Huawei has a back-up operating system just in case it's blocked from using US software.

By CNBC | 20 May 2019 at 16:53hrs
Huawei has built its own operating system for smartphones and computers in case it's blocked from using U.S. software from Microsoft and Google, the Chinese company confirmed to CNBC on Friday.

On Monday, it was reported that Google - which makes the Android operating system that Huawei uses in its handsets - has suspended the transfer of hardware, software or technical services to Huawei except what's available via open source.

In addition to using the Android mobile operating system for handsets, Huawei uses Microsoft Windows for its laptops and tablets.

Richard Yu, the CEO of Huawei's consumer division, told German publication Die Welt in a recent interview, that the company has a back-up operating system, in case it's blocked from using U.S.-made software.

"We have prepared our own operating system. Should it ever happen that we can no longer use these systems, we would be prepared," Yu said, according to a translation of the original German text. "That's our plan B. But of course we prefer to work with the ecosystems of Google and Microsoft."

Yu's comments were confirmed to CNBC by a Huawei spokesperson on Friday who said the back-up systems would only be used in "extenuating circumstances" and were "there for basic business continuity in a worst-case scenario."

"We don't expect to use them and to be honest, we don't want to use them. We fully support our partners' operating systems — we love using them and our customers love using them," the spokesperson said.

Those "extenuating circumstances" could be a nod toward the troubles rival Chinese firm ZTE faced last year. The U.S. government banned American firms from selling parts and software to ZTE because the Chinese company violated sanctions on Iran and North Korea. Its ability to use Google's Android was under threat, Reuters reported at the time.

In other regards, though, Huawei has been trying to wean itself off of American technology. The company has made a big play in semiconductors and now designs its own chips for its smartphones. However, some its laptops still use American components from companies like Intel.

A new operating system (OS) could make problems for Huawei, particularly if it's forced to stop using Microsoft and Google software outside China. Within its home market, the Chinese government already blocks Google services, including the Play Store. But internationally, Google's app store is available.

"For Huawei, almost half of its smartphone sales come from China. So 50 percent of the business is anyways secured as Google mobile services — the Play Store is non-existent in China," Neil Shah, research director at Counterpoint Research, told CNBC on Friday. "However, having no access to Google Android and Play Store could affect the other half of the business quite a bit in the near-to-mid-term."

"What Huawei has up its sleeves as an Android and Play Store alternative is not proven, though it could have a capability of running third-party Android app stores which could alleviate some concerns from the developers and apps perspective," Shah added. "However, users which are fully immersed into Google services might give ... Huawei's own OS a pass initially until (it has been) proven to run services and a user experience as good as Google's."

Huawei has faced intense political pressure from the U.S. which says its networking equipment could be used by the Chinese government for espionage. The company has repeatedly denied the claims, but intelligence experts who spoke to CNBC have been skeptical about Huawei's assurances. They point to Chinese laws which appear to require domestic companies to help the government with intelligence-gathering if they're asked to do so.
New political pressure on phone business

While the pressure on the Chinese tech giant from governments has focused on Huawei's networking equipment, its consumer division has been largely kept away from the negative headlines.

Its smartphones have been absent from the U.S. market for several years, but it has enjoyed success around the world. Last year, it overtook Apple to become the world's second-largest smartphone maker by market share — just behind Samsung.

Huawei's consumer business CEO, Richard Yu, told CNBC in an interview in November that the company believes it can be the top smartphone seller by 2020 and also revealed plans to launch augmented reality glasses.



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