After US Sanctions, Huawei Turns to New Companies to Increase Sales | Business and economic news
Six months after the Trump administration dealt a heavy blow to Huawei Technologies Co.’s smartphone business, the Chinese telecommunications giant is turning to less glamorous alternatives that could possibly offset the decline of its biggest revenue contributor .
Among his new clients is a fish farm in eastern China that is twice the size of New York’s Central Park. The farm is covered with tens of thousands of solar panels fitted with Huawei inverters to protect its fish from excessive sunlight while generating power. About 370 miles west in coal-rich Shanxi Province, wireless sensors and underground cameras monitor oxygen levels and potential machine malfunctions in the mine – all provided by the titan of technology. And next month, a shiny new electric car with its lidar sensor will debut at China’s biggest auto show.
Once the world’s largest smartphone maker, the Chinese company has seen a series of US sanctions nearly wipe out its lucrative consumer business. As the Biden administration keeps the pressure on Huawei, billionaire founder Ren Zhengfei has ordered the company to expand its client list in transportation, manufacturing, agriculture and other industries. . Huawei is the world’s largest supplier of UPS and now relies on growing those sales alongside its cloud services and data analytics solutions to help the company of 190,000 employees survive.
“The United States is highly unlikely to remove us from the entity list,” Ren said last month when opening a mining innovation lab partly sponsored by Huawei. “Right now we just want to work harder and keep looking for new opportunities to survive.”
Ren said the new initiatives could offset the decline in its cellphone business “more or less over the course of this year,” although the company declined to provide specific numbers. Its consumer unit generated revenue of 256 billion yuan ($ 39 billion) in the first six months of 2020, more than half of the company’s total. It managed “marginal growth” in sales and profits last year, driven by record 5G base station orders and strong smartphone sales in the first half of the year.
Huawei has been exploring business opportunities beyond telecoms equipment and smartphones for years, but efforts have taken on new urgency after phone shipments fell 42% in the last three months of 2020, largely due to a Trump-era order that cut off its ability to obtain the most advanced semiconductors. The Biden administration has also informed some vendors of stricter conditions on previously approved export licenses, banning the use of items in or with 5G devices, according to people familiar with the movement.
The U.S. ban has had a limited impact on Huawei’s emerging businesses, as most of the required components are available from Chinese suppliers, according to a person directly involved in the initiative. To meet growing demand from entrepreneurs, including Huawei, local suppliers are extracting better performance from mature technologies that Washington has not banned, the person said, declining to be identified to discuss internal matters.
Huawei’s most advanced inverter chips, used to convert the electrical output of solar panels, are based on 28-nanometer technology, which Chinese companies are capable of manufacturing. Other components, such as power modules, can be manufactured with 90nm or greater technology. Yangzhou Yangjie Electronic Technology Co. and China Resources Microelectronics Ltd. are among the leading producers of power diodes in China.
Each inverter – slightly larger than an outdoor unit in a central air conditioner – can sell for over 20,000 yuan, more than Huawei’s latest high-end foldable Mate X2 phone. The company plans to deploy more of its PV inverters, as Beijing’s efforts to have carbon emissions in the world’s second-largest economic peak by 2030 spur investment in renewable energy.
Like its solar inverter business, the chips needed for Huawei’s automotive systems are less sophisticated than mobile phone processors and may come in part from European suppliers, according to a person familiar with the matter. This has allowed Huawei to overtake the auto industry, pushing engineers from other business units to work on sensors for self-driving cars and powertrains for electric vehicles.
Although the company has denied plans to launch electric vehicles under its own brand, Huawei has worked with several manufacturers to test its autonomous driving and driver-car interaction technologies. Its entertainment features are found in Mercedes-Benz sedans, and the company has partnered with domestic electric car makers such as BAIC BluePark New Energy Technology Co. to develop smart car systems. The first model under its partnership with Chinese EV maker Arcfox αS HBT will be unveiled at Auto Shanghai 2021 in April.
Another initiative dubbed 5GtoB involves Huawei deploying 5G technology in areas ranging from healthcare to aircraft manufacturing. The company has helped China build the world’s largest 5G network, providing more than half of the 720,000 base stations operating across the country. He’s now looking to use the country’s 5G connectivity to help companies hit by a pandemic automate factory lines – joining other tech giants like Xiaomi Corp. and Alibaba Group Holding Ltd. to try to modernize. manufacturing – and digitize once labor-intensive industries like mining.
Huawei has signed more than 1,000 5GtoB agreements in more than 20 industries with the help of telecom operators and partners, according to rotating chairman Ken Hu. Online education, entertainment and transportation are among the sectors he plans to explore, he said. In January, the firm gave smartphone czar Richard Yu a new role to lead its rapidly growing cloud and AI business.
“The adoption of 5G in mining, medical services and manufacturing is becoming clearer and some of the applications are in use across the country,” said Liu Liehong, vice minister of industry and information technology , at an industry event in Shanghai last month.
Ren personally leads the expansion into mining, meets with local officials, and inspects coal pits in Shanxi Province. “Most information and communications technology companies didn’t see mining as an area where they could break into the market, but we did,” the billionaire told reporters on last month. “China has about 5,300 coal mines and 2,700 ore mines. If we can serve these more than 8,000 mines well, we could expand our services to mines outside of China. “
As Huawei bets that inverters, electronic extraction solutions and smart car software can offset the decline of smartphones, its longer-term future – and its ability to continue fueling the 5G rollout in China – remains obscure. Its subsidiary HiSilicon had been the most proficient chipset designer in the country, making the high-end processors that power the company’s smartphones and wireless base stations, before Washington cut off access to the latest design software from the company. chips and subcontractors such as Taiwan Semiconductor Manufacturing Co.
For now, the company has told its wireless customers that it has enough communication chips to support base station construction in 2021. But it’s unclear how long those stocks can last. and what options does Huawei have once those stocks run out.
“The ongoing political friction has cast shadows on the business activities of Huawei and other Chinese companies for the foreseeable future and strategic investments in emerging technologies are essential for the sustainable growth of Huawei’s business,” Charlie Dai said. , Senior Analyst at Forrester Research Inc.