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Huawei Wants to Play Nice With Google and Microsoft, But Has Its ‘Last Resort’ Ready

May 25, 2019, 3:00 PM UTC

Huawei is an electronics powerhouse that has relied on partnerships with Google and Microsoft to help boost its global business. But the Chinese company must now face the possibility of a future without its American partners.

Microsoft removed Huawei laptops from its online store on Friday, marking the latest move against Huawei after it was blacklisted on May 15 by the U.S. Department of Commerce over security concerns. A Microsoft spokesperson declined to comment.

“I think Huawei’s removal from the Microsoft Store portends to the future where Huawei, already kicked out of the U.S. in phones, spreads to its very high quality PCs,” says Patrick Moorhead, principal analyst at Moor Insights & Strategy. Huawei’s existing business requires it to “rely on U.S. companies in the short and mid-term,” he added.

The company also relies on several American semiconductor companies, including Qualcomm, Intel, Nvidia, and Lattice, along with British-American chip maker ARM, to supply parts to build its smartphones and laptops. Some of those chip makers have reportedly stopped supplying Huawei, but none of them have confirmed it.

“It will take a decade for China to replace these capabilities,” says Moorhead.

Google briefly pulled Huawei’s Android license on Sunday, but restored it on Tuesday after the Trump administration issued a temporary order to allow operations to continue for existing Huawei mobile users.

Without the license, Huawei wouldn’t be able to sell smartphones with Google’s services, including Maps, Gmail, and Google Assistant, essentially forcing the company to come up with their own back-up plan or risk losing market share. Huawei laptops use Microsoft Windows, however Microsoft hasn’t commented on whether it plans to pull Huawei’s license to use Windows on future products.

Huawei isn’t taking any chances. The company was just granted a trademark for an in-house operating system from China’s National Intellectual Property Administration.

A Huawei spokesperson told Fortune the operating system is a “Plan B” and “very last resort.”

“Our preference is to use Microsoft and Google, but we do have a ‘Plan B’ that can be rolled out as soon as Q1 or Q2 of 2020,” the spokesperson says.

The operating system would be similar to what Huawei customers in the Chinese market already see, since Google services are banned by the country’s censors. It would include Huawei’s app gallery store, along with alternatives for popular Google services.

However, doubts have been raised over whether Huawei, or anyone, can now effectively build an operating system to rival the dominance and customer satisfaction of Android. Google’s open source platform has an 80% market share.

Huawei shipped 59.1 million smartphones in the first quarter of 2019, making it the second best-selling smartphone maker globally, just after Samsung, according to research firm IDC. During a time when smartphone sales have been stagnant, Huawei also reported year-over-year growth of 50.3%.

Huawei’s blacklisting comes as the Trump administration is engaged in an escalating trade war with China. Earlier this month, President Trump placed another round of tariffs on $200 billion of Chinese goods. China retaliated with plans to raise tariffs as high as 35% on 5,000 products across a wide range of industries, including food, building materials, and consumer goods.

Trump and President Xi Jinping of China have both indicated they’re ready for a long fight, if necessary, with no plans to back down.

Speaking at the Potsdam Conference on National Cybersecurity on Thursday, Ken Hu, deputy chairman of Huawei, warned that his company’s blacklisting “sets a dangerous precedent” for consumers and business.

“It goes against the values of the international business community, cuts off the global supply chain and disrupts fair competition in the market,” he says. “This could happen to any other industry and company in the future if we don’t jointly confront these issues.”