A longtime industry expert explains why Trump's attack on Huawei could end up hurting Google and other US tech giants (GOOGL, FB, UBER)

GBA managing partner Gregor Berkowitz

The Trump administration's assault on Huawei could end up harming Google and other US tech giants, said Gregor Berkowitz, a tech industry consultant with extensive experience in China and Asia.
The US government's move to bar the Chinese device maker from using US tech products and services could encourage it to promote Chinese apps and services outside of China, Berkowitz said.
That could give companies such as Baidu a leg up over Google and Didi one over Uber in areas of the world where Huawei is strong, he said.
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Investors have already started to worry that Apple may get caught in the crossfire of the Trump administration's attacks on Huawei and the broader US-China trade war.

But the iPhone maker may not be the only tech giant that suffers collateral damage in the conflict, warns Gregor Berkowitz, a longtime tech-industry consultant. The administration's moves against Huawei could end up giving a leg up to the Chinese competitors to US behemoths such as Google and harm those tech giants' ability to compete, particularly in the developing world, he said.

"There are many secondary effects" of the attack on Huawei "that are maybe more significant than the primary effect," Berkowitz said.

US officials have charged that units of Huawei have conspired to steal trade secrets from T-Mobile, and have cautioned that the company's equipment could be used to spy on people and companies on behalf of the Chinese government.

Last week, as part of its targeting on Huawei, the administration issued an order barring US companies from supplying Huawei with their products and services. That move not only barred smaller component makers from dealing selling their products to the Chinese company, but it also will prohibit Google and other tech companies from offering their software to Huawei. On Monday, the US government gave Huawei a temporary repreive from the restrictions, allowing it to continue to work with US companies to serve current customers.

Read this: President Trump's national emergency likely won't stop you from buying a Huawei phone, much less an iPhone. Here's what it means for you.

As part of the restrictions, Huawei will no longer be able to use the Google-supplied version of the Android operating system, nor will it be able to offer its phone users access to the Google Play app store. The company has said that it is working on its own homegrown alternatives to both.

Chinese alternatives to Google and Facebook could get a boost

Huawei is the second largest smartphone maker. Although its phones haven't gotten much traction in the US, they're popular in China and in many other countries around the world.

Ren Zhengfei huawei Inside China, Huawei already offers local alternatives to US tech services, because Google's Play store and many US apps and services — such as Facebook and Uber — are unavailable there. But now that it's unable to work with US companies, Huawei will likely start promoting those Chinese alternatives outside of China, Berkowitz said.

"People like Google begin to lose out, because Huawei will point its search [box] at Baidu, not at Google," Berkowitz said. He continued: "As the conflict or trade war between the US and China [heats up] ... we're going see that set of Chinese suppliers begin to spread throughout the world."

Many US tech companies have struggled to gain traction in China or, finding themselves in untenable positions due to the country's censorship and domestic surveillance policies, have abandoned the market. Now, they may find themselves in losing out to Chinese firms in developing countries also, Berkowitz said. Huawei could promote Didi's ride hailing services instead of Uber's, or Chinese messaging service WeChat instead of Facebook's WhatsApp, he said.

US tech companies may find themselves not just facing trouble in China, but also "that Baidu becomes the default search engine for India and for consumers in Africa and the email provider and online transaction provider," Berkovitz said.

In the developing world, price trumps all

At least right now, the US tech services in general tend to be better known and more popular outside of China than their Chinese rivals. But that brand strength may not matter all that much in developing countries.

Much of Huawei's success in the smartphone market has come from offering devices with top-end features at prices that are significantly lower than their rivals. If a Huawei phone is selling in a developing country at a steep discount to the price of an iPhone or Samsung phone there — but is perceived to offer similar features — it's going to be attractive to consumers in those countries, regardless of whether it has the Google Play store or Google's search app, Berkowitz said.

What's going to matter to such customers is "more pure economics and the cost of the phone," he said.

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