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Thu 19 Sep 2019 08:28 AM

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Huawei remains strong in Middle East despite US restrictions

Gulf countries have signed 11 5G contracts with Huawei

Huawei remains strong in Middle East despite US restrictions

Huawei’s business in the Middle East remains strong, despite US efforts to curtail its growth in the region, through trade restrictions and lobbying of governments.

Huawei, the world's biggest supplier of telecommunications networking equipment and number-two smartphone manufacturer, has emerged as a central figure in the worsening China-US trade rivalry.

The US government claims Huawei equipment could contain security loopholes that allow China to spy on global communications traffic, and is urging nations to shun the company in 5G networks.

Just last week, US officials told Reuters that the US Federal Communications Commission admitted issuing a warning to Saudi Arabia, the UAE and Bahrain earlier this year about potential risks in using Huawei’s superfast equipment.

Washington has thus far failed to provide any evidence to substantiate its claim, and one that Huawei strongly denies.

Gulf contracts

In the Gulf region, however, the impact of the US lobbying has had little effect, with 11 telecom firms in the UAE, Saudi Arabia, Kuwait, Oman and Bahrain signing 5G contracts, with a further 28 contracts signed in Europe.

“I know that the US government has been trying to engage the Middle East in the same conversation as Europe around restricting Huawei,” Joe Kelly, vice president, corporate communications, Huawei told Arabian Business in a media briefing in the Chinese firm’s Shenzhen HQ this week.

“I see no evidence yet that it is having a material impact on our business - our business in the Middle East remains strong. It’s not being affected as much as other parts of the world - very small impact on consumer [business].”

Kelly said GCC governments have no “have no big issues with Huawei because they think we’re in compliance with their national security standards”.

“What we do know is that the carriers in Europe and the carriers in the Middle East have already spoken on Huawei’s 5G. Twenty-eight European carriers have signed commercial contracts for 5G, 11 have signed contracts in the Middle East. That is a public commitment and endorsement of Huawei from their perspective.”

US restrictions

The US has also targeted sales of the Huawei smartphones by placing the Chinese firm on an ‘entity list’ that restricts its ability to buy and use American technology. This impacts on the Chinese firm’s use of Google Marketing Services, which includes Google Play Store, YouTube and Google Maps.

“Our preference as a company is to keep working with Google,” Kelly said. “We have invested hugely in helping to make Google the success it is today, and Android the success it is; we don’t want to walk away from that.

“We know that Google is advocating to the US government to lift the restriction. The US government did say some time ago - both the president and the commerce department - that they would issue licences and allow US companies to continue providing that technology. They have not awarded any licences.”

Smartphone launches

Huawei is set to launch its highly anticipated Mate 30 Pro this week, with further models planned in the coming weeks. The restriction means as it stands it won’t be able to launch the phone in markets outside China with the Google products that have been central to the success of Android phones.

“Our ambition is to keep working with Android and Google. If we’re not allowed to, we will have no choice but to have an alternative,” Kelly explained.

“We have Harmony OS but it was not developed to be a smartphone operating system. It is an operating system designed for the internet of things, to connect many different devices, [like] television, wireless earphones for example. It can be adapted for smartphones, so if we’re not allowed to use Google then we will develop Harmony.”

He added that the restriction is also having a negative impact on US firms.

“I saw some research recently that American vendors lots $400 million in the first month after the entity list,” he added.

Headwinds

While the impact to date has been minimal so far. revenue for the first half of 2019 reached $58.3 billion, thanks largely to a massive boost from Chinese consumers buying its smartphones.

However, those figures will be severely challenged in the second half of the year, with the with the restrictions not put in place until mid-May, near the end of the second quarter.

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