No silver bullet for the embattled firm
There’s a lot of excitement following Huawei’s announcement of its HarmonyOS operating system. But despite a lot of technical detail, there was little context showing why it’s important and how Huawei intends to galvanize such an ambitious project. Huawei stated its new platform will be the first operating system with a distributed architecture, featuring a “deterministic latency engine” and a microkernel architecture that “will reshape security and trustworthiness”. Statements like this always sound impressive but determining the substance behind them is challenging.
We’ve been here before. In recent years, the market has coalesced around Android and iOS but prior to that there were endless Android contenders, few of which made it to a commercial device. The pitches for these alternatives were always good on paper; they offered a decentralized alternative to Android with more open governance, or furthered a given company’s vision of vertical integration.
Huawei falls firmly into the latter category. Its vision is remarkably akin to that of Samsung with Tizen. Huawei has presented a clear strategy based on the need for consistency on its devices for consumers and for developers. By controlling the operating system and putting it on a wide range of devices, the company is in a better position to customize the experience, differentiate and add value through services.
This can have a flywheel effect: investment in the ecosystem drives service revenue, which in turn makes the hardware more attractive, thereby strengthening margins and reducing customer churn. Apple’s written the playbook for this process.
It all sounds easy, but it’s extraordinarily difficult to achieve, particularly for a hardware company that has yet to develop any serious services, especially in the West. Samsung has achieved a degree of success with Tizen in smartwatches and smart TVs, but its failure to establish Tizen an alternative to Android in smartphones is testament to the difficulties involved.
Even though Huawei is the world’s second-largest smartphone manufacturer, that won’t guarantee it can make HarmonyOS a global success. More than half of Huawei’s smartphone sales are in China, so developers in its home market, where Huawei sits in the number-one slot and is well ahead of the competition, are likely to take it seriously. The problem is that in the West, Huawei’s strength is largely limited to Europe, with no smartphone presence in the US. Its European sales may not be enough to attract developer attention.
That said, this is exactly the move that Huawei should be taking. Given the company’s size and ambition, it has to be thinking about more effectively controlling its destiny, achieving greater consistency across device categories and creating a platform on which it can diversify its sources of revenue.
However, HarmonyOS isn’t a silver bullet that will rid Huawei of the headache of being placed on the US Bureau of Industry and Security Entity List. As we’ve said before, the operating system is only part of the problem (see A Third Mobile Ecosystem). For any smartphone to be competitive outside China it must have full access to Google services and a long tail of third-party apps. Creating this is an impossible task, even with the help of some old-fashioned chequebook evangelism and a proposed revenue share above the industry benchmark of 70%.
Reassuringly, Huawei is not presenting HarmonyOS as the answer to all its problems. It has the potential to be used in smartphones but that’s not the company’s intention. It has far greater scope on other devices where Android is less entrenched and where the app ecosystem is less of a barrier. As it matures and if it manages to build scale, then it becomes more feasible as a hedge against Android. In the meantime, we may see a smartphone or two running HarmonyOS, but Huawei’s under no illusions that the Entity List and broader trade war present far bigger challenges. Like the Chinese government, Huawei’s playing the long game.
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