Is Huawei Becoming the Apple of China?

Huawei is borrowing a page from compatriot Sun Tzu’s Art of War: to defeat Apple, you must become Apple. 

Bloomberg has reported that the Chinese tech giant is considering taking a commission on in-app purchases on its native Harmony smartphone operating system — a tactic that’s borne considerable fruit for both Apple and Google’s Android.

This is the Huawei

Like Samsung and other third-party hardware manufacturers, Huawei had long relied on Google’s Android OS for its devices. That is, until 2019, when US sanctions barred American companies from doing business with the Shenzhen-based tech player. But the geopolitical maneuver may prove to be a blessing for Huawei. While it was forced to rush out an early version of Harmony — its own OS originally intended for Internet of Things devices — Huawei took advantage of a sanctions workaround by making made-for-Android apps downloadable on its devices. Last September, the company unexpectedly launched its Mate60 smartphone series, complete with a China-made chip.

Suddenly, at least in China, Huawei became an Apple-like leading player for both hardware and software. And increasingly leaning into an all-proprietary ecosystem is paying off:

• In March, a filing from Huawei’s holding company reported a $2.7 billion net profit in the first quarter — good for an astronomical 564% year-over-year increase. The first quarter also saw Harmony overtake Apple’s iOS by market share in China, leaving it second only to Android, according to Counterpoint Research.
• In January, with plenty of developers and consumers using Harmony, Huawei cut off access to made-for-Android apps. Now the company may begin charging a 20% fee on in-app purchases, Bloomberg reports (Apple and Google usually charge 30%).

IP-Whoa: To be sure, the privately-held Huawei remains significantly smaller than the $3.2 trillion Apple. In December, before its robust first quarter, Reuters estimated Huawei to be worth only around $128 billion by using the same 25-times trailing earnings multiple of Apple. Still, Huawei’s path to Apple-like status may be becoming more clear — and enticing. Founder and CEO Ren Zhengfei hinted the company could “gradually enter the market in the future” in a 2021 letter to employees, a reversal from previous vows to keep it private. Meanwhile, former Lenovo chief engineer and China tech industry luminary Ni Guangnan once estimated Huawei could be worth more than $1 trillion. But beware: Take a page from Apple today and risk taking a hit like Apple tomorrow. On Tuesday, Europe’s competition chief Margrethe Vestager signaled serious consequences for Apple, due in part to its App Store fees.