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Google's decision to cut China to Huawei could cost it up to $ 425 million in lost annual revenue.
This is the estimate of stock research firm Nomura Instinet, who encrypted the numbers in response to the announcement that Google will no longer sell a license for its Android smartphone software to Huawei.
Google does not have much choice in this area. The Trump administration has blacklisted Huawei this month, preventing US companies from dealing with the Chinese manufacturer of smartphones and telecommunications equipment.
This means that new Huawei devices in markets around the world will no longer be able to use the Android version bundled with the latest security patches, access advanced Google services like wizard or download apps from Google Play Store.
Huawei's break with the Google Play Store, in which Google typically takes 30% off each transaction, is where Google is most at risk of losing. Instinet places the general sales loss range of the Play Store for Google at between $ 375 and $ 425 million.
The biggest impact will be in Europe
Instinet estimated that Huawei currently has about 500 million smartphone users in the world.
But 52% of Huawei phone owners are in China, where Google Play is not available, according to Instinet's estimates. Thus, Google would only impact the markets – such as Europe and Asia (excluding China) – where it benefits from sales of applications today.
Instinet estimates that Google has generated a global Play Store business turnover of $ 7 billion in 2018. According to Instinet's calculations, the portion of this $ 7 billion coming from Huawei phones is likely to be 39, about 388 million dollars. The main driver of this revenue is located in Europe, where Instinet estimates that Google has generated $ 190 million through sales of the Play Store on Huawei devices last year. Huawei users in Asia (excluding China) contributed about $ 137 million to Play Store sales, according to the report.
Huawei "switchers" will make a difference
This shot would likely be mitigated, they wrote, as some users will switch to phones from another manufacturer to gain access to a fully charged Android experience. Huawei announced that it was developing its own operating system to replace Android on its devices, but experts are extremely skeptical about consumers' positive response to switching.
"You can create a different operating system … but what will consumers do for research, maps, YouTube?" Carolina Milanesi, senior analyst at Creative Strategies, told Business Insider a recent interview. "All of these solutions have alternatives, but why would I?" It's not as if Huawei's phones were as incredible as I would give up all the services I've been using for years. "
Read more: Google has more control over Android than we realize and, at the moment, companies like Huawei have no choice but to accept that.
Colin Sebastian, Senior Equity Research Analyst at Baird & Co., told Business Insider that he thought "to be the most affected" [Huawei] users "will start looking to switch to devices from other companies.
"My general assumption is that, since there is no viable alternative to Android / Google Apps (with the exception of Apple), most of the affected users would migrate to D & # 39; 39, other Android devices, "said Sebastian. "Obviously, there could be a transition period, but I guess that would happen pretty quickly."
Others, like Wedbush Securities' CEO, Dan Ives, believe that Huawei will lose market share in countries like Europe, but that it will not be a catastrophic scenario for the world's second largest manufacturer. smartphones.
As for the loss of revenue for Google, Ives estimates that it will be between $ 150 and $ 200 million a year. And for a company that has generated more than $ 130 billion in revenue in 2018, Mr. Ives said that these future losses were a "round-up error" for the technology giant and that "finally, the Bark could be much worse than the bite ".
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