Google (NASDAQ: GOOGL) has reportedly ended licensing and technical service agreements with Chinese telecommunications company Huawei. Reuters News broke the story on Sunday evening, citing unnamed sources from within Google. While this isn’t likely to impact Google’s stock or the expansion of its mobile platform, it will be a huge blow to Huawei.
It could also be the first of many moves against the Chinese company, following a recent U.S. government trade blacklisting.
Huawei Will No Longer Receive Specialized Support for the Google Android Platform
Google’s Android mobile operating system is by far the market leader and is installed on over 86% of the world’s smartphones.
Huawei will now be forced to use the open source version of Android on its phones. This could seriously hinder the company’s expansion outside of Asia. A Google representative told Reuters that existing Huawei devices will still receive app updates, but that the company “will only be able to use the public version of Android and will not be able to get access to proprietary apps and services from Google.”
This would mean that future phones would not come with key services such as YouTube, Gmail, Google Docs, and the Google Play Store.
This will leave Huawei phones even less attractive in international markets. Huawei has struggled to gain traction outside of Asia, failing to compete against brands like Samsung and Apple. Without Google’s suite of apps, the company’s position will become even less competitive.
Huawei Blacklisted by President Trump
There’s more than the Android licensing deal at stake for Huawei. The Trump Administration added the company to a trade blacklist last week, making it virtually impossible for it to sell its products and network services in the United States.
Huawei is the world’s largest manufacturer of 5G network equipment, but it has faced increased pressure from the U.S. government, with claims that its hardware can be used for espionage. With Huawei essentially barred from the U.S., its network and infrastructure competitors stand to gain during the nationwide deployment of 5G.
Both Nokia Corp. (NYSE: NOK) and Ericsson (NASDAQ: ERIC) should benefit from the trade ban on Huawei, and at bargain prices they are interesting stock picks today.
Huawei is the biggest and most recent casualty in the ongoing trade war with China. While a high-level trade deal is possibly still on the table, this company may remain perpetually locked out of the U.S. market.
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