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What the Huawei Ban in the US means for Startups, Entrepreneurs and Chinese Phones The ban means US companies are withdrawing from operating agreements with the Chinese tech company, leaving its operating future in limbo

By Matej Michalko

Opinions expressed by Entrepreneur contributors are their own.

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Is the Huawei ban just the beginning? And, what does it mean for startups and entrepreneurs using Chinese devices? This is the uncertainty that remains following the shocking decision to all but ban Huawei within the United States. The ban means US companies are withdrawing from operating agreements with the Chinese tech company, leaving its operating future in limbo.

It is the decision that shocked the tech world; and, there is no signal that it is anywhere near over. This could make phone buyers pause to consider what the future may hold for other popular Chinese phones brands such as HTC, Oppo or OnePlus. So, let's unpack what the ban means for the market and the entrepreneur user going forward.

The Beginning of the End?

The stroke of a diplomatic pen is all it took to unravel Huawei's international operations. Almost overnight, Huawei went from being one of the biggest smartphone companies in the world to be outlawed in one of the biggest smartphone consumer markets in the world. In May, the US Commerce Department enlisted Huawei in an entity list over national security concerns, thereby requiring American companies to get approval from the government before conducting business with the company. A 90-day reprieve was granted to allow companies such as Google to offer critical support to Huawei, but the future of the company remains far from certain.

Several American firms, including Google, Intel and Qualcomm, have already curtailed their business agreements with the Chinese giant. The reaction from international customers has been immediate with sales of the Chinese telecoms giant's handsets sinking by 40 per cent in the month following the US ban. This led Huawei founder Ren Zhengfei to state that the company would slash production by US$30 billion.

Huawei has applied to trademark its "Hongmeng" operating system (OS) in at least nine countries and Europe in an attempt to salvage its base outside of the US, but the ban is certainly bad press on the market and with consumers.

For the Market

So, what does this mean for other Chinese phone makers? Could they be in danger, too? Since some of the concern around the company relates to Chinese law that demands local firms cooperate with the government, other Chinese companies could theoretically be affected. But the US Department of Commerce did single out Huawei for inclusion on the Bureau of Industry and Security's Entity List, which details companies considered to be a potential national security threat.

ZTE, a telecoms' equipment and smartphone maker that competes directly with Huawei, has already run into its own trouble with the US government. The company was caught violating trade sanctions and then failed to comply with the terms of its own punishment, leading to a severe but somewhat less controversial response from the US The two parties ultimately struck a deal to let ZTE get back on its feet. The two situations are not directly comparable, but Chinese companies like Oppo and Xiaomi will likely be on edge nonetheless.

Conversely, China hit back at the end of May with the announcement that it will create its own list of foreign companies that are not to be trusted. Importantly, all of this is happening amongst a trade war between the two powers that is only escalating. Tensions are high and it remains unknown whether other Chinese phone makers will be the next targets. So what does this mean for the average phone user?

For the Entrepreneur

Huawei phone owners in the US will be hit by the executive order. All new additions Google has steadily been making to Android via Google Play will no longer be available to Huawei for its western phones. The phones will continue to use Android, but with important differences from here on out.

The underlying Android operating system is open source, called the Android Open Source Project (AOSP), and can be used by anyone and any company. AOSP is updated in step with Google's version of Android, on which it is built.

The ban does mean, however, that Huawei has to supply its own updates from AOSP to the version of Android running on its phones, rather than Google's updates. This is what the company has to do for its smartphones sold in China, which do not have Google's services. Whether this is too much of an inconvenience to put entrepreneurs and startups off from further use of Huawei will be up to them, but it is an important consideration to make nonetheless.

And, what about other Chinese phones? As noted, there is no guarantee that further bans are not on the horizon. Users must make an informed decision when it comes to purchasing their next Chinese device and weigh up how any future sanctions might impact upon their enjoyment of the said product. Sanctions translate to tech companies withdrawing functionality and further updates, so customers must personally consider how any such changes could impact upon their use of the device.

These are uncertain times for entrepreneurs looking for their next smartphone. Certainly, there have not been many times in the past when users needed to take the onus upon themselves to weigh up whether their new device could be targeted by the US government. However, this is the reality of today. Chinese phones will continue to work regardless of sanctions, it is up to the customer to decide what that may mean for them.

Matej Michalko

Founder & CEO, DECENT

Matej Michalko is the Founder and CEO of DECENT. He is also regular speaker at conferences about the immense potential and vertical integration of Blockchain technologies into various industries.
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