HarmonyOS: Huawei's OS venture, challenges, and potential global impact.

Introduction 

In August 2019, Huawei introduced HarmonyOS, a distributed operating system designed by Huawei for a range of devices including smartphones, tablets, smart TVs, smartwatches, personal computers, and other smart devices. Last January, Huawei launched HarmonyOS Next, an updated version of the earlier operating system. This launch signalled Huawei's determination to establish its own self-sufficient ecosystem of mobile applications similar to those built around iOS and Android. Experts speculate that Huawei has the potential to emerge as a proper competitor to both iOS and Android, potentially surpassing its American-based counterparts in the operating system arena. Prior to Huawei, several technology heavyweights attempted to establish operating systems that could compete with Android and iOS. These efforts included Microsoft's Windows Phone, created in collaboration with Nokia, Samsung's Tizen, developed alongside Intel and Alibaba's YunOS. Each of these projects ultimately failed due to the significant challenges and financial costs associated with developing and maintaining a new operating system in a market controlled by established giants.

HarmonyOS Potential

Current data suggest a more positive outlook for Huawei's future market trajectory. To illustrate, in the initial six weeks of 2024, Huawei’s smartphone sales in China saw a 64% year-on-year increase. Its market share climbed to 16.5%, making it the second largest in smartphone sales, right behind Vivo, according to data from Counterpoint Research. The surge in sales was primarily driven by the Mate 60 series, which benefited from strong brand loyalty and the successful launch of HarmonyOS, according to a research article from Caixin. Furthermore, the financial burden of assembling a team to develop an operating system is substantial. Entering the operating system market requires substantial investments not only in development and talent but also in building a supportive ecosystem that can compete with established giants such as Android and iOS. New companies must invest significantly in research and development to create a competitive and secure operating system. Beyond the technical development, high costs are involved in marketing, establishing partnerships with hardware manufacturers, and attracting third-party developers to create a diverse app ecosystem. Huawei believes that HarmonyOS needs to secure 16% of the market to reach a tipping point for success. Achieving this market share is crucial for drawing developers to build apps specifically for its operating system. The company achieved this milestone in the fourth quarter of 2023, when HarmonyOS was used in 16% of the smartphones sold in China, bringing Huawei closer to Apple’s 20% market share in China. Globally, HarmonyOS holds nearly 4% of the market, in contrast to Apple's 23% and Android's 74%, as reported by market research from Counterpoint Research. Alongside data suggesting a successful trajectory, Huawei has detailed and ambitious plans aimed at boosting its market share and enhancing its overall standing in the industry. Generally, two phases are identified. The first phase involves integrating over 5,000 apps that represent 99% of the daily usage time on smartphones. Reaching this goal is essential for HarmonyOS to start gaining momentum and to develop a robust software ecosystem. Subsequently, Huawei aims to expand the operating system to include 500,000 apps, in order to meet a broad range of consumer needs and preferences, according to Huawei's Consumer Business Group. Furthermore, at the January launch of HarmonyOS NEXT, over 200 companies are involved in app development for the operating system. These companies span diverse sectors such as travel, finance, social media, productivity tools, entertainment and gaming, including names such as iQiyi, China Merchants Bank, Ctrip, and Zhihu. Furthermore, since September 2023, Huawei has actively encouraged major domestic firms to create apps for HarmonyOS. By year-end, prominent companies such as the video platform Bilibili, digital payment service Alipay, and game developers NetEase and miHoYo had confirmed their partnerships with Huawei to develop apps for HarmonyOS NEXT. Moreover, according to a research from Caixin, highlighted Huawei's smartphone user base, which generally has medium to high incomes and a willingness to spend, as a compelling reason to develop apps for HarmonyOS.

Another interesting development that could indicate success is that they collaborate with multiple universities around China. More specifically, Huawei has been partnering with domestic universities to prepare programmers by introducing HarmonyOS courses into their curricula. To illustrate, in February 2021, Wuhan University became the first in China to integrate courses on HarmonyOS mobile application development, with 30 students from computer science, software engineering, and information management majors participating in the inaugural semester. Additionally, Huawei established a collaboration with Shanghai Jiao Tong University in December 2020, signing an agreement to jointly train graduate students. This 2.5-year program admits 30 students each year, with the first group graduating in early 2024. Interestingly, HarmonyOS developers command starting salaries that are 30% to 50% higher than those of Android developers, according to OpenHarmony project management committee.

On the other hand, there are indications that the new operating system may not have as promising a future as initially predicted. To illustrate, some major apps have not yet joined the participant list, including Tencent's WeChat and ByteDance's Douyin, which is the Chinese equivalent of TikTok. Reasons for their absence could include that they do not intend to develop apps for HarmonyOS anytime soon. An executive from a small gaming company highlighted the financial constraints caused by app stores, which claim half of the revenue generated from games. As a result, many small and medium-sized game developers prefer to distribute their games through well-known social media and payment platforms such as WeChat, Douyin, Kuaishou and Alipay. These platforms enable users to interact with games directly, eliminating the need for downloads and registrations. This approach helps developers connect with their audience more cost-effectively.

Other consequences

Huawei’s development could reshape the operating system landscape in China and have a profound impact on the job market. Huawei's investment in HarmonyOS is expected to significantly boost China's tech industry, potentially creating at least 3 million jobs. Currently, there are over 380,000 developers certified to work with HarmonyOS, and Huawei is dedicated to expanding this number by training 100,000 developers each month through online videos and other educational resources. Additionally, companies such as Meituan are also contributing to the ecosystem; for instance, Meituan has allocated about 100 employees to develop a beta version of their app for HarmonyOS. This collective effort underscores the substantial economic and technological ripple effects of Huawei's strategy.

American sanctions

The launch of Huawei's new operating system, HarmonyOS, marks a strategic response to the American sanctions against the company. This move is part of a broader shift aimed at asserting dominance in certain global markets. HarmonyOS was initially developed in 2015 with a focus on the Internet of Things, including applications in autonomous driving and industrial automation. However, the imposition of U.S. sanctions in 2019, which barred Huawei from using Android, posed a significant threat to the Shenzhen-based company. This led Huawei to rapidly accelerate the development and deployment of HarmonyOS, launching it within just four months. Caixin already reported the development of HarmonyOS as a forced move due to sanctions. Now, with steady support growing over the past five years, HarmonyOS is seen as a key element in Huawei's push for technological independence. This includes developing their own chips and applications, a move that not only circumvents the impact of sanctions but also positions Huawei for enhanced product experience and commercial success. This strategy, although not entirely new against the backdrop of US sanctions, highlights Huawei's resolve to adapt and innovate under pressure.

HarmonyOS for the EU 

When considering the introduction of HarmonyOS to the EU market, several factors come into play. Firstly, it is essential to note that the EU has its regulations and standards for technology and telecommunications, which Huawei would need to comply with to ensure the legality and market acceptance of HarmonyOS within the region. Regarding sanctions, while the EU has not imposed specific sanctions on Huawei or HarmonyOS, the company has faced scrutiny and restrictions in certain EU member states, particularly concerning its involvement in the development of 5G infrastructure. However, these restrictions are not directly related to operating system software such as HarmonyOS. In terms of market reception, the EU generally promotes competition and innovation in the technology sector. Therefore, Huawei's introduction of HarmonyOS to the EU market could be met with both opportunities and challenges. On one hand, the EU may welcome the diversity and competition that HarmonyOS could bring to the operating system landscape, potentially providing consumers with more choices and fostering innovation. On the other hand, Huawei may encounter resistance or skepticism from EU regulators and consumers due to concerns about data privacy, security and potential geopolitical tensions. Lastly, while the EU has not imposed trade restrictions on Huawei similar to those imposed by the US, changes in geopolitical dynamics or alignment with US policies could potentially impact Huawei's operations in the EU.

Conclusion

Huawei's development of HarmonyOS represents a significant shift in the global technological landscape, potentially challenging the dominance of established American-based operating system companies. This development is not only significant for its potential to reshape the industry, but also for its response to current geopolitical tensions, particularly the American sanctions imposed on Huawei. While Huawei's efforts have shown promising signs, particularly in terms of market growth and ecosystem development, challenges remain, including the need to attract major app developers and overcome financial constraints. The outcome of Huawei's challenge to industry leaders remains uncertain, yet its efforts signal a significant potential shift in the operating system landscape.Only time will reveal the full extent of Huawei's impact and its ability to shape the future of the global technology landscape and its impact on the European market. 

Source: Caixin Global

Editor: Lucy van Eck