How Huawei wants to shape the future

China pushes to soften industry’s dependence on U.S. software

SAN FRANCISCO— The surprise arrest of Meng Wanzhou, chief financial officer of Huawei Technologies Co., has thrust the company into a political firestorm and deepened a core threat: that more and more countries will blacklist its switches, routers and phones out of growing concern that they could be hijacked by foreign spies.

Yet, inside Huawei’s Shenzhen headquarters, a secretive group of engineers toil away heedless to such risks. They are working on what’s next — a raft of artificial intelligence, cloud-computing and chip technology crucial to China’s national priorities and Huawei’s future. As the trade war drags on, China’s government has pushed to create an industry that is less dependent on cutting-edge U.S. semiconductors and software.

Meng’s detention, far from slowing these ambitions, will instead speed the fall of this “silicon curtain,” when the U.S. and China will no longer provide chips to one another, Gus Richard, a Northland Capital Markets analyst,

wrote in a recent report.

“Huawei is the icon of the rise of China industrial power,” Richard wrote. Though Meng was granted bail by a Canadian court, she must remain in the Vancouver area as she awaits possible extradition to the U.S. on fraud charges. The company is investing massive resources in nextgeneration technology, seeking to replicate the success it has had in other areas. Over the past decade, the closely held firm has quietly emerged as a titan in networking and telecom gear, now second only to San Jose, Calif.-based Cisco Systems Inc. Then Huawei entered the smartphone market and, in a surprise to most observers, toppled Apple Inc. in market share earlier this year. In the September quarter, the Chinese company had 15 per cent of the world’s shipments, trailing only Samsung Electronics Co., according to data from IDC. Just two years earlier, it had about 9 per cent of the market.

Huawei’s technical expertise, combined with its ties to China’s blue-chip firms and government, could let it engineer another surprise in what many see as the critical backbone of future technology.

Those ambitions are consistent with the government’s goals. President Xi Jinping wants China to be a self-sustaining leader in semiconductors — Huawei is showing it can. Xi wants China to have a global footprint — Huawei has one. Xi wants China to move from basic manufacturing to more lucrative industries, with the country capturing the benefits — and Huawei does that, too.

A sprawling room at its Shenzhen campus is filled with digital mock-ups of how banks, retail stores and city streets would look like with Huawei’s technological capabilities. That tech is created a short drive away, inside a research lab nicknamed the “White House.” Visitors there are rare. Yet the mock-up room, called the “vertical industries exhibition hall,” welcomes guests and imagines a future where companies and governments use Huawei’s cloud and AI to crunch data, spur sales and make cities see and hear everything.

Huawei’s Enterprise Business Group, which trails networking and smartphones in sales, sells components and services for internet-connected devices, smart cities and cloud products. It will net more than $10 billion (U.S.) in revenue this year, about a 10th of the company’s overall total, Qiu Heng, the division’s chief marketing officer, said in an interview in November.