After US sanctions, Huawei turns to new companies to spice up gross sales | Enterprise and Financial system Information
Six months after the Trump administration dealt a severe blow to Huawei Technologies Co.’s smartphone business, the Chinese telecommunications giant is turning to less glamorous alternatives that could potentially offset the decline in its biggest revenue driver.
One of the newest customers is a fish farm in east China that is twice the size of New York’s Central Park. The farm is covered with tens of thousands of solar panels equipped with Huawei’s inverters to protect the fish from excessive sunlight while generating electricity. About 370 miles west in the coal-rich Shanxi Province, wireless sensors and cameras deep underground monitor oxygen levels and possible machine malfunctions in the mine pit – all from tech titan. And next month, a shiny new electric car with a lidar sensor will be showcased at the largest Chinese auto show.
The Chinese company, once the world’s largest smartphone maker, has seen a series of US sanctions that have all but wiped out its lucrative consumer business. With the Biden administration keeping pressure on Huawei, billionaire founder Ren Zhengfei has directed the company to expand its list of corporate clients in transportation, manufacturing, agriculture and other industries. Huawei is the world’s leading provider of inverters and is now looking to grow those sales along with its cloud services and data analytics solutions to survive the 190,000-strong business.
“The US is very unlikely to remove us from the entity list,” Ren said last month at the opening of a mining innovation lab, partly sponsored by Huawei. “Right now we just want to work harder and look for new ways to survive.”
Ren said the new initiatives could offset the decline in the cellphone business “more or less within this year,” although the company refused to provide concrete figures. The consumer unit had sales of 256 billion yuan ($ 39 billion) for the first six months of 2020, more than half of the company’s total sales. Thanks to record orders for 5G base stations and strong smartphone sales in the first half of the year, the company was able to record “slight growth” in sales and profits last year.
For years, Huawei has looked for business opportunities beyond telecommunications devices and smartphones. However, the effort took on a new urgency after phone shipments fell 42% in the last three months of 2020, largely driven by a Trump-era order that restricted cell phone supplies from using the most advanced semiconductors. The Biden administration has also notified some suppliers of stricter terms on previously approved export licenses which, according to people familiar with the move, prohibit use in or with 5G devices.
The US ban had 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 contractors like Huawei, local suppliers are pushing for better performance from mature technologies that Washington has not banned and are refusing to be identified to discuss internal matters.
The most advanced chips in Huawei’s inverters, which are used to convert the electrical power of solar panels, are based on the 28-nanometer technology that Chinese companies can manufacture. Other components, such as B. Power modules, can be manufactured with 90 nm technology or older. Yangzhou Yangjie Electronic Technology Co. and China Resources Microelectronics Ltd. are among the leading manufacturers of power diodes in China.
Each inverter – slightly larger than an outdoor unit of a central air conditioner – can sell for over 20,000 yuan, more than Huawei’s newest high-end foldable phone, the Mate X2. The company plans to roll out more photovoltaic inverters as Beijing’s drive to achieve carbon emissions by 2030 at the world’s second-largest economic summit, encouraging investment in renewable energy.
Like the solar inverter business, the chips required for Huawei’s automotive systems are less sophisticated than cellphone processors and some can be obtained from European suppliers, according to someone familiar with the matter. This enabled Huawei to double the auto industry and get engineers from other business areas to work on sensors for self-driving cars and drive units for electric vehicles.
While the company has denied bringing electric vehicles to market under its own brand, Huawei’s has partnered with several manufacturers to test its autonomous drive and driver-car interaction technologies. The entertainment functions can be found in Mercedes-Benz limousines. The company has partnered with local electric car manufacturers like BAIC BluePark New Energy Technology Co. to develop intelligent car systems. The first model as part of its partnership with the Chinese EV manufacturer, the Arcfox αS HBT, will be presented at Auto Shanghai 2021 in April.
Another initiative called 5GtoB involves Huawei’s use of 5G technology in areas ranging from healthcare to aircraft manufacturing. The company helped China build the world’s largest 5G network and supplied more than half of the nation’s 720,000 base stations. Now attempts are being made to harness the country’s 5G connectivity to help pandemic-hit companies automate factory lines – along with other tech giants like Xiaomi Corp. and Alibaba Group Holding Ltd. to modernize manufacturing – and digitize once labor-intensive industries like mining.
With the help of telecom providers and partners, Huawei has signed over 1,000 5GtoB contracts in more than 20 sectors, according to rotating chairman Ken Hu. Online education, entertainment and transportation are among the sectors to be explored, he said. The company gave smartphone tsar Richard Yu a new role in January to lead the fast-growing cloud and AI business.
“The adoption of 5G in mining, medical services and manufacturing is becoming more apparent and some of the applications are being deployed across the country,” said Liu Liehong, vice minister of industry and information technology, at an industry event in Shanghai last month.
Huawei 5G routers are used in mines [File: BLOOMBERG]Ren personally leads the mining expansion, meets with local officials, and inspects coal mines in Shanxi Province. “Most information and communication technology companies didn’t see mining as an area in which to make market breakthroughs, but we did,” the billionaire told reporters last month. “China has around 5,300 coal mines and 2,700 ore mines. If we can serve these 8,000+ mines well, we could expand our services to mines outside of China. “
While Huawei is betting that inverters, electronic mining solutions, and smart car software can compensate for the decline in smartphones, its longer-term future – and its ability to further advance China’s 5G adoption – remains tarnished. The HiSilicon subsidiary was the country’s most skilled chipset designer, making the high-end processors that power the company’s smartphones and wireless base stations before Washington gaining access to the latest software for chip design and contract manufacturers like Taiwan Semiconductor Manufacturing Co . locked.
Currently, the company has told its cellular customers that it has enough communication chips to support the construction of base stations in 2021. However, it is unclear how long these stocks can last and what options Huawei will have when those stocks eventually run out.
“Persistent political tensions have for the foreseeable future dwarfed the operations of Huawei and other Chinese companies. Strategic investments in new technologies are key to Huawei’s sustained business growth,” said Charlie Dai, principal analyst at Forrester Research Inc.