Huawei indicted, China responds. Should consumers worry?

Huawei Mate 20 Pro vs P20 Pro Camera

The U.S. socked Huawei right in the mouth with the power of a heavyweight boxer. The Department of Justice this week filed indictments against the company, alleging it stole trade secrets, violated trade sanctions against Iran, and committed fraud. Everyone knew the hit was coming, but that doesn’t stop it from smarting.

The indictments are part of a years-long campaign by the U.S. to minimize Huawei’s reach in the telecommunications market over what it says are legitimate security concerns. Some believe the Chinese government has a backdoor into Huawei’s telecommunications gear that could be used for spying. The company has long denied any wrongdoing and asserted those claims once again in the wake of the latest action.

“Huawei is disappointed to learn of the charges brought against the company,” said the company today in a statement. The charges are aimed at Huawei CFO Wanzhou Meng, who was arrested in Canada last year. The U.S. hopes to extradite Meng and force her (and Huawei) to face trial. Huawei says it reached out to the U.S. after Meng was arrested, but was rebuffed. “The company … is not aware of any wrongdoing by Ms. Meng, and believes the U.S. courts will ultimately reach the same conclusion.”

The Chinese foreign ministry also leveled a new complaint against the DoJ. “We strongly urge the United States to stop the unreasonable crackdown on Chinese companies including Huawei,” said Foreign Ministry spokesperson Geng Shuang in a statement. The Ministry further urged the U.S. to “immediately withdraw the arrest warrant” and “stop making such kinds of extradition requests.”

The charges

Huawei has to play the short and long game at the same time, and navigate both skillfully if it wants to extricate itself from this ever-growing threat.

The U.S. case focuses on some fairly specific incidents. It alleges that a Hong Kong-based subsidiary, Skycom, acted as a front for Huawei’s activities in Iran. Skycom’s Iran offices were staffed by locals, but acted at the behest of Huawei to strike deals in violation of international trade sanctions in place against Iran. Bank fraud is lumped in with this charge. Meng was roped in due to her role as chief financial officer, a position that would have allowed to her to oversee such behavior.

The U.S. also says Huawei engineers in the U.S. attempted to steal trade secrets from T-Mobile. This case, settled some time ago, involved a testing robot called Tappy. A jury has already awarded T-Mobile $4.8 million.

Huawei claims its employees acted on their own (lone wolf defense), while the U.S. says it can prove the employees acted on the company’s behalf.

The actual theft of Tappy secrets isn’t that important, noted Tim Culpan, a Bloomberg contributor, via Twitter. It’s more important to learn whether company management was part of the plot and whether its lone wolf defense is legit. This will eventually establish — or strip away — trust in Huawei’s leadership.

Consumer impact

Can Huawei counter this in a meaningful way, and what might the impacts be on consumers?

While the company’s telecommunications gear has been banned in the U.S. for some time, Washington has only recently succeeded in making other countries question Huawei. Vodafone in Europe, for example, said it would pause purchases of Huawei equipment while it reevaluates its relationship with the company. Vodafone is one of the biggest carriers across the continent.

This shows things are beginning to turn south for Huawei’s telco biz.

Should carriers begin to source equipment from Huawei’s competitors, it will affect global 5G build-outs eventually. Carriers are set to begin deploying 5G in earnest over the next six to 18 months. Losing a major supplier could slow things down. This isn’t the worst possible outcome.

Then there’s Huawei’s other business: mobile phones. There’s still time for the company to shield its handsets from the fallout.

“Huawei really needs to separate its devices business from [its] telecom infrastructure,” recommends Avi Greengart, research director, consumer platforms & devices, at GlobalData.

Huawei has in the last year become the world’s second-largest supplier of cell phones. This includes its Honor-branded devices. Huawei sits between number one Samsung and number three Apple. It might consider divesting the business entirely. Maybe rebrand the entire phone business under the Honor umbrella, or come up with a new brand. Put a clear, internal wall to separate the telecommunications business from the phone business. Doing so might ease some minds and allow Huawei’s phone unit to continue innovating.

Innovation is key. With 5G around the corner, phones are about to get exciting again. It would be a shame to see the number two player, which has delivered some of the most compelling phones in the last year, knocked down. 

Huawei’s path forward is a bit murky. It must first prevent Meng’s extradition to the U.S. If it cannot, it needs to mount a successful lone wolf defense for those accused of breaking the law. Should Huawei lose the case entirely, its reputation will suffer severely and its telco business may be in immediate most danger. Consumers needn’t worry overmuch for the time being. 

Portless phones: Dumb gimmick or inevitable future?

Meizu

Meizu and Vivo, both of which recently announced phones with no ports, are seeking the answer to an age-old question: do people prefer function or form? The answer, as always, is “it depends,” but in this case Meizu and Vivo are asking consumers to vote with their wallets. Should they?

In September 2016, Apple removed the headphone jack from the iPhone and the internet lost its mind. A number of scathing editorials burned red hot across the web, with the move called “user-hostile and stupid.”

The trusty headphone jack has been a staple in consumer electronics since it was designed in the 1950s. The standard 3.5mm jack got its start with transistor radios, and it later showed up in nearly every type of media device over a six-decade span, including WalkMan radios, cassette and CD players, laptops and PCs, mobile phones and tablets, gaming consoles, and much more. The jack is functional across devices and form factors, making it a must-have. Apple disagrees.

“Maintaining an ancient, single-purpose, analog, big connector doesn’t make sense because that space is at a premium,” said Phil Schiller, Apple COO, at the iPhone 7’s launch. Schiller claimed Apple needed to lose the headphone jack in order to waterproof the iPhone 7, and even said it took “courage” to be among the first phone makers to take this step. The company continues to sell lots of iPhones.

USB-C, headphone jack: Samsung S9 lilac and Google Pixel 3 with bases showing to reveal headphone jack and lack thereof.

Any port in a storm

Like it or not, Apple set a precedent and other phone makers followed. Google ditched the headphone jack in favor of USB-C audio, as did Motorola, Huawei, and OnePlus, among others. In each case, the phone maker provided a pair of USB-C headphones or a 3.5mm-to-USB-C adapter. The trend is slowly catching on, but that doesn’t mean people are happy about it.

What Meizu and Vivo are doing is next-level user hostility.

The front and back of the Meizu Zero. Meizu

The Meizu Zero has absolutely no ports. None. It drops the headphone jack, the USB-C port, the SIM card slot, the memory card slot. Need to power up your phone? The Zero sports wireless charging. Want to listen to music? Bluetooth, my friend. What about transferring files? Use the cloud! Need wireless service? An eSIM is inside. While Meizu has an answer to all these nagging everyday needs, you shouldn’t be convinced of Meizu’s logic. At least, not yet.

“Designers dream of clean, port-free lines, but smartphones need to live in the real world, where consumers cannot always expect wireless connections,” quipped Avi Greengart, research director, consumer platforms & devices at GlobalData, to Android Authority. “The loss of the headphone jack at least can be countered by dongles, but until wireless charging spots are ubiquitous, asking consumers to go without a charging cable — which is also used for data transfer and other purposes — simply is not practical.”

Mainstream, here we come?

Charging pads may be available at some Starbucks locations and in some cars, but wireless power is still a niche technology that has yet to be widely adopted. Until every phone ships with a wireless charger by default, consumers will continue to expect to plug their phones in for charging purposes. Moreover, wired charging is still faster than wireless charging.

The idea of phones without physical SIM cards is also problematic. The promise of eSIM, wherein an electronic SIM card can be programmed for network access, has yet to be fully realized. It should be easy, but apparently it’s not.

Apple’s rollout of eSIM in the iPhone Xs and Xs Max, for example, was slow to be adopted by carriers in the U.S. AT&T, T-Mobile, and Verizon Wireless added support for the tech months after the phones reached store shelves. Sprint still doesn’t support Apple’s eSIM. Multiply this by hundreds of carriers around the world and you see where this is going.

Then there’s the Meizu Zero’s lack of physical buttons. The Zero features pressure-sensitive edges that are used to manage functions such as adjusting the volume. HTC’s U12 flagship phone was largely panned by reviewers due to its incredibly frustrating pressure-sensitive buttons. Can Meizu succeed where HTC failed? Hard to say.

Like it or not, phone makers are headed in this direction.

“Apple designers eventually hope to remove most of the external ports and buttons on the iPhone, including the charger,” reported Bloomberg last year. Apple weighed making this radical move while developing the 2017 iPhone X. It later scaled back those ambitions due to the cost of wireless charging. That means we’ll see an iPhone with no ports or buttons at some point, and we can expect the same from Apple’s competitors.

Meizu and Vivo are clearly way ahead of the curve, dancing on the bleeding edge for the spectacle alone. Will people buy these portless phones? Sure. Should they? Probably not yet, but we all will at some point down the road.

Note: There is a poll embedded within this post, please visit the site to participate in this post’s poll.

How much does the RAM and storage in your phone actually cost?

An image showing the front and back of the new Samsung LPDDR5 DRAM chip. Samsung

I’m sure my eyes weren’t the only ones watering at the leaked price for Samsung’s upcoming Galaxy S10.

The report suggests that the most expensive S10 Plus model, which packs 12GB RAM and 1TB of internal storage will cost 1,599 euros (~$1,818). It wasn’t long ago that smartphones controversially passed the $1000 mark and it appears that we could soon be at the $2,000 milestone. Ouch!

Editor’s Pick

The only extra you get when you opt for the top variant is more RAM and more storage. As far as we know, nothing else about the smartphone’s specs change. However, the premium paid for this extra memory appears to rise exponentially.

Here’s a breakdown of the European leaked prices, converted to U.S. dollars:

  • Samsung Galaxy S10 Plus 6GB RAM/128GB storage: $1,193
  • Samsung Galaxy S10 Plus 8GB RAM/512GB storage: $1,477
  • Samsung Galaxy S10 Plus 12GB RAM/1TB storage: $1,818

(In the United States, Galaxy S10 Plus prices are likely to be lower, but still nowhere near affordable.)

The difference between the 6GB/128GB Galaxy S10 Plus and the 8GB/512GB model is $284. In other words, you’ll pay $284 for the extra 2GB of RAM and 384GB of storage space.

That’s already expensive, but the move from 8GB/512GB to 12GB/1TB could cost a further $341. In this case, $341 gets you 4GB of RAM and 512GB of storage space.

Memory isn’t usually the most expensive component in a smartphone, that’s usually the display and application processor. Although, to be fair to Samsung, cutting-edge memory in a very high capacity can often cost a premium. But is there some level of price gouging going on here?

How much does memory really cost?

Pinning down exactly how much RAM and NAND flash memory costs is a tricky business, in no small part because component prices are almost impossible to find. There are various capacities, technologies, and manufacturers to pick from, each charging slightly different prices. Not to mention that Samsung and other OEMs have much better bargaining power to negotiate prices below anything you’ll find online.

We attempted to track down equivalent part prices from component retailers, including Mouser and DigiKey, but there’s a considerable markup applied on these sites that Samsung definitely isn’t paying.

We’re going to have to use a bit of intuition to figure this out.

According to this bill of materials (BOM) breakdown, the Samsung Galaxy S9 Plus‘ 6GB RAM cost Samsung just $39, probably because it was sourced in-house (Samsung is a leading RAM and flash storage manufacturer). Meanwhile, 64GB of UFS flash memory from Toshiba cost just $12.

Flash storage

We can extrapolate Samsung’s Galaxy S9 costs up to 512GB and 1TB of storage. Ignoring falling flash memory prices and savings by scaling up capacity, prices could be in the region of $96 for 512GB and $192 for 1TB. Actual costs are likely to be lower if we factored in the cost savings of scale. Industry estimates suggest that flash storage could cost just $0.08 per GB in 2019, which could halve our conservative estimates here.

RAM 

As for RAM, we can make a similar assumption. The move from 6 to 8GB should cost no more than 33 percent more. This suggests that an 8GB LPDDR4 chip should cost somewhere in the region of $52 for Samsung. Meanwhile, the 12GB chip should cost somewhere around $78.

Remember though, this is a very rough estimate based on extrapolating guideline prices. This gives us a very conservative ballpark, but actual prices that Samsung pays could be lower. And DRAM prices across the market are currently dropping due to oversupply and sluggish demand.

So what’s the markup?

Using these ballpark estimates will get us in the region of Samsung’s BOM.

  • The RAM and storage in the base 6GB/128GB Galaxy S10 Plus should cost around $63.
  • The RAM and storage in the 8GB/512GB model should cost around $148. That’s $85 more compared to the lower version.
  • The RAM and storage in the 12GB/1TB model should cost around $270. That’s $122 more compared to the lower version.

We calculate the estimated cost differences between models at $85 and $122 respectively. Certainly not the $284 and $341 price hikes that Samsung is rumored to be charging for the Galaxy S10 Plus models with more storage. We’re looking at a markup of around 179% to 234% on these parts, which could be potentially much higher if flash memory prices fall as far as expected.

Galaxy S10 Plus variant Estimated cost of memory Cost increase over lower tier Price premium over lower tier Markup
6GB RAM/128GB storage $63 N/A N/A N/A
8GB RAM/512GB storage $148 $85 $284 234%
12GB RAM/1TB storage $270 $122 $341 179.5%

Bear in mind, these rough calculations don’t take into account the full picture. There are other development costs, such as configuring drivers and other bits of software involved too. Even so, there’s definitely a significant markup applied by smartphone manufacturers for the privilege of owning larger storage capacities.

We’ll keep an eye out for a Galaxy S10 BOM after the phone launches on February 20. That will tell us how accurate our estimation was and how much of the price premium is just profit in Samsung’s pockets.

Why?

To be clear, we’re not singling out Samsung here. Higher markups for top-tier versions seem to be the norm, and not just in the mobile industry. From a consumer’s perspective, it seems greedy. But if you put yourself in a mobile CEO’s shoes, you may be less inclined to think so.

The high premium that customers pay for the higher-end versions of a phone may help “subsidize” the base models, which have lower profit margins. Furthermore, memory and storage is one of the few opportunities to upsell for a phone manufacturer. In an extremely competitive market, offering highly expensive, high-powered variants means companies can improve their margins without completely giving up on more budget-conscious buyers.

Let us know your thoughts!

Hey AT&T, stop lying to your customers about 5G

AT&T is at it again. A generation ago, AT&T began marketing 3G technologies as 4G in order to make up for its initial lack of 4G coverage. Fast forward to 2019 and AT&T is doing the same thing. The company is marketing LTE 4G as “5G E” on select Android devices in order to fool customers into thinking they’ve received some sort of upgrade. They haven’t.

This is pathetic, AT&T, and you should be ashamed. And yet somehow, you’re not.

AT&T’s 5G Evolution is simply rebranded LTE-Advanced. It relies on 256QAM, 4×4 MIMO, and three-way carrier aggregation to improve throughput and speeds on compatible devices. AT&T has increased the footprint of this LTE-A technology rapidly over the last year and it is now in more than 400 markets. That’s laudable, but 5G it ain’t.

AT&T coined the 5G Evolution marketing term in 2017. From Day One, the press has rightfully called out AT&T for its bogus and confusing nomenclature. This month AT&T took things to a new low: The company pushed a minor software update to nearly 20 different Android models. Those devices now show “5G E” in the status bar at the top of the screen instead of “4G LTE.”

Consumers who are paying attention know there is no technology improvement here, there’s no actual upgrade, they aren’t connecting to a real mobile 5G network. Not every consumer is as informed, and surely some believe their phones are magically faster. In other words, the change, which is a lie, may be confusing to some people.

AT&T doesn’t care.

Last week during the Consumer Electronics Show in Las Vegas, AT&T executives doubled-down on the lie.

Igal Elbaz, AT&T senior vice president for wireless technology, told Tom’s Guide, “What we’re trying to do is two things. One is to let the customer know that they are in an enhanced experience market or area. So we’re letting them know this on the device.”

When pushed about the misleading marketing, Elbaz replied, “Our customers will love it.” (Psst, Elbaz, as an AT&T customer I can tell you I’m not lovin’ it. In fact, quite the opposite.)

John Donovan, AT&T Communications CEO, also defended the lie saying, “We felt we had to give [customers] an indicator of when they getting twice traditional 4G speeds.” While LTE-A does provide faster speeds than LTE, it’s still 4G. Calling it anything else is just plain wrong.

AT&T defended the lie.

Eric Zeman

Why is AT&T lying like this? Perhaps the answer is perception. All the major networks are scurrying to launch mobile 5G as rapidly as possible. Each wants to scream “First!” like a 12 year old YouTube commenter.

In October, Verizon launched a non-standard, fixed 5G network in a handful of markets. This is specifically an in-home broadband replacement service. In December, AT&T launched standards-based 5G in a handful of markets. A single device, a $499 mobile hotspot, can access that mobile 5G service. Sprint and T-Mobile are still working on their 5G plans and expect to get things up and running by mid-year.

AT&T’s competitors lashed the company for its approach. Verizon took out a full-page ad bashing AT&T, while Sprint, and T-Mobile also derided the company.

What bugs me most about this is AT&T’s complete and utter disregard for the truth. The company is intentionally misleading its own customers. It makes me sick.

Mobile innovation: Things will get worse before they get better

royole flexpai foldable smartphone display

After a couple of flat years, the mobile industry is abuzz, flush with innovation. 5G will arrive in 2019 to transform the way we consume data, while flexible, foldable smartphones will reshape the way we interact with technology — or so various manufacturers and industry pundits would have us believe.

Our industry needs some optimism to relieve its current funk, but everyone seems to be forgetting the number one rule of cutting-edge technology: It takes years, not months, for bleeding-edge innovations to meaningfully change the typical consumer’s life.

Read: The most important news from CES 2019

The numbers don’t add up

Case in point, the first 5G networks and smartphones should be with us by mid-2019, but they won’t be so widespread that everyone can buy into them. Only a few global carriers offer 5G and in just a few cities, making coverage spotty at best. Furthermore, most won’t rush out to spend ludicrous money just to be first, even if they can.

Opinion post by
Robert Triggs

Research from Deloitte Insights predicts just 1 million 5G smartphones will be sold in 2019, out of an estimated 1.5 billion phones sold throughout the year — that’s not even 0.1 percent. It’s under 3 percent of the total number of smartphones currently in use in the United States. This will improve in 2020, with an estimated 15 to 20 million 5G global sales.

However, even by 2025, just 14 percent of worldwide connections are likely to be based on 5G compared to 53 percent on 4G, according to data from GSMA.

The bottom line is this year’s 5G efforts will be reasonably muted in terms of real impact, just like the first few years of 4G were. Manufacturers are keen to be first, with the glaring exception of Apple, but this fanfare needs a reality check.

Trying to provide more tangible innovations to consumers, Royole, Samsung, Huawei, and others are planning to launch smartphones with flexible displays sometime in 2019 too. Again though, industry sales expectations peg this with niche appeal rather than a real revolution.

Editor’s Pick

Flexible AMOLED display shipments are only expected to top 50 million by 2025. That’s clearly a long way down the line and that figure would only account for a little over 3 percent of today’s entire global market. In 2019, the number is expected to sit somewhere around 1.4 million. It’s not exactly predicted to be the next must-have technology then, though perhaps supply will ramp up if the first products prove to be a hit.

Ultimately the big hitters this year won’t be the first 5G or bendable phones. Instead, the regular Samsung Galaxy S10 and Note 10, Huawei P30 and Mate 30, Google Pixel 4, and a selection of other fan favorites will no doubt continue to sell in the most meaningful numbers.

5G signal on Galaxy Note 8

What does this all mean for 2019?

Most 2019 smartphones, for better or worse, will probably end up resembling 2018 handsets (albeit probably with a sprinkling of novel announcements to liven things up). That’s not a bad thing — lots of 2018 smartphones were really impressive. You might even say a number of companies finally nailed the smartphone formula last year.

That said, we’re probably going to see a number of more questionable “innovations” this year too. More cameras are almost certain, as are a myriad of phones hiding cameras in pinhole display cutouts. We may also see more in-display fingerprint scanners, weird and wonderful notch designs, novel ways to make bezels even smaller, and even stranger uses for “AI.” Sadly none of that is particularly new.

Read: What about 9G? T-Mobile ridicules AT&T for using fake 5G logo on 4G phones

Worse for the industry, 5G and flexible displays are unlikely to spur growth. From Apple to ZTE, phone makers — and their suppliers — are bracing for another tough year marked by market saturation, trade conflicts, and a possible widespread economic downturn.

If you’re looking for exciting and interesting products, 2019 will certainly have a few. You might even buy one of them if you’re prepared to stump up the early adopter fee. However, most consumers won’t be joining the 5G or flexible bandwagons any time soon. It’s going to take a couple more years before the mobile market looks any different to how it does today.