Huawei’s Hongmeng will face challenges from Google’s Android operating system. Huawei’s first quarter sales rose on domestic demand. The overseas market for its smartphones has tanked.

On Monday, as per a report from China’s state media Global Times, Huawei Technologies Co Ltd is set to release its own mobile operating system, Hongmeng, by the end of this year.

Huawei is testing a smartphone equipped with Hongmeng.

The development marks a milestone for Huawei, the world’s second biggest smartphone maker, and comes in the wake of the U.S. government threatening to restrict Android, Google’s operating system, to its smartphones.

The Global Times report states, the smartphone is likely to be priced at around $288 (2,000 yuan), which will place it on the lower end of the smartphone segment.

Huawei did not immediately respond to requests for comments.

Previously, Huawei executives had said Hongmeng was developed as an operating system for internet-of-things (IoT) products. In July 2019, Huawei had stated, it would release its first major devices that will be powered by Hongmeng which will include its upcoming line of Honor-brand smart TVs.

So far, Huawei leaders have publicly downplayed the possibility of Hongmeng powering a smartphone.

Last week, at an event wherein Huawei announced its first quarter earnings for 2019, Huawei’s chairman Liang Hua had said, the company preferred to use Google’s Android operating system for its mobile devices and referred to Hongmeng as part of Huawei’s “long-term strategy”.

Huawei’s first quarter revenue for 2019 grew by 23%, largely due to a strong domestic demand for its mobile phones; however, in the overseas market, the sales of its smartphones have tanked.