What Could the Trade-War Mean for the Secondary Device Market? Featured

What Could the Trade-War Mean for the Secondary Device Market? Image Credit: Dean Drobot/Bigstockphoto.com

The US/China trade-war has hit new heights. Over the last couple of weeks, the mobile industry has seen significant steps made against Chinese manufacturer, Huawei. The latest developments saw Google banning Huawei from Android services and suspending business activity with the manufacturer to comply with the US Administration ban. This is going to cause major implications for global smartphone makers and consumers alike.

The initial announcement left many operators asking questions: Do I need to be concerned? How does this ban affect my organization? What impact does this have on our partnerships? And most importantly, what impact does this have on our customers? With all these things to consider, the US stepped in and implemented a 90-day extension before the trade restrictions came into full force.

Within this timeframe, the Huawei ban could be scrapped. But it is unlikely to change the trade-war that has been ongoing ever since the early days of Trump administration. So, with all things considered, is Huawei just a pawn in the US/China trade war? Could China retaliate and ban Apple? And what could this trade-war mean for the secondary device industry? 

Checkmate

Huawei has been made into the biggest story in tech right now by US president, Donald Trump, who has placed the manufacturer on an “entity list”, thereby blocking it from buying US goods due to activities contrary to national security. As a result, Huawei has lost access to commercial versions of Google’s Android, as well as associated services like Gmail, YouTube and Play Store, and Intel’s chips; it’s even seen other international partners like ARM and Panasonic bowing to American influence and discontinuing trade.

With pushback from global trade for one of China’s biggest players, the industry has been questioning whether China will retaliate and do the same to a large US heavyweight such as Apple, who has a large stake in the region. But in reality, this is unlikely to happen. Firstly, Apple devices are very popular among the middle and high classes in China; therefore, removing them will have a significant effect on operators in the region who have been selling the devices. Customers will also be forced to consider other options which are not positive for customer services.

It is also important to note that Apple is a massive employer and acquirer of parts within China. So, it would make very little sense to implement a ban like this when you consider the negative effects it will have on the Chinese economy in the region. However, replicating the manufacturing capability, supply chain and know-how that Apple has built up in China will not be a trivial task for Apple.

Coincidentally, the ban on Huawei comes at a time when the Chinese manufacturer has maintained its lead as the world’s second biggest smartphone vendor in Q1 2019. At such a critical time, when global operators are racing to deploy 5G networks, a prolonged ban could result in potentially catastrophic results for not only Huawei’s smartphone business, but also its infrastructure business.

A domino effect

When significant developments happen within the device industry, like the banning of a manufacturer or trade-war, there is always a chance of a domino effect hitting the secondary device industry.

The Huawei ban is likely to see the price of first-hand devices increase globally. While China’s prices could go up from the increase of tariffs placed on US devices, the US could expect the cost of manufacturing to grow, as a result of moving away from Chinese manufacturers. As a result, we could expect upgrade cycles to increase again. Today in the US, consumers are holding onto their iPhones for around three years. If this trend continues to grow, we can expect OEMs to take a significant hit in their pockets, or they could consider not releasing a device as often as annually. 

But there could be some light at the end of the tunnel. If device trade-ins slow down, this could mean that the demand for cheaper alternatives, like pre-owned devices, could thrive. As the demand for pre-owned devices grows, so will the value. And as a result, operators can incentivise their customers to trade-in their devices for a higher credit than previously. This credit can then go towards a shiny new device, or even some accessories they might have not considered. 

Winners and losers

With the news changing most days on this topic, it’s hard to know what will happen over the next couple of months with Huawei. But one thing is for sure, we can expect that there will be winners and losers within the US/China trade war. While some OEMs will thrive in the opportunity to step out of Huawei's shadow, it's important to consider the wider impact on the industry, with operators, and customers, forced to look for alternatives that come at a higher price.

As President and CEO, Biju Nair is responsible for the execution and strategy of HYLA’s global business. He leads the company’s expanding effort to grow the company’s global strategic vision, with a focus on bringing new technology solutions and new business opportunities to the forefront. He is responsible for all aspects of ensuring the company’s short and long-term goals are realized and that the corporate strategy is secure and engaged.

Bringing more than 20 years of experience to his role, Biju is a recognized entrepreneur and technology industry leader. Most recently, he served as the Executive Vice President and Chief Corporate Strategy Officer for Synchronoss, where he was responsible for leading the technology direction and strategic vision of the company as well as investor relations.

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