Seeking Alpha

Google Kills Huawei's Workaround

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Includes: GOOG, SSNLF
by: Richard Windsor CFA
Richard Windsor CFA
Research analyst, tech, internet, mega-cap
Summary

Huawei’s imperfect, but viable, backdoor to add Google Services to its devices has been killed off by Google.

This virtually guarantees that market share in smartphones outside of China is going to 0%.

Samsung is in pole position to pick up most of this ceded share.

In order to sell a smartphone outside of China either the iOS ecosystem or the Google ecosystem needs to be installed on the device at the point of sale. In the case of Android devices, this means Google, requiring every manufacturer to have a software supply agreement with Google. Following Huawei’s entry onto the entity list, this agreement has been stopped and Huawei can no longer install the Google ecosystem at the factory which I have long argued spells disaster for its sales outside of China.

One possible backdoor to this has been for the user to enable the sideloading of apps onto the device (easy) and then download the APKs (installation files) for Google services from a 3rd party. Unfortunately, this is more complex than it sounds due to the fact that some of the Google ecosystem services need to have system access to the smartphone in order to function properly. Typically, this is done at the factory, but it can be done post-sale as long as the device is running a Google licensed system image.

Although Google services are not available in China, many of the OEMs ship Google compliant Android and leave software “stubs” in the code that have been signed by Google and enable GMS to be installed at a later date. These “stubs” do not do anything other than allow GMS to be installed with the right system privileges but with Huawei’s entry onto the entity list, it lost the ability to install these “stubs”. Easy and fast installs of the Google ecosystem have already been demonstrated on the Mate 30 Pro raising the question as to this was possible without the “stubs”.

The answer lies in two undocumented APIs that occur in Huawei’s mobile device management software that allows the installation of system apps and undetachable apps.

The easy install of the Google ecosystem relies on an app called LZPlay which makes use of these APIs to install the Google ecosystem without the Google “stubs” being present. Given that the APIs are undocumented and that Huawei has to sign off on all of the apps that are written for its devices, I suspect that Huawei knew about LZplay or even wrote it itself. Since these issues have come to light, this workaround has stopped working as the Mate 30 Pro now fails the Google CTS (compatibility test suite) test. Furthermore, the LZplay app has disappeared and the website where the APK could be obtained is no longer working.

Just one week ago, the Mate 30 Pro passed the CTS test with no issues and so the only possible explanation is that Google has flipped the kill switch causing the installation to fail.

The net result is that the one potential workaround that users (albeit pretty unsafe) had to get the Google ecosystem on their Huawei devices has now been cut off and there will be no Google services on the Mate 30 and future devices from Huawei for the foreseeable future.

I am pretty sure that someone will come up with another workaround, but it will be complex, insecure and way beyond the skill set or desire of the average smartphone buyer. Furthermore, I really don’t see why anyone would bother when there are plenty of perfectly good alternatives to this device which have none of these issues. Hence, I think this cements Huawei’s demise outside of China in smartphones where it’s market share has already fallen by 3.1% points to 8.2%.

This is before it has attempted to sell any of its affected devices outside of China, and so I suspect the remaining 8.2% will be quickly ceded to rivals. The outlook for Huawei is as grim as ever.

Samsung is in pole position to pick up most of this share which I don’t think is reflected in either the guidance or the market expectations for Samsung which is why I remain bullish on the shares. I am still happy to keep Samsung in my portfolio.

Disclosure: I am/we are long SSNLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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