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Huawei wisely avoids Android clash with targeted operating system, analysts say

Huawei Technologies Co. Ltd.'s decision to deploy its new operating system HarmonyOS 1.0 across connected devices such as cars and smartwatches — rather than smartphones — is potentially a good strategy but one that relies on heavy investment, analysts said.

The Chinese company debuted its OS Aug. 9 during its annual developer conference. Huawei said the system will only be rolled out to smartphones if Google LLC bans it from using its Android OS, but will be available across its internet of things, or IoT, portfolio.

"Huawei is smart to position [the OS] as an enabler for IoT," Lynnette Luna, technology analyst at GlobalData, said in a note. Unlike the smartphone OS market, which is dominated by Android and Apple's iOS, the IoT space is fragmented with no common system.

Huawei expects the rollout of next-generation network technology 5G to boost IoT demand thanks to faster data speeds, and the company wants to take advantage of this, Rex Wu, an equity analyst at Jefferies Hong Kong Limited, wrote in a note. "HarmonyOS is the first step to establish partnerships with more smart home appliance producers and build up an entire IoT ecosystem," he wrote.

The company will have to first persuade developers to support Harmony and create compatible applications though, Luna wrote. "The success of an OS is dependent of the companies' ability to offer a sufficient application pool for its users," Sangeetika Srivastava, Senior Market Analyst at IDC, said.

"Many companies have tried to create that third OS only to not gain enough developer support," Luna wrote, citing Samsung Electronics' Tizen platform as an example. Released in 2012, Samsung's Tizen is used for wearables, home media devices and appliances.

China's size guarantees user demand for apps on HarmonyOS, and in turn developer support, according to Luna. But potential users will want to see popular applications from developers on the HarmonyOS before they buy devices running on the system, Luna added.

"Huawei is going to have to invest a lot of money and give a lot of incentives to convince developers," Luna wrote. "This move just may end up being an OS that only dominates in China."

With global smartphones sales slowing, Huawei said in its 2018 annual report that "technologies like the IoT and cloud computing are more important than ever." The company sold 290 million IoT chips in 2018 and this year to date, according to data provided by Huawei during its developer conference.