Richard Yu, head of Huawei's consumer business group, unveils the company's new HarmonyOS operating system at the Huawei Developer Conference in Dongguan, China August 9, 2019. Photo: Reuters
Richard Yu, head of Huawei's consumer business group, unveils the company's new HarmonyOS operating system at the Huawei Developer Conference in Dongguan, China August 9, 2019. Photo: Reuters

HarmonyOS seems more like Huawei’s growth strategy than a contingency plan

  • Huawei's new OS, combined with its expertise in hardware, makes it one of the only companies alongside Samsung, that’s theoretically capable of creating a vertical ecosystem like Apple
  • Huawei doesn’t just want to secure itself against Google’s dominance on Android, it wants to ensure that it gets more customers into its own ecosystem

After being effectively banned from using Google’s Android operating system (OS), Huawei today unveiled its contingency plan. But what was expected to be a plan B, seems more like the next step in Huawei’s growth strategy.

For one, Huawei’s OS has been in the works for over two years now, so it’s not really something the company planned with respect to the US trade ban that led Google to block Huawei’s access to Android’s most important elements.

Next, HarmonyOS is not an operating system for its phones alone. In fact, Huawei stressed on the fact that it works across devices, and is an OS meant for the Internet of Things (IoT). That means the primary play here is to bring cross-platform operability, and have consumers locked into an ecosystem. If you’re wondering where you’ve heard this before, it’s how Apple keeps you in its ecosystem with interoperability between MacOS, iOS and now iPadOS.

It all makes sense if you take Huawei’s size into account. Unlike most smartphone makers from China, this is not an upstart that sells phones only. Huawei has a huge patent portfolio in its arsenal and it is one of the biggest and most important telecom companies in the world. According to a report by research agency Dell’Oro Group, Huawei had a 28% market share in the global telecom equipment market in Q3, 2018.

Furthermore, the company also owns chipmaker HiSilicon and routinely launches products on its Kirin branded chipsets instead of Qualcomm’s popular Snapdragon chipsets. It even has a 7nm Kirin 980 chipset, putting it at par with Qualcomm and Samsung, as far as chipset technology is concerned.

And all this makes Huawei one of the only companies alongside Samsung, that’s theoretically capable of creating a vertical ecosystem like Apple. This means the company can now have its own operating system, its own processors and apps designed for these systems. The only thing missing are the number of devices that run on these systems.

“If you look at the top 10 smartphone vendors, Huawei is amongst the few that can create a vertically integrated ecosystem. Such an ecosystem allows it to gain more customers through other device," explained Tarun Pathak, Associate Director, Counterpoint Research.

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The vertical ecosystem has been a key driver for Apple over the years. The company retained performance superiority over Android for many years thanks to the homogeneity in its devices. In fact, Apple’s smartphone processors still come out in front of Android devices on benchmark testing, often.

But simply having an operating system doesn’t mean Huawei will be able to build the vertical ecosystem it wants. There have been examples of companies that have tried and failed in this department before, the biggest of course being Samsung.

The South Korean giant also has its own operating system called Tizen, and according to a recent report by Strategy Analytics, it’s the leading smart TV ecosystem in the world. Tizen runs on Samsung’s smart TVs and smartwatches, but it has failed miserably on Android phones like the Samsung Z1, Z3 etc.

The primary reason for this was the lack of Android app support, which Huawei CEO, Richard Yu confirmed is the case with HarmonyOS as well. And much like Yu, Samsung had also claimed that it’s very easy to port Android apps to Tizen. Alas, that didn’t happen.

Why? Because developers don’t invest in operating systems that don’t have the user-base. And that user-base begins with smartphones.

However, while Samsung started with entry-level smartphones, Huawei already has a decent market share worldwide and a strong home market. According to numbers from the International Data Corporation (IDC), Huawei had shipped 36.3 million smartphones in China alone in the April-June quarter. The Chinese and European markets have been the company’s most successful markets.

In fact, Tarun Pathak, research director, Counterpoint Research, suggests that this could be the key differentiator between Huawei’s effort and Samsung’s endeavour with Tizen. “Huawei’s home market China is huge," Pathak explained. “Huawei could learn from the Chinese market before taking the OS global," he added.

Essentially, the company’s strong customer base in China could convince a lot of developers to build apps for HarmonyOS, thereby giving it the strong app store that any operating system needs to be successful. Huawei can use this to convince smartphone buyers in other markets. “For the short run, this OS will be for televisions, watches etc," Pathak said.

In sum, while it’s easy to call HarmonyOS a plan B, it seems to be the next step in Huawei’s growth strategy. The company doesn’t just want to secure itself against Google’s dominance on Android, it wants to ensure that it gets more customers into its own ecosystem, and HarmonyOS is the way to go for that.

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