Like a b-plot from a particularly bad Bond movie, the Huawei security scandal has been a bit of a slow burner, with the roots of the saga reaching right back to January 2019 at CES, when AT&T announced themselves as the first major partner to ditch the Chinese technology giant. The next month, the director of the FBI warned against buying their phones and by May, Huawei and ZTE phones (ZTE being another company with potential ties to the Chinese government) were banned on US military bases. In the ensuing months, established partnerships began dropping like flies.
Throughout 2019 it’s gone from bad to worse. By June 5 of this year, company chairman Liang Hua had issued a ‘no-spy’ deal with the US, but the damage had already been done. Once the Trump administration decided to hammer the company with indictments (23 of them, in fact), the ink had already begun to dry on Huawei’s death warrant, at least as far as the west was concerned.
So, to say it’s been something of a turbulent 18 months for the world’s number one telecom supplier (and number 2 smartphone manufacturer) would be an understatement. However, the latest wrinkle in the story might prove to be the company’s final undoing.
Losing Your ARM
The BBC recently obtained internal documents suggesting that ARM, the Cambridge-based chip designer, recently announced that it was going to suspend all business with Huawei. The memo reveals that as ARM’s designs contain “US origin technology,” it technically needs to adhere to the Trump administration’s ban, which forbids all trade with the controversial company. The “US-origin” statement might be initially confusing, until you realise that ARM has US headquarters in California, as well as offices in Washington, Arizona, Texas and Massachusetts. It also owns a 49% stake in ARM China, to which it would appear the ban also applies.
This is significant news, as ARM (which was acquired by Japanese telecoms giant Softbank in 2016) provides the underlying technology for the vast majority of Huawei’s chipsets, which are used in everything from their smartphones to their servers and 5G base stations.
It has been described as an “insurmountable blow” to the business, which will struggle to source home-grown components given the nascent status of the semiconductor industry in China. Huawei’s own HiSilicon semiconductor company exclusively uses ARM tech, so it’s not like they’ve just lost an arm here, it’s like they’ve lost their lifeblood.
All About Oak
Of course, Huawei was already facing a rude awakening after Google and Microsoft both suspended access to their operating systems for new Huawei devices. The company has reportedly been planning for this eventuality for some time (since 2012, in fact), and has been developing its own proprietary paranoia project “Oak OS,” which is rumoured to be touching down in October of this year.
Times have changed rather dramatically for the company since 2012, when it has less than 5% of the global smartphone market share. Six years later in 2018, it shipped a total of 206 million smartphones, with almost half of that number going to overseas markets. The vast majority of those phones utilise the Android operating systems and if there’s one thing smartphone users don’t like it’s change.
As such, whilst the Oak OS might have once been a bold reimagining of what a smartphone operating system can be, it is now likely to be little more than a re-skin of the open source version of Android. So few users will notice the difference, at least immediately. Still, the lack of any native Google apps will be a major blow to those who are not au fait with the practice of installing apps ‘the hard way’ by side-loading.
What About The Cloud?
Huawei has always been a company at the bleeding edge when it comes to the data centre. Indeed, it was just earlier this year that the vendor released the first AI-powered data centre switch, which boasts micro-second latency, zero packet loss, and 100% throughput to double the AI computing power of enterprise networks.
Huawei’s cloud computing game, however, is all based around the Kunpeng chips that are used to power their TaiShan-series computer servers. These chips exclusively use ARM designs. So, whilst the mainstream headlines might all be focusing on how the ban will stall 5G expansion, there will be an even greater loss for Huawei clients who were counting on TaiShan servers, which are built on ARM architecture.
So as well as their smartphone and 5G businesses potentially being dead in the water, it would appear that without ARM, Huawei’s incredibly ambitious cloud offering is now essentially dead before it even had time to hit the ground.
Life After ARM
Ultimately, whilst the odds are stacked against them, Huawei is a company that could surprise us all with a bold and brilliant comeback story if they are willing to be more transparent with their operating procedures. It is expected that the company will unveil its new 5G Kirin 990 phone at the upcoming IFA 2019 and reports claim that work had already been completed on the phone prior to the ban, which means they might have at least a little breathing room on the smartphone side of the business before they really start feeling the pinch.
Whether or not Huawei will weather the storm raging around them, however, it’s a storm that has already caused a potentially irreparable amount of collateral damage. On an immediate level, tens of thousands of jobs have been affected and the mutual trust that exists on the global supply chain between China and the rest of the world has been powerfully disrupted.
More tangentially, the 5G rollout has been delayed significantly (leading to a large number of knock-on economic problems), British politics has experienced yet another scandal and the Huawei Cloud is as good as toast. Still, everybody loves a good comeback story and there is a glimmer of hope to be found as Huawei's Mate 20 Pro recently reappeared on the Android Q beta program as one of the 21 handsets officially listened to test the new update. So maybe Huawei and Google have reached an agreement? Either way, Huawei is going to have an uphill battle on their hands if they want to reclaim their lost ground after this monumental setback.