Sun Tzu said: “just as water retains no constant shape, so in warfare, there are no constant conditions”. Applying this to the trade war between America and China that culminated in the banning of Huawei, Flagship Company of China, America has indeed changed the ground conditions, but in doing so it has given blessing in disguise to her competitor. Here are the facts:
Since May 2019, curtailing Huawei as a business strategy was on the air in US. Huawei was anticipating some form of crippling action is on the way. Finally, US banned Huawei from selling her products in America and elsewhere with allies. The ban cannot be generally implemented due to plethora of companies that have buyer/supplier relations with Huawei. Therefore US made a selective move.
This move had two limbs: one targeting the mobile market where Huawei phones are sold cheaper than her competitors. In mobile market US prevailed upon Google to make its app unavailable for mobile users who have Huawei phones. In addition Google also stopped YouTube, Gmail and Play Store for Huawei phones.
Second one is much more potent, that is, shutting out Huawei from the networking segment where American companies that use components such as HI Silicon are required to phase out the purchases from Huawei. Most noted amongst these companies are Verizon and AT&T.
Going a step above America pressured Taiwan Semiconductor Manufacturing Company (TSMC) not to process new orders for the supply of chips from Huawei. TSMC founded in 1987 by Morris Chang has developed the entire ecosystem in the semiconductor line and has been a major supplier to international techy companies including those in China. Even chip designer Arm Holdings was not spared by US. Wholly owned by Japan’s Softbank group, Arms which designs multiple uses of chip in electronics is under great pressure to cut ties with Huawei.
Considering the circumstances would change in the future and expecting US to leverage on her techy strength, Huawei put into operations few precautionary business tactics.
1. Diversify purchases of semiconductors from willing suppliers who are outside the US pressure circle such as Samsung.
2. Strengthen its chip subsidiary HI Silicon to meet up with new challenges.
3. Huawei Mobile System (HMS) is being developed as an effective alternative to Google Mobile system (GMS).
4. Insource purchase of semiconductors from Semiconductor Manufacturing Industrial Corporation (SMIC) is accelerated. Incidentally SMIC received a research grant of more than two billion US$ from the Chinese government
5. Baidu, Chinese equivalent of Google that handles 75% of domestic search queries is being developed with multi lingual multi-dimensional search engine platform to be made available for both Huawei and non-Huawei users.
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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