Huawei Blacklist: Wilbur Ross Offers a Ray of Hope for Google

The Trump administration is close to granting special licenses to American companies like Google (GOOGL) to resume sales to Huawei. On Sunday, US Commerce Secretary Wilbur Ross told Bloomberg that the special licenses “will be forthcoming very shortly.”

The Trump administration blacklisted Huawei as a national security threat in May. With that action, the administration barred American companies from selling certain technology components to Huawei. In response to the blacklisting, Google prevented Huawei from preinstalling its apps such as YouTube on its smartphones.

As a result, Huawei launched its latest flagship smartphone series, the Mate 30, without any Google apps. Although Mate 30 includes robust hardware features, it’s proving to be a hard sell without the popular Google apps. Huawei admitted last month that losing access to Google apps had been a blow to its smartphone business.

Huawei helps Google distribute its money-making apps

In 2018, Huawei sold more than 200 million smartphones in 2018. As a result, it is one of Google’s major app distribution partners. Google’s other major app distribution partner is Samsung (SSNLF), which sold about 300 million smartphones in 2018.

Apps like YouTube and Maps make money for Google through advertising—Google’s primary source of revenue. In the third quarter, advertising sales contributed 84% of total revenue for Google parent Alphabet. Huawei’s reduced ability to sell its smartphones could also adversely affect Google’s advertising business.

In our view, it should be great news for Google that the Trump administration plans to ease the pressure on Huawei. Restoring these Google apps to the Mate 30 could help boost sales of the device, broadening the distribution of Google’s monetized apps.

American companies requested exemptions from Huawei ban

The Trump administration has banned American companies from selling certain technology components to Huawei. However, the administration allowed companies to apply for exemptions from the ban. Wilbur Ross told Bloomberg that the administration had received 260 requests from companies seeking permission to sell to Huawei.

Is Google among the companies that requested an exemption? We are not sure, as Google has neither confirmed nor denied submitting an exemption. However, there are hints that Google may be one of those companies seeking a revived sales channel to Huawei.

In August, Reuters reported that Google stated that it wants to continue doing business with Huawei. At that time, the government had received 130 requests for exemption from the Huawei ban.