful app store over the past decade.

On Tuesday, Samsung jumped 4.3% in Seoul, marking its biggest intraday gain in two months.

Instead, Huawei could employ the open-source version of Android, which it uses in China, where Google services are blocked. That version has some scaled-down Google apps, such as Gmail. But the search giant doesn't control them, and so it can't manage security upgrades or reap the consumer data that make the services useful and fuel advertising.

A pillar of this independent strategy was Huawei's homegrown app store. But that faces an uncertain future now.

Huawei's app store strategy centered on Europe. It held more than 20% of the smartphone market in 22 countries there, including Spain, Italy and the Netherlands, according to the internal documents from last year.

Huawei held talks this year with European wireless carriers about installing App Gallery on new devices, said one person familiar with the conversations. The Chinese company proposed splitting revenue from the store, offering a 'very significant' portion to partners, this person said. Under the plan, carriers' phones would come pre-installed with App Gallery, alongside GoogleGs app store.

Trump's ban could bring App Gallery, and HuaweiGs broader smartphone expansion plans, to a grinding halt. If Google can't provide software and services to future devices made by the Chinese company, other U.S. companies may be restricted, too.