Huawei and Tencent Close to Agreement Excluding WeChat From Revenue Share

Huawei and Tencent Poised for Revenue-Free WeChat Collaboration on Harmony Platform

Huawei Technologies Co. is close to finalizing an agreement that will permit Tencent Holdings Ltd.'s WeChat super app to function entirely on Huawei’s Harmony mobile platform without imposing any revenue-sharing stipulations. This strategy aims to secure Huawei's recent dominance over Apple Inc. in the Chinese market.

Strategic Collaboration

The anticipated deal, stemming from protracted negotiations, will see Huawei waive fees on in-app transactions within WeChat. This entente represents an exception in Huawei’s broader initiative to introduce charges for content and services via its app store. Discussions have included potential fees of around 20% on in-app purchases, particularly with game developers.

In exchange, Tencent will ensure the ongoing maintenance and updates of WeChat, a crucial app for millions of Chinese users who rely on it for activities ranging from payments to gaming. This agreement, once finalized, would significantly benefit Tencent by enhancing sales through WeChat’s mini programs, which achieved a gross merchandise value of 1.5 trillion yuan ($207 billion) in the September quarter of the previous year.

Ensuring Continuity and Support

Currently, WeChat is downloadable and usable on Huawei devices without a formal maintenance obligation from Tencent. The new deal would not only obligate Tencent to provide consistent updates but also require Huawei to continue hosting and supporting WeChat. This arrangement features keen importance as Huawei transitions to a new version of its Harmony OS, ensuring WeChat’s availability on the updated platform.

There are no significant perceivable changes expected for phone owners from this deal. However, should both parties reach a final agreement, it would mark a critical step in Huawei’s overarching strategy to monetize its smartphone ecosystem, which recently surpassed Apple’s iOS market share in China.

Extended Negotiations

The negotiations underscore Huawei's broader move to generate revenue from its app ecosystem. Talks with other significant content providers like ByteDance Ltd.'s Douyin are also underway, though ByteDance has not yet shown an inclination towards a revenue-sharing deal.

This strategic move by Huawei emerges amid a backdrop of transitioning from reliance on Google's Android to its proprietary Harmony OS, following punitive US sanctions. Securing a deal with Tencent is crucial as it ensures that WeChat remains accessible and updated on their Harmony platform during and after this transition.

As Tencent continues to leverage its mini programs to drive further sales, the agreement would be mutually beneficial in strengthening both companies' positions within the Chinese market. Discussions are still ongoing, and while there is optimism, there remains a possibility that the two sides might not reach a final agreement.

Huawei, Tencent, and ByteDance refrained from commenting on the ongoing negotiations. Apple also did not provide any comments regarding its revenue policies related to WeChat transactions.