America killed Huawei smartphones in South Africa

Huawei was once on track to challenge Samsung as the most popular smartphone brand in South Africa before regulators in the United States ended its rapid ascent with a stroke of their pens.

Once known only to telecommunications industry insiders as an up-and-coming network equipment vendor, Huawei’s devices division initially provided mobile networks with phones they could white-label.

The company began building its consumer brand in the early 2010s with its Ascend line of Android smartphones.

However, its major South African push began in 2015. Globally, Huawei dropped the “Ascend” brand from its devices, simplifying model naming across its portfolio.

Instead of the Huawei Ascend P7 and Ascend Mate 7, its next range of smartphones simply became the Huawei P8 and Mate 8.

In South Africa, Huawei came in with aggressive prices and incentives to encourage retailers and salespeople to market its devices to buyers shopping for a new smartphone.

Essentially, it copied the playbook Samsung used to establish its brand in South Africa — going so far as to hire several people away from Samsung South Africa to repeat their success for Huawei.

Huawei’s strategy included competing head-on with Samsung’s most killer feature in South Africa — an accidental damage from handling (ADH) warranty.

ADH offered two free, no-questions repairs of a cracked screen or liquid damage to Samsung’s flagship devices.

Samsung introduced ADH with the Galaxy S4 in 2013, offering two screen repairs, two water damage mainboard replacements, or one of each with a 24-month span.

However, by the time Huawei launched its strategy in 2015 to unseat Samsung as South Africa’s most popular smartphone, ADH was already beset by rampant fraud.

Sources at Samsung told MyBroadband that people would deliberately damage their devices to have them repaired or replaced, maximising their second-hand resale value. As a result, Samsung had slowly begun to reduce the benefits ADH offered.

Despite this quandary, the Chinese challenger introduced its Huawei Select warranty with the launch of the Huawei P8 in July 2015 — with the full benefits of the original Samsung ADH product.

In addition to launching a compelling rival to Samsung’s unique value proposition in South Africa, Huawei came to market with phones that could go toe-to-toe with the best, while undercutting everyone’s prices.

Huawei’s strategy paid off.

StatCounter GlobalStats data shows that Huawei’s market share in South Africa began increasing rapidly from July 2015.

Entity list

Then, on a fateful day in May 2019, the Bureau of Industry and Security in the U.S. Department of Commerce announced that Huawei had been added to the Entity List.

This blocked U.S. companies from selling or otherwise providing any technologies to Huawei — including preventing Google from providing critical software and certification for the Chinese manufacturer’s new smartphones.

Google owns the smartphone operating system Android. Although the software itself is open source, the search giant provides a module called Google Mobile Services (GMS) that enables several key integrations with its ecosystem of apps.

This includes the app store Google Play, Google Maps, YouTube, Gmail, Google Drive, and integration with other services that Android users outside China have come to expect with their smartphones.

In response to being placed on the Entity List, the Chinese manufacturer announced Huawei Mobile Services as a replacement for GMS.

Huawei also explained to users that they could “sideload” many of their favourite apps and did not need access to Google Play. It also offered its own Huawei app store.

However, industry commentators quickly pointed out that sideloading increased security risks and that some apps would not work without GMS.

A year after being added to the Entity List, the U.S. further tightened restrictions on Huawei, preventing it from accessing the latest chips and manufacturing processes as they at least partially relied on U.S. equipment and technology.

In a cruel twist of irony, despite being a world leader in 5G technology, Huawei was unable to produce phones with 5G capabilities.

Although Huawei’s market share didn’t immediately plummet, StatCounter data shows that its growth came to a grinding halt in 2020.

Within two years of being placed on the Entity List, it went into decline — coinciding with a typical two-year upgrade cycle at the time.

National security or economic eye-for-an-eye

The United States government said it placed Huawei on the Entity List because it represented a national security threat.

It also accused Huawei of breaching sanctions by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of the alleged violations.

However, another major issue that was never mentioned in official government statements was that many American technology companies are prevented from doing business in China, while Chinese companies had unfettered access to the U.S. market.

Google, its subsidiary YouTube, Facebook, Instagram, WhatsApp, and Twitter/X have all been blocked from operating in China.

Elon Musk recently said the quiet part out loud in a post on Twitter/X — the social media platform he owns.

“I have been against a TikTok ban for a long time, because it goes against freedom of speech,” Musk said.

“That said, the current situation where TikTok is allowed to operate in America, but X is not allowed to operate in China is unbalanced. Something needs to change.”