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The Tech Cold War continues – what does it mean for identity?

May 29, 2019

The trade war between China and the U.S. is escalating, and the latest victims are Google and Huawei.

Last week, the U.S. Commerce Department announced that Huawei was added to the “Entity List,” a blacklist of foreign entities U.S. companies are prohibited from doing business with, absent of a special exemption license. Google responded immediately by announcing it would adhere to the Commerce Department’s mandate and begin limiting services to Huawei.

On Monday, the Trump administration backed-off on its absolutist stance and issued a 90-day exemption for Huawei to continue receiving services, through August 19th, a move that temporarily calmed markets and eased the short-term impact  on Huawei’s supply chain.

This latest move by the Trump administration shows a willingness to leverage access to services and hardware in addition to tariffs in this “tech cold war” with China. This tactic exposed a key vulnerability in the Chinese supply chain, and experts believe this will force China to lessen its dependence on foreign components and services, and move those processes closer to home – either within its own borders or to more trusted allies.

Google removing ongoing support has several key identity-related implications. First, in the short-run Google plans to halt software updates to Huawei phones after the 90-day extension expires, begging the question – what happens on August 20th? Absent Google support, Huawei users running Android will no longer be privy to security and after-sales services and updates. Google Play Protect will continue to run after the August deadline, but will no longer receive rolling updates.  

This news could not have come at a worse time for Huawei. Over the past year, Huawei’s share of the global smartphone market share has risen from 11.8 percent in Q1 2018 to 19 percent in Q1 2019, surpassing Apple for the first time. A growing user base forces considerations around network and end-point security to be more pressing and costly for the tech giant.

 

Source: Statista report on mobile market share by vendor

 

In the long-term, China taking increased ownership over the end-to-end manufacturing process will have a substantial impact on the mobile phone market. The first move came from Huawei, which recently released further details on plans to release a new OS, HongMeng.

This escalation in the trade war was something Chinese tech leadership was prepared for. Huawei has been stockpiling U.S.-made chips and other components for months, and is equipped to weather a short-term flare-up in trans-Pacific antagonism. If the blacklisting extends beyond a few months, however, Huawei will have to invest fully in endogenous component and OS development

In a world dominated by iOS and Android (see graph below), the possibility of a third major OS could introduce a bevy of complications for service providers at the identity layer who are accessing device-level attributes through the application and OS layer.

Source: Statcounter Mobile operating system by market

 

Traditionally, the “identity layer” of a network architecture sits between the application and the network, and assists in correctly identifying the desired party and giving appropriate access to endpoints based on the permissions assigned to their identifier. Over the past decade, as the world moves ever more towards mobile, the relationship between app developers and identity service providers has evolved. In 2012, 10% of the global internet traffic volume was on mobile devices, by 2018 that number had risen to 52%. The evolution of user behavior to be more mobile dominant has been the catalyst for the convergence of the physical and digital world. Our mobile devices are becoming increasingly capable of tracking our movements, identifying our physical nuances such as sleep patterns, mood signals, etc, and are being stored on device.

As such, stakeholders have developed cooperative channels to access these device level identity elements to unlock innovative approaches to verification and authentication. A third OS has the potential, depending on how Huawei decides to design it (could end up being a simple Android fork), to make current approaches obsolete and force identity providers to update products to be compatible with the new OS.

Here at OWI, we will continue to monitor the geopolitical dynamics that are forcing tech companies on both sides of the Pacific to disrupt the status quo for device manufacture and service delivery. However, regardless of how the trade wars shift, the blacklisting Huawei makes a future world with three major OSs more likely. China has historically had no problem banning access for U.S.-based tech services provider (think Google and Facebook), so China’s inevitable retaliation could have an even greater impact.

The development of new application designs and methods of connecting to the larger network present an interesting opportunity for identity companies to innovate on existing products to serve a shifting landscape. We are currently working with our clients to ensure they are prepared for the impact of this new system on the marketplace and the identity layer.

 

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