The Trump administration shocked the world with its ban on US companies supplying Huawei. ARTHUR GOLDSTUCK digs deeper.
In the same week that the wildly popular Game of Thrones series reached its climax with major characters meeting their startling destinies, US president Donald Trump took the game of phones to a new level in a move that was as startling.
By declaring a trade ban on Huawei, he in effect blocked any US technology from being supplied to the world’s fastest growing smartphone manufacturer. The immediate consequence: Google revoked Huawei’s access to the Android operating system, the Google Play Store, and Google apps like Maps, Gmail and YouTube for all future phone models.
However, Google announced on Twitter, through its Android account, that it would not pull the plug on current devices. It said:
For Huawei users’ questions regarding our steps to comply w/ the recent US government actions: We assure you while we are complying with all US gov’t requirements, services like Google Play & security from Google Play Protect will keep functioning on your existing Huawei device.— Android (@Android) May 20, 2019
This means that the current market-leading phone, the Huawei P30 Pro, won’t be affected by the ban. Huawei said it had stockpiled chips from US suppliers with this possibility in mind, so it should at least be able to meet demand for the current model.
Huawei is also known to have worked on its own operating system for some years now, with a view to it eventually replacing Android and reducing the company’s reliance on Google. However, the severity of the ban, and its catch-all nature, shook the market. A smartphone without any Google products is a phone that will see little demand outside China, which itself has banned most Google apps and services.
Notably, the first impact of the shock wave was on American companies that supply Huawei. Chipmakers Intel and Qualcomm were hit, and a wide range of other corporations, from Microsoft to Corning, could also be affected. Apple could be next, as the Chinese government may well block the assembly of its products in China. Currently, all iPhones are put together at factories in China. Should it retaliate in this way, Apple will have to develop a new supply chain, both delaying its next versions and increasing its cost due to its loss of a cheap source of labour.
That is not to say that Huawei won’t be a big loser in this trade war. It’s a massive blow. Until now, Huawei could carry on blithely in the face of a sales ban in the USA, knowing it is dominant in the rest of the world in both 5G equipment and in handset sales.
However, its smartphone leadership is founded on a particularly good implementation of Google’s Android ecosystem. Losing that means it has to go back to the drawing board in developing and evolving its own operating system and even apps environment. It can do it, but it will lose years of development to Apple and Samsung.
The bottom line, then, is that everyone loses in this trade war. If the Huawei ban is not rescinded, Donald Trump will have dealt a crippling blow to the entire smartphone industry. This could, in turn, presage a slump in technology shares on the stock markets of the world.
It may, then, appear baffling that the US administration would take such drastic steps. The ostensible reason is that Huawei is subject to a Chinese law that requires local companies to cooperate with authorities. This is interpreted as meaning that Huawei would install secret backdoors in handsets to give the Chinese government access to them, and secret spy technology in 5G networks to allow the government to eavesdrop on all communications.
This is clearly an absurd accusation, as any evidence to this effect would instantly destroy Huawei as a credible provider of technology to the world. No such evidence has been presented, and most arguments to this effect have been on the level of conspiracy theory rather than presentation of facts.
It also speaks volumes that the US has not banned trade with China’s Lenovo, which acquired the IBM hardware business a few years ago, and the Motorola handset division more recently. Motorola is still perceived to be an American brand, while Huawei is perceived not just as the challenger brand it had been for some years, but in fact as an invader brand.
Can foreign policy be based on mere perception? In the case of the Trump administration, that tends to be the rule rather than the exception. And the perception is further clouded by the halo effect that surrounds Apple products in the USA. The iPhone makes up well over a third of all American smartphone sales. Typical iPhone users tend to be rather enthusiastic about their loyalty to the brand, to the extent that they are usually disparaging of any other brands.
Grudging respect for Samsung, which has been going head-to-head with Apple for much of this decade, does not extend to Huawei, which emerged seemingly from nowhere to become the world’s third biggest smartphone brand. Its current sales trajectory has it overtaking Apple very soon, and reaching the number one position by the end of the year. Until, that is, Donald Trump brought its momentum to a halt.
Again, why not ban Motorola and Lenovo in the same breath? The answer may well lie in the pathology of the Apple fanboy. American-born Motorola and Lenovo handsets pose no threat to Apple’s dominance of the US market, whereas the interloper, Huawei, is a fundamental threat. It is, therefore, the enemy, merely by virtue of its existence as serious competition when it is seen as having no right to compete with the likes of Apple. Trump is known to be an enthusiastic iPhone user, using two of the devices simultaneously, and would almost certainly buy into this mindset. That, in turn, makes it a natural kneejerk reaction simply to ban American companies from doing business with Huawei.
Whether this is merely idle speculation is beside the point. The ban also represents self-inflicted harm, which extends the pathology argument to an entire administration.
It will be a blow to both countries, symbolic of how a trade ban can hurt the country imposing the ban. It also casts a dark shadow over world trade, and is a shameful example of how trade wars wreck so much in their paths.
- Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee
The shape of the SME future
What does the future of technology look like for South Africa’s SMEs? COLIN TIMMIS, general country manager of Xero SA and a professional accountant, looks into the tech crystal ball
Over the past decade, technology has radically changed the way businesses operate. Now, even small businesses have access to powerful tools that were previously expensive or complicated.
The pace of change has been rapid – and it’s unlikely to slow down. Businesses must keep up with technology to stay competitive. According to research conducted by Citrix, 92% of companies across South Africa’s key industries agree that digital adoption directly affects company profits. However, 54% still feel unprepared for the future.
So, what does the future of technology look like for South Africa’s small businesses? How can the other 46% of companies prepare?
5G and WiFi 6 – faster internet speed
In the foreseeable future, we will see a rapid increase in the use of fibre across South Africa. According to Xero’s State of Small Business Report produced with World Wide Worx, 49% of small businesses surveyed used ADSL connections and only 37% used fibre. When asked to describe their internet connections, 45% said they were ‘great’, while 43% said they were ‘okay but not 100% reliable’. 57% of those who said their connection was ‘great’ were fibre users.
South Africa is still playing catch-up in terms of internet connectivity and speed. However, WiFi 6 is set to improve the way routers distribute traffic to connected devices and increase the transfer speeds by around 30%. For when you’re on the go, 5G is the next generation of mobile data standard. It’s already being trialed by South African carrier Rain, and a broader rollout is expected in 2020.
Machine learning and Artificial Intelligence – more efficient software
Even if you aren’t aware of it, you’re probably already using smart software which leverages machine learning (ML) and artificial intelligence (AI) in your business. While only a tiny proportion of respondents (0.25%) from Xero’s State of Small Business Report say they are using them, most businesses are aware of how important they are.
AI and ML are great at taking large amounts of data and spotting patterns that humans might miss. They help businesses cover some of the more routine tasks so they are freed-up to focus on the most important priorities. For example, tedious tasks like bank reconciliation, can now be completely automated.
Blockchain – safer, more secure transfers
If you hear ‘blockchain’ and think ‘cryptocurrency,’ you’re not alone. However, the technology also has something to offer when it comes to existing payment technologies. Through its complexity and high level of encryption, integration with blockchain can make transferring valuable assets more secure. It can also be used for more effective fraud prevention and other security-focused tasks.
The cloud – access data everywhere
Cloud computing is starting to become a standard part of life for many small businesses in South Africa today. According to Xero’s State of Small Business report, 19% of respondents surveyed make use of cloud technology. Of these respondents, 98% reported a significant increase in profit thanks to adopting this technology – and 99% identified an increase in efficiency.
The trend towards cloud adoption is likely to continue as we see the development of technologies, like faster speed through fibre, WiFi 6, 5G, and machine learning powering it.
Integrated financial software
When it comes to accounting in a small business, these new technologies will enable much smarter ways of working. Take bank reconciliation, for example, where cloud storage and machine learning will search through documents and expenses on your behalf to compile reports.
Eventually, we will be able to access everything we want in one integrated, seamless hub. We can see this development through the use of app integration. Xero has 800+ apps already compatible, which enables small businesses to automate, gain better insight and grow their businesses all through one ecosystem of partners.
Access to capital
Open banking, the process of banks and financial services opening their APIs to the market, will shape how businesses access funding. By sharing their financial data instantly, potential investors have immediate access to a company’s revenue, profits and cashflow – enabling them to make fast, informed decisions.
Platforms like Xero keep all of a company’s financial data up to date. That way, when the company needs to file for a loan their documents are ready to go. Xero is also continuously pursuing new partnerships to help fuel small business growth. Earlier this year Xero partnered with three new alternative lenders, to help improve access to funding.
Digital adoption offers an island of stability in the volatile South African economy. Technology allows businesses to run more efficiently, remain globally integrated, and maximise their profits. Companies which keep up with the latest technology, from incorporating it into their processes to training staff, will have a real advantage over their competitors.
Cash is here to stay, and other trends shaping payments
As we enter the next decade, local and African merchants should support payment methods that suit their customers, rather than following global trends just for the sake of it. Peter Harvey, MD of payment service provider, DPO SA, looks at five trends we can expect over the next few years.
- Cash is here to stay – for now
Despite common perceptions, South Africa still has more than 11 million unbanked individuals and cash remains the preferred payment method for these and many other customers.
Harvey says: “As we enter 2020, we can expect a host of new digital payment technologies that sound like excellent options – and they may well be for some – but merchants need to carefully monitor their customer behaviour before they rush to try the latest gadget or fad.”
According to Harvey the banks and card companies like Visa and Mastercard will be placing a large focus on enticing consumers to move from cash to card-based payments in the coming years.
“Overcoming the reliance on cash will take a fair amount of time and effort,” says Harvey. “For merchants trading in a cash-based community, depositing money into a bank that tracks your spending, charges you to store your money, and then charges you again to withdraw it can seem unattractive. At the end of the day consumers will make their decision based on convenience, cost and risk.”
Card payments are expected to morph over the coming years. In South Africa the tap and pay method is becoming more commonplace. Harvey believes this and other near field communication (NFC) methods of card payments will continue to grow in use as shoppers become more trusting of the technology and retailers see the efficiency benefits of moving customers through their purchase cycle more quickly and easily.
- Mobile is still king
There is no doubt that the means to facilitate most digital payments in Africa will depend on mobile technology.
According to South African communications regulator, ICASA, South Africa has a smartphone penetration of 80%. In Sub-Saharan Africa meanwhile, the mobile phone penetration is 50% and the GSMA expects smartphone penetration to grow from around 40% to 66% in 2025.
Harvey says smartphone technology and wearable technology will allow for the growth in some of the newer payment tech, like Apple Pay and Samsung Pay, but these payment methods will remain in the hands of the top LSMs and have little effect on the bottom of the pyramid customer base.
“For the moment USSD technology will still underpin the majority of mobile payment methods. Until smartphones increase in penetration, payments like m-Pesa will continue to dominate. Customers know and trust the solution and its these types of offerings that will need to be beaten by any new entrant over the next two to three years at least.”
- New decade, new banks
Harvey is upbeat about the new digital-only bank offerings like Tyme Bank, Bank Zero and Discovery Bank.
“It appears that 20Twenty was two decades too soon,” says Harvey. “The local markets are now finally ready for a new digital offering without the fuss and cost of the traditional offering. These banks stand a good chance of making an impact and making headway towards financial inclusion in the country.”
Harvey believes, that in order to boost the number of people using digital payments, the banking institutions, merchants and payment service providers need to start incentivising consumers to make the switch. Loyalty and Rewards will start playing an even bigger role in the near future.
- New services for the payment ecosystem
Based on demand, Harvey believes forward thinking payment service providers will work closely with their banking partners to focus on providing their mutual merchants with a ‘fully managed service’. This service includes: instant sign-up; a full suite of payment products; risk screening; account reconciliation; anti money laundering checks; access to shopping cart plugins; and a variety of other value-added services in the online digital payment space.
These services will enable digital retailers to quickly and easily start selling their services online, while protecting them from the associated risks.
The service benefits the banks as well as the broader digital ecosystem, as the payment service provider actively monitors and manages merchants and transactions, removing risk from the process and facilitating ‘good’ transactions.
- Identity technology takes centre stage
Looking at newer technologies, Harvey believes biometrics will continue to be the key focus.
Harvey says voice and facial recognition are set to take off in South Africa in 2020 and 2021 and he believes the key driver in this regard is the increasing use by the government.
“Banks and Home Affairs teaming up for the renewal of ID documents and passports is a major win for the average citizen,” Harvey says. “This falls neatly into the ‘convenience’ motivator and as people use and trust the biometrics used by the banks for this service, they will become less afraid to try it for payments.”
As technology rapidly improves, the payments ecosystem can expect some exciting advancements over the coming decade. Chat commerce and even augmented and virtual reality developments will almost all come with payment features. However, Harvey cautions against over exuberance.
Harvey says “Make sure you cater for what your customer actually wants, not what you think they should want. If working closely with African merchants, banks and customers has shown us anything, it’s that the fastest way to drive away business, is to dictate how customers pay. Provide the options and let them choose.”