Tech

US-China Trade War Settled: Huawei Allowed to Trade with US Tech Companies

Perhaps the most discussed topic as of late has been the trade-war between the US and China. The epic turn of events resulted in Huawei users experiencing uncertainty with their devices. Perhaps, one should take into account their epic success in recent years. Huawei, China’s largest manufacturer of tech devices was grasping on to the rest of the world too. Phones like the P30 Pro are quite amazing and easily flagship level. Sadly though, when the trade-war between China and US prompted up, it led companies like Google to end support with them. But of course, the company isn’t that small that it would succumb to the pressure either. In an article on Appuals, you can read our take on their reply to this embargo. But to understand the gravity of the situation, we must first see the background.

Background

Huawei was the most affected company due to the trade war between US and China

Starting off on the 15th of May after the US-China relationship deteriorated, President Trump issued a ban on all Information Technology companies to stop issuing services to Chinese companies. They also put a ban on a transfer of any technology or information in the same context. Companies like Huawei were put on the Entity list, which required them to get a government approval before conducting any trade activity. Perhaps this resulted in widespread panic. Google had to end security support with Huawei, which meant an eventual end of support with android as well. But, the Chinese giant had a trick up its sleeve too. The company had been developing a custom OS too which would potentially replace Android on all future devices. While, at the moment, this would not affect Google’s market share, but with the size of the Asian market, we could be seeing a new favourite OS, if it is that good.

Anyway, a couple of days later and US allowed some leeway to the company, allowing for support for a while.

Now..

Since then, a lot of developments have been made. Not only has Huawei taken full advantage of the situation, but it has also made arrangements if in the future something like this, or worse happens. Luckily for the companies though, US-China talks ended with quite a lot of success. Perhaps it should come off as no surprise that the US would be happy to have this happen. Since the US economy has not been doing so well, with all its debts, an open trade with the world biggest economy would actually be a good thing. It should not be forgotten that many of the top industry leading tech companies get their products manufactured from China. It was only yesterday that we got the news that Apple would be using Quanta Computer for the new Mac Pro production.

Coming back to the topic at hand, the US-China talks. In accordance with the previous spat, the two countries have agreed to start a trade as according to the agreement, China would purchase US farm goods and US would allow trade for IT companies in both the countries. What does this mean though?

Implications

Coming from an economics perspective, in a globalised world we live in today, every country fills up the commodity for another. Instead of being the jack of all trades (no pun intended), countries have adopted specialisation. China, for example, specialises in large scale production as the cost of labour is pretty cheap if not the cheapest. Germany specialises in the manufacture of heavy machinery. So, what this embargo being lifted means is that trade would be engaged. Similarly, this would be good for the US as well as they would have their crops being sold and would have a better balance budget quotient.

In the tech world, this just means that companies would have it easier for the manufacturing process. Had this continued or increased in intensity, the US would have been in trouble. Prices would have increased, not just because of expensive labour cost but because the Americans do not have the same production capacity. This would mean that demand would go up and the supply down. Thus, an increase in an already inflated price level.

Lastly, we come over to the Huawei side of things. Yes, while the company had their cards stacked in the right direction with pre-development of their OS Hongmeng, but that would still not ensure its success. Perhaps, the company needs a standing platform before it can start soaring on its own. I am, in no way, saying that Huawei shouldn’t be looking to stop work on their OS. Perhaps the saturation with android demands competition to engage further development on the platform. That is how brand, products and companies grow. The competition engages everything that is good about a perfectly competitive market.

So, to sum it up eloquently, this talk between the countries can result in great things to happen. Not only would it allow companies to grow more swiftly, but it would also retain the swiftly increasing prices of technology we see today. Not only that, but technological advancement is only done when we share information and technology so, therefore, this is a step in the right direction.


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