by Gun Woo, Senior Analyst, JK Capital Management Ltd., a La Française group-member company
When the relations between the US and China started degrading under the Trump administration and Huawei felt the weight of sanctions, one subject appeared particularly problematic for the smartphone maker: its reliance on Google’s operating system, Android. At the time, Huawei had announced it had an operating system (OS) ready should it no longer be allowed to rely on Android, although the company backtracked afterwards to say the said OS was not fully commercially ready and adopted Android’s open-source OS, called EMUI, without GMS (Google Mobile Service) support starting September 2020 when the sanctions came in. Huawei has now released its OS, Harmony 2.0, which will be installed on all the Huawei phones freeing the manufacturer from any engagement to Google within the software system.
The release of the OS is quite remarkable as it shows the ability to replace key pieces of software with home developed quality ones. The Harmony OS system is not based on Unix or Android. It is completely independent. Some functionalities look very similar to some patented features of Android or Apple such as some logics, gestures features, or sequences and there could be patent-related uncertainty in the future, especially in the global market. But this is not overly critical at this stage. The most important element to make Harmony a success will now be the app-developer environment. Many applications will likely not work on this OS. Huawei does put forward its own emulator that can easily convert Android apps into Harmony apps, but users of the iOS emulator for the Android OS know the performance is hardly satisfying. The emulator can mechanically change the language, but it will not give it a nice commercial finish or an ergonomic feel. This is why app developers often need to double the efforts and the costs to release versions of their app for the different platforms. It explains also why, for PCs, there are fewer software available for the Mac OS then there are for the Windows OS. In the gaming world, PlayStation and Xbox are the lead actors competing to bring more game developers to their platform. Relatively smaller players like Nintendo have a hard time competing and need to find their own niche in which to thrive without the contribution of many game developers.
Whether app-developers will start working in the Harmony OS environment is the key question. It all depends on how many end-users the Harmony OS will attract. If the market is deep enough app-developers will eventually invest to have products made for the platform. Many Chinese consumer-electronics companies such as Midea, Haier, Joyoung, and Fotile, have already agreed to use this OS on their consumer electronic devices like washing machines or ovens. However, smartphone makers like Oppo, Vivo, or Xiaomi have not yet. If they do, at least for the domestic market, the Harmony OS may be a success.
Huawei’s smartphone shipment has already dropped to 4% of the global market share in Q1 2021, from 20% at its peak. At this level, the challenge to launch an OS is very different. Huawei needs other Chinese smartphone makers to adopt it and they may request Huawei to abandon manufacturing altogether as a requisite for their move. But this would only solve the problem for the Chinese market. Globally, Apple’s iOS and Google’s Android are well implanted, and it is hard to imagine a third OS taking significant market share from them and attracting developers. Harmony may need to be something like Nintendo in the gaming world, a niche player with its own environment, features, followers and reasons for existence. Until then, although we salute the technical tour-de-force to have released a completely new and independent OS, it is not the “Get-out-of-jail” free card Huawei needs. At least not yet.
Source: Counterpoint Technology Market Research