Huawei wants to drive your car for you
Its phone business hobbled, the Chinese giant expands into AI
[It will] trigger the most disruptive industry transformation the world will see in the next 10 years
Eric Xu
Rotating chair, Huawei
● Huawei, facing political headwinds in the hardware categories it has dominated, this week signalled its intention to become a global player in software.
Its mobile handset business, which came within swiping distance of the world No 1 spot, and its 5G infrastructure business, which was at one stage regarded as a year ahead of rival technologies, are under increasing pressure.
Two years ago the US government banned Huawei devices from using Google technologies, including the Android operating system and Play Store. The 5G hardware business, though dominating the African region, faces bans in a number of countries aligned with the US.
This week, at Huawei’s annual analysts summit, rotating chair Eric Xu said the company was looking “for new business opportunities in the software sector” to cope with uncertainty brought about by geopolitical tensions and the resurgence of Covid.
“We want to boost the resilience of our entire business, and since last year we have been working to optimise our portfolio with this goal in mind,” he said.
“When we find the right fit, we will step up investment to increase the percentage of software and services in our revenue mix.”
Until now, Huawei’s software initiatives have been largely confined to developing its own app store, the App Gallery, and Huawei Mobile Services, its answer to Google Mobile Services.
However, it has also been building up its cloud business, to become a major competitor to Amazon Web Services (AWS), Microsoft Azure and Google Cloud, as well as China’s Alibaba Cloud. Those efforts are likely to be ramped up with cloud-based software tools, to compete more aggressively with AWS, Microsoft and Google.
The South African market will be a key target for Huawei, given that its operators
continue to be loyal to the brand’s 5G hardware, and Huawei handsets remain a major presence in the country.
Stone He, president of Huawei Cloud for Southern Africa, told Business Times that adoption of the company’s cloud services in SA had been “phenomenal”.
“As we evolve our business, our objective remains one of customer-centricity. This year we are focusing on optimising the cloud business organisational structure and leveraging
our strategic partners as we enable our customers on their digital transformation journey.”
At the analysts summit, Xu said that a recent restructuring of Huawei’s cloud and artificial intelligence (AI) business group, including its management team, was part of this process.
“Software is at the core of cloud. We aim to build a stronger software organisation and ensure it’s decoupled from hardware,” he said.
“Going forward, we will invest more in software to drive growth in this sector and pave the way for growth in the future.”
One of the competitive differentiators offered for software by the Chinese market, aside from its size, is the rapid scale developers are able to achieve in cutting-edge areas such as AI and autonomous vehicles.
Xu singled out autonomous driving software as a key focus of the company’s software investment plan and of its broader strategy.
“Once unmanned driving becomes a reality, we will see disruption in practically all adjacent sectors and [it will] trigger the most disruptive industry transformation the world will see in the next 10 years,” he said.
Huawei’s announcement came at the same time as a similar statement by China’s leading computer manufacturer, Lenovo, which has maintained its No 1 global position through the pandemic.
Lenovo is small in comparison with Huawei, generating about $50bn (R711bn) in revenues annually, but it faces none of the political pressure that Huawei does. As a result, its revenue grew 12% in the first three quarters of last year.
“Our share price has doubled,” said Lenovo CEO Yang Yuanqing.
“This not only shows our outstanding execution, but also that the market views Lenovo as a resilient, winning company. We were a strong team before the pandemic, and an even stronger team after.”
Despite this, Lenovo is preparing for major potential shifts in the market by making a transition to a “solutions business”.
Ironically, its core PC business was built around the acquisition of IBM’s hardware in 2005 when that company made a transition to solutions.
Lenovo said in a statement this week: “Today, customers want integrated solutions combining hardware with software, support, and expertise.”
It also stated its plan to offer “the foundational technology for emerging trends, including IoT [the internet of things], big data, algorithms and edge computing”.
Lenovo said it would combine hardware with services “to create intelligent solutions in smart manufacturing, smart education, smart retail, and smart cities”.
For Lenovo, the strategy is focused on growth.
Huawei, in contrast, is focused on survival — its revenue almost flattened last year, reaching $136.7bn (nearly R2-trillion). This represented 3.8% growth, compared with 19% the year before.
It was a context Xu emphasised this week: “In 2019 and 2020, we spent most of our time coping with … US restrictions. We had little time to think about whether we could really survive, and how we could live better. Now we have much more confidence about our survival.”