Huawei has been building its substitute to Android for a rainy day. Is that day looming?

Having an alternative smartphone OS may have taken on added urgency for China with rising trade tensions with the US. Huawei has been developing and perfecting its own system, according to people familiar with its plans

PUBLISHED : Friday, 27 April, 2018, 4:35pm
UPDATED : Saturday, 28 April, 2018, 1:09am

The US ban that bars Chinese telecommunications equipment maker ZTE from using American products and services has served as a reality check for China’s technology ambitions. The prospect that ZTE could lose its license to use Google’s Android operating system for smartphones has also raised the question: does China need its own smartphone OS as a backup?

For a start, Android and Apple’s proprietary iOS have a stranglehold on smartphone operating systems, accounting for 99.9 per cent of the global market, according to Gartner estimates. 

There has been a long line of developers and operating systems seeking to break the duopoly: Microsoft with its Windows Mobile OS, and Samsung Electronics with its Tizen system. There was also Nokia’s Symbian platform, considered the pioneer of the age of the smartphone.

Huawei Technologies, the top-selling smartphone brand in China and world’s biggest telecommunications equipment manufacturer, could be the next to try, if push comes to shove. The company has been developing and perfecting its own smartphone OS, according to four people familiar with the company’s plans.

The company started building its own operating system after a US investigation into Huawei and ZTE in 2012, one of the people said, asking not to be named discussing confidential matters. Huawei also has its own OS for tablets and personal computers, the person said.

Chinese tech company Huawei probed ‘for violating US sanctions on Iran’

The plan was initiated by Huawei’s founder, Ren Zhengfei, and the company has never given up on it as it is seen as a strategic investment to prepare for “worst-case scenarios”, according to the sources. The company has not released the OS because it is not as good as Android, and the system does not have many third-party apps developed for it, one of them said.

At an event in Beijing this week, Zhao Ming, president of Honor, a smartphone brand owned by Huawei, was asked whether the company was developing its own OS. 

“It is a matter of capacity and necessity,” Zhao said on the sidelines of the Global Mobile Internet Conference in Beijing on Thursday. “There is no doubt that Huawei is capable of doing it, but for now I don’t think it is necessary since we work very closely with Google and will continue to use its Android system.”

Huawei “has no plans to release its own OS in the foreseeable future”, the company said in a response to a query. “We focus on products powered by Android OS and adopt an open attitude towards mobile OS.”

Huawei is in better shape to withstand US pressure with large R&D budget 

Having an alternative OS may have taken on added urgency with the trade dispute escalating between the US and China. Huawei is reportedly under investigation by US authorities for possible violations of sanctions banning sales to Iran. Neither the Justice Department nor Huawei have confirmed that the inquiry is taking place. 

The company has said it “complies with all applicable laws and regulations where it operates”. Earlier this year, American phone networks AT&T and Verizon withdrew their support of the Chinese brand.

“Even if they have developed something, the key question is whether Google services will be available on it,” said Brian Ma, a vice-president at technology research firm IDC. If not, then its app ecosystem will be horribly hampered for users outside China, similar to Windows Phone, Tizen and other mobile OS that have struggled to get off the ground”. 

China calls for ‘core technology’ breakthrough amid US pressure

Preparing for a worst-case scenario was in the mind of company management, according to a reported speech by Ren in 2012.

“We are developing our own OS out of strategic consideration because won’t we be doomed if they suddenly cut off our food, don’t allow us to use Android or Windows 8,” Caijing quoted Ren as saying in a meeting with Huawei executives and external expert. Huawei declined to verify the contents of the speech, reports of which were carried by major news portals Sina and Sohu.

Similarly, I don’t oppose buying high-end chips from the US when we are also developing our own high-end chips,” Ren said. “I think we should use their high-end chips as much as possible to understand it well. When they no longer sell their chips to Huawei, we’ll be able to use our own chips in large quantities, even if they’re a bit inferior, they can still be used.”

ZTE may be too big to fail, given China’s global technology ambition

Huawei has one of the largest research budgets in technology, spending US$14.2 billion last year on research and development, or 14.9 per cent of its revenue, second only to Amazon in dollar terms and more than what Google’s parent Alphabet spent.

As a result of that spending, Huawei’s HiSilicon unit, a Shenzhen-based semiconductor company, was able to develop the Kirin chip, which has increasingly been used in its namesake handsets, including the high-end Mate 10 and P20 series. 

Still, China has remained heavily dependent on the import of semiconductors, accounting for more than 60 per cent of annual global chip sales, according to data from PwC. Semiconductors represent one of the top exports of the US, along with aircraft, refined oil and cars.

The ban on ZTE and reported inquiry into Huawei has turned up the heat on China’s tech industry. Core technology is an important tool for the nation, President Xi Jinping said during a national conference on network security and information on Saturday. “We must keep persevering … and accelerate core technology breakthrough in the information field,” he said.

Is ZTE ban the start of a tech war between China and the US?

Huawei shipped 153.1 million smartphones last year equipped with an OS called EMUI that is optimised from Google’s Android. The company is now the world’s third biggest smartphone maker. In China, it is the market leader, shipping 21 million units including the Honor brand.

The company will continue to buy chip sets from US-based Qualcomm and Taiwan-based MediaTek, two of the world’s largest mobile chip set manufacturers. Its Kirin chips will be used on its own smartphones and not sold to external customers, the company said. 

“We remain committed to this multi-vendor strategy, as it is critical to ensure healthy development of the smartphone business,” Huawei’s rotating chairman Eric Xu said during its annual Global Analyst Conference in Shenzhen this month. “We cannot put all the eggs in one basket.”

As for the reported investigation by the US, Honor’s Zhao said Huawei has come out of previous investigations by other countries because the company complies with the law.

“As long as we continue to do business honestly, we are fine,” he said.