The US/China trade-war has reached new heights. Over the last couple of weeks, we’ve seen the media report on the moves made against Chinese manufacturer Huawei. News reports have discussed developments including Huawei being banned from Google’s Android services, and suspending business activity with the manufacturer to comply with the US Administration ban. This news is going to cause major implications for global smartphone makers and consumers alike across the globe.
The initial announcement saw many operators left asking questions: do I need to be concerned? How does this ban affect my organization? What impact does this have on our partnerships? And, most importantly, what impact does this have on our customers? With all these things to consider, the US stepped in and implemented a 90-day extension before the trade restrictions came into full force.
However, a lot can happen in three months. Within this timeframe, for all we know, the Huawei ban could be lifted. But, it’s unlikely to change the ongoing US/China trade-war that has been ongoing since the early days of Trump administration.
So, with all things considered, what could the Huawei ban and this trade-war mean for the secondary device industry?
The Google ban is not something that should be taken lightly, as it will see Huawei losing access to commercial versions of Google’s Android, as well as associated services like Gmail , YouTube and Play Store; Intel’s chips, and it’s even seen other international partners like ARM and Panasonic as required by law and discontinuing trade.
With the ban having such a significant impact, the industry has been questioning whether China will retaliate, with a big US player like Apple. But, in reality, this is unlikely to happen. Firstly, Apple devices are extremely popular in China, and removing them will have a significant effect on operators in the region.
Apple is also a massive employer and acquirer of parts in China, and a ban of this kind would have negative effects on Chinese economy. And replicating the manufacturing capability, supply chain and know-how that Apple has built up in China is not a trivial task for Apple. Any kind of retaliation against Apple is Mutually Assured Destruction or the very least serious disruptions to both sides.
It’s also important to note that the ban on Huawei has come at a critical time—not only has the Chinese manufacturer maintained its lead as the world’s second biggest smartphone vendor in Q1 2019, but it’s also a time where global operators are racing to deploy 5G networks, and a prolonged ban could result in potentially catastrophic results for not only Huawei’s smartphone business, but also its infrastructure business.
A domino effect
When any significant developments happen within the device industry, like the banning of a manufacturer or trade-war, there is always a chance of a domino effect hitting the secondary device industry. In any circumstance like this, there are likely to be winners and losers:
- Price of first-hand device increase: The Huawei ban is likely to see the price of first-hand devices increase worldwide. While China’s prices could go up from the increase of tariffs placed on US devices, the US could expect the cost of manufacturing to grow from moving away from Chinese manufacturers.
- Upgrade cycles to increase again: In the US, consumers are holding onto their iPhones for around three years (you can read more about this in our infographic here). If this trend continues to grow, we can expect OEMs to take additional steps to boost sales of new handsets.
But it’s not all doom and gloom—and there will be some light at the end of the tunnel:
- Pre-owned devices could thrive: If device trade-ins slow down, this could mean that the demand for cost-effective alternatives, like pre-owned devices, could thrive. As the demand for pre-owned devices grows, so will the value.
- Higher value in trade-ins: And as a result, operators, retailers and OEMs can incentivize their customers to trade-in their devices for a higher credit than previously. This credit can then go towards a shiny new device, or even some accessories they might have not considered. Given that demand for pre-owned devices will grow, operators and retailers can get higher value for the devices they collect through trade-ins.
Winners and losers
With the news changing most days on this topic, it’s hard to know what will happen over the next couple of months with Huawei. But one thing is for sure, we can expect that there will be winners and losers within the US/China trade war, and it will not be very obvious as to who.
While some OEMs will thrive in the opportunity to step out of Huawei's shadow, it's important to consider the wider impact on the mobile industry, with operators, retailers, and customers, forced to look for alternatives that come at a higher price.