Huawei banned from Google Android

 The ongoing trade war between the United States and China has resulted in another stunning development. The BBC is reporting that semiconductor IP company ARM has suspended business with Huawei. Huawei’s chip designs use a lot of ARM’s IP, so Huawei faces yet another significant setback in its path to becoming the number 1 smartphone vendor in the world.
According to the BBC, ARM has instructed its employees to suspend “all active contracts, support entitlements, and any pending engagements” with Huawei and its subsidiaries named in the U.S.’s Entity List of the Export Administration Regulations. The BBC further notes that ARM told its staff not to “provide support, delivery technology (whether software, code, or other updates), engage in technical discussions, or otherwise discuss technical matters with Huawei, HiSilicon or any of the other named entities.” Although ARM is based in the United Kingdom and its parent company is Japan-based SoftBank, ARM is complying with the U.S. trade restrictions because the company says its designs contain “US origin technology.” ARM is a multi-national company and has multiple offices in the United States in places such as Austin and San Jose, so it’s possible that some of ARM’s architectural technologies designed in their U.S. offices might be subject to the new regulations.
To call this move a devastating blow to Huawei would be an understatement. If the U.S. and China cannot reach a deal, then the one-two punch of Google revoking Huawei’s Android license and ARM suspending all business with Huawei will be the death of China’s largest technology company. The inability to distribute Google Play apps and services, get early access to the next Android platform release and security patches, and even potentially fork AOSP have led Huawei to consider its “Plan B” OS for its smartphones. Although reportedly far from ready, Huawei’s Android alternative has been in development for years, and the company is already seeking alternatives to Google Play. On the other hand, Huawei’s hardware independence (for the most part) from U.S.-based companies has been its one saving grace in this trade war – at least until now.
Huawei’s smartphone business is heavily dependent on IP from ARM. The majority of smartphones from Huawei and its sub-brand Honor feature chip designs from another Huawei-owned entity: HiSilicon. And HiSilicon’s chip designs are based on ARM architecture. For instance, HiSilicon’s latest consumer SoC, the Kirin 980, features ARM’s latest Cortex-A series CPU and Mali GPU designs. But HiSilicon is also a licensee of ARM’s v8 CPU architecture, which it uses to build custom chip designs for servers. Thus, ARM IP is significant to Huawei’s hardware business across the board, and losing access to that IP will be crippling to the company.
While the loss of ARM IP will prove devastating, Huawei won’t immediately feel the effects as the company has stockpiled 3 months worth of supplies in anticipation of the U.S. trade ban. And as the BBC notes, Huawei and HiSilicon can continue to manufacture existing chips using ARM technology, so current smartphones like the new Honor 20 series should be unaffected. A source told the BBC that the upcoming HiSilicon Kirin 985 will also not be affected by the ban, but that HiSilicon’s next chip design will likely need to be “rebuilt from scratch.” Given the long design and development process for new chips and how dependent Huawei has been on ARM IP, it could take Huawei years to build a new chip without ARM IP. If they survive that long, that is. Huawei’s best hope now is to petition China to resolve its trade dispute with the United States because going it alone just doesn’t seem possible for Huawei with this latest development.
If they choose to continue using AOSP without Google’s Android, that leaves them with two possible scenarios.

Usage In China Only

If Huawei decides to withdraw to operating exclusively in China, they will create a situation where they will be able to continue to use AOSP (assuming they can get all the parts they need to create phones) in EMUI with local app stores, much as they currently are (albeit with slower security patches and slower updates to new Android versions). China is notorious for selectively enforcing copyrights of foreign entities. And this is where de jure vs. de facto comes into play.
While Huawei can be banned from entering into a licensing agreement with Google and would be violating U.S. law if they used AOSP or Tizen under those circumstances, the U.S. has limited ability to directly enforce those aforementioned criminal penalties if Huawei does not maintain any activity outside of China. The U.S. government could pressure Google to pursue their copyright in China via a civil suit, however, there would be questionable ability to win that specific suit despite the clear copyright ownership, and Alphabet would be reluctant to spend that time and money on a legal battle.
Huawei has stated that since 2012 they have been building a backup OS in case they can no longer use Google’s Android, however, they may be in for a surprise there as well. While it is possible that this is a complete clean-room OS with no code shared with AOSP or any other OS that a company with a U.S. presence has copyright on, it is extremely unlikely for anything developed in those conditions to be able to hold its own against the 15 years of development that have gone into Android and the 28 years of development that have gone into the Linux Kernel, or the decades of work that have gone into iOS (with its Unix roots). Even Tizen with its Linux Kernel base and more than 14 years of (admittedly fragmented) development from a host of large companies (dating back to the Maemo days) struggles to compete on phones. That leaves Huawei between a rock and a hard place, as in all likelihood this backup OS is either 1) not going to be competitive, or 2) based on something that they can be blocked from using.
So while Huawei would be in violation of the letter of the law, in practice they might actually be able to survive in this matter.

Usage in Western Markets

However, while China is large, it might not be enough for Huawei. They may wish to expand to an even larger market. If Huawei has their sights on India and Europe, it gets more complicated quickly.
Right off the bat, civil cases become substantially more likely to succeed as they will be able to be filed in jurisdictions that are more favorable to copyright lawsuits from foreign companies. That does not alleviate the difficulty in getting Google to pursue the case, but it isn’t the only change that happens either. At the same time, many of these countries have criminal offenses for copyright infringement of this scale (including Canada, the UKIndia, and others). This means that any assets or personnel that Huawei puts in those countries would be at risk of being involved in said case.
It is not guaranteed that it would reach that level and quite a bit would need to go wrong for it to get there, but if the U.S. government wishes, they can follow the letter of the law to that extent. If the U.S. government acts to the full extent that they are capable of, they could potentially prevent Huawei from distributing AOSP based phones in any region beyond China.

How Long Can This Last?

While that sounds all doom and gloom, things may turn out much better. This trade ban will be absolutely crippling to Huawei and the many companies that rely on them, so there will be substantial pressure to find a solution and lift this ban. More importantly, the United States Department of Commerce understands those effects and is reluctant to leave trade bans on individual companies in place for extended periods of time, instead working with the companies to try to find a solution.
This reluctance came to the forefront just three years ago in early 2016, when U.S. companies were banned from selling to ZTE, as a result of ZTE violating U.S. trade sanctions on Iran and North Korea. The United States Department of Commerce immediately stated that they would give ZTE a temporary three-month export licensein exchange for cooperating with the ongoing investigation, and would continue to ease them if ZTE continued to cooperate. A year later (after multiple extensions of the temporary export license), ZTE agreed to a plea deal with the Commerce Department that would see their trade restrictions on ZTE be fully lifted in exchange for an $892 million dollar fine, the removal and/or disciplining of the personnel who orchestrated the violation of the sanctions, an independent compliance monitor, a seven-year period where any violation of the agreement would immediately reinstate the ban, and a $300 million security deposit which would be forfeited if ZTE violates the terms of the agreement.
Unfortunately, ZTE proceeded to violate those terms by only firing 4 of the people involved, and instead giving bonuses to another 35 employees who took part, thereby reinstating the ban. That’s not the end of it, however, as the United States Department of Commerce entered into another plea deal with ZTE a couple of months later, wherein ZTE would have the restrictions lifted in exchange for paying another $1 billion in fines, having further compliance oversight, changing their board of directors, and putting up an additional $400 million security deposit (as the previous $300 million had been forfeited when the initial plea deal was violated). The U.S. Senate attempted to block the plea deal with the National Defense Authorization Act for Fiscal Year 2019, however, the version of the NDAA 2019 that eventually passed the U.S. House did not include that provision. As of publishing, ZTE is still able to operate and no longer has an active export restriction in place (although they still are subject to the compliance requirements of their agreement.)
While it is still early, that process is already drawing parallels to what is happening with Huawei. After the initial trade blacklist that came about from providing prohibited financial services to Iran (which resulted in Google, Intel, Qualcomm, and others suspending future collaboration with Huawei), the U.S. Commerce Department almost immediately gave Huawei a three-month export license so that they could fulfill existing orders. In that statement, the U.S. Commerce Department highlighted that they would continue to evaluate potentially extending that license beyond the initial 90 days. While that is as far as we have gotten so far, I would not be shocked to see further extensions of that license in exchange for cooperation, culminating in a plea deal in about a year or two from now (maybe even less), much like what happened with ZTE.
If that is the case, then the potential negative effects on AOSP will be avoided. I would be surprised if Huawei’s legal team hadn’t already been contacted by the U.S. Department of Commerce about working on extending the export license, and Huawei realizes that they are just one plea deal (or one won legal battle) away from being able to work with Google and Qualcomm on future projects again. We have seen this happen before, and it turned out fine the last time, with ZTE back on the market and using Android with Google Play. It also (eventually) turned out fine when the U.S. government restricted exporting cryptography (including open source cryptography) from the cold war all the way through to 2000, with notable discussion at the time revolving around Phil Zimmermann’s PGP, Peter Junger’s lawsuit (Junger v. Daley), and Daniel J. Bernstein’s lawsuit (Bernstein v. United States).
Finally, you are going to see a lot of opinions published about this case from people who are not lawyers. That includes me. I am not a lawyer, I am not your lawyer, and you should not use anything stated here as legal advice. If somehow you end up in a situation where the discussion here directly impacts you, you should really go speak with your copyright lawyer. My background is in interpreting tax law (with a specific focus on Excise Tax for new product categories) and I have given talks on the basics of software licensing for developers. While that isn’t enough for you to blindly follow my analysis, that is enough for me to connect the dots, put together the relevant sources, and paint a picture. So please, dive into the sources that have been linked and read through this analysis. If after reading them you come to the same conclusion, share this article around. If you disagree, let me know why in the comments below.

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