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Huawei was once number 1 in the global smartphone market. But its core chip development and flagship smartphone business at home and abroad has suffered greatly by trade United States sanctions, imposed under the Trump administration.
But the company is determined to find a new path to growth despite crippling sanctions by the US. The world’s largest telecommunications equipment maker from China continues to advance in its smartphones and chip production business. Backing the firm’s resilience, Guo Ping, the company’s rotating chairman said that Huawei will survive the US crackdown.
“The US has created many difficulties for Huawei but they are solvable. Huawei has established and helped its industrial chain partners to solve the problems of supply continuity and competitiveness”, Guo Ping told new employees in August, according to the Huawei online community Xinsheng Shequ.
Employees should have the attitude of “what does not kill me makes me stronger” to deal with the obstacles, he added.
Guo also indicated the company will require more investment and innovation to get over the disruptions caused by US trade sanctions on its smartphone business and other operations.
The blacklisted telecom company has plans not only to expand its hardware business but to also pivot expansions plans towards software tech. Huawei has also gone into a hiring rush for international talent to stimulate its tech advancement and competition. Out of its total workforce of over 190,000, the company already employed more than 37,000 people overseas as of 2019. Furthermore, it plans to extend further into emerging markets as well as the Asia Pacific, in its move to reinvigorate its overseas business.
In 2019, Huawei was put on a US export blacklist that barred its access to some American technology, citing national security concerns. In 2020, Washington moved to cut Huawei off from key semiconductor supplies. Facing these clampdowns, the Chinese giant reported its biggest-ever decline in revenue, with its first-half figure of 2021 down 29.4% from a year ago to $49 bn.
Expressing views on the results for the first half of 2021, Eric Xu, Huawei’s rotating chairman said, “We’ve set our strategic goals for the next five years. Despite a decline in revenue from our consumer business caused by external factors, we are confident that our carrier and enterprise businesses will continue to grow steadily.”
Huawei hangs on to hardware business
Huawei is still “optimistic”. ‘We will never give up on the mobile phone business,’ Guo said on the firm’s Chinese social media accounts. According to the rotating chairman, Huawei plans to eventually return to the smartphone industry throne.
“At present, the biggest difficulty for us is the mobile phone business. Huawei can design its own chip but no one can manufacture it for us. That’s where we stuck. We are looking forward to the day when the core problem of chip manufacture will be completely solved in China”, said Guo.
According to IDC, a global market data agency, the embattled Chinese tech giant‘s shipment of mobile phones dropped out of the top 5 in the first quarter of 2021, with a market share of less than 10%. According to the report, Huawei smartphones also fell out of the top five by the second quarter in its domestic market, replaced by Vivo, OPPO, Xiaomi, Apple, and Honor.
However, in part, the drop in sales is also blamed on the sale of Huawei’s budget smartphone unit, Honor, in November 2020.
Revenue from Huawei’s consumer division, which includes smartphones, plunged 47% year-on-year in the first half of 2021 to $21 bn. Earlier in 2019, its consumer electronics sales, mainly smartphones, used to contribute over 50% of the company’s total revenue. Its telecom equipment business, also saw revenue drop 14% YoY.
The company has also not given up on its semiconductor capabilities. According to Guo, Huawei is providing value-added ICT technology (information and communication technology) components to automakers. He added, “We are positioning ourselves as a new component provider for intelligent connected vehicles, and our aim is to help car Original Equipment Manufacturer (OEMs) build better vehicles.”
Meanwhile, Reuters reported on Wednesday that US officials have approved licenses for Huawei to buy chips for its growing auto component business.
Huawei forays towards software and expansion to Asia
The Shenzhen-based company is boosting its efforts to steadily move its focus to a cloud and services company, as it is mostly free of the impact from US sanctions.
Huawei Cloud is already a growing business. According to the company, the business arm recorded revenue growth of 168% for 2020. In China, Huawei holds a 20% market share of the Q1 2021 cloud market, according to Canalys, and revenues could reach over $10 bn in 2022.
Huawei’s expansion plans are aiming to rank among Asia’s top cloud services providers in the next three years.
“Huawei will never be a company limited to the Chinese market only and will never pull out of foreign markets,” Guo said.
To encourage start-ups in Asia Pacific to use its cloud services platform, the telecoms equipment maker plans to invest $100m in startups, with the funds going towards its Spark Program in the region. It has set a goal of recruiting 1,000 startups and shaping 100 to scaleups over the next three years.
The company has Asian countries such as Singapore, Hong Kong, Malaysia, and Thailand as its priority markets. In its Cloud Spark Founders Summit in July, it also announced the development of four additional start-up hubs in Indonesia, the Philippines, Sri Lanka, and Vietnam. Meanwhile, through its Huawei Mobile Services (HMS) Ecosystem, it aims to cultivate over 100,000 HMS, cloud-native developers, in the Asia Pacific over three years.
As Huawei signals to expand its role in cloud computing, it will also challenge some of the biggest technology companies. According to Gartner, Tencent, Alibaba, and Huawei together held 22% of the cloud market in Southeast Asia and the smaller Asia-Pacific economies in 2020, up from 18% in 2019.
