Huawei says it’s not looking to make 5G mobile chips in-house

Last week Huawei Mobile South Africa held a local flagship event to announce new devices slated for the country, which was headlined by the new P60 Pro smartphone. At said event, they were on hand during a media roundtable to discuss a number of subjects regarding the company, with one element in particular being of interest to us – mobile chips.

Yes, mobile chips is an area of smartphone technology that Huawei has been a bit of an industry leader in, with its HiSilicon-made Kirin offerings powering some of the most impressive devices they have encountered locally.

That landscape has changed significantly, however, as the well-documented troubles between the Chinese company and the United States government have made the procurement of components nigh untenable.

Still Huawei has pushed on and despite not being able to secure 5G modem-embedded chipsets from US companies, which is still a US ruling that baffles given that CPEs (routers) can feature these modems, they do wonder whether there is scope for the Chinese outfit to move the production of such technologies in-house.

At the aforementioned roundtable they asked Huawei Consumer Business Group’s chief marketing officer for Middle East and Africa, Cheng Lei, about the subject of mobile chips and the possibility of developing capacity for an in-house 5G mobile chips foundry at the company.

While they had hoped to get a nod or hint that it was possible, Cheng was emphatic in his answer, towing the company line and reiterating the stance of its executives.

“Firstly their CEO, Mr. Eric Xu, once told media that they (Huawei) are not doing 5G smartphones simply because of the ban. They do not have the capability of making 5G smartphones unless the ban stops. This is something that I want to repeat,” explained Cheng.

“Secondly, Huawei does not believe that 5G alone equals a great phone. A great phone is a great phone. Especially with the latest technology that you can experience with the Mate X3 and P60 Pro. These two are a great demonstration of their way of making phones,” he added.

In fact, Cheng took a rather philosophic approach to the entire situation involving the ban and the limits it has placed on the company from a device production perspective.

“We will try to Excellerate what they can, rather than spend time on what they cannot do.”

We attempted to reframe the question around the future and the possibility of creating the capacity that he alluded to earlier when it comes to mobile chips, but once again, Cheng was emphatic in his answer.

“No, not at this time.”

It therefore looks like Huawei will continue to work within the limits that have been imposed against it, rightly or wrongly, and push the technology envelope in the areas it can. Having recently reviewed the P60 Pro, they can attest that it is certainly leading the industry when it comes to the photography capabilities of its smartphones.

That said, while 5G support is not a highly pressing issue right now given the availability of the broadband standard in SA, the longer the ban continues, the bigger an issue it is likely to become.

Huawei founder Ren Zhengfei seeks employee input on business direction amid struggle to reinvent company under US sanctions

Ren Zhengfei, founder of Chinese telecoms giant Huawei Technologies Co, has called for employees to contribute ideas about the company’s future direction, according to an internal memo, as the company struggles to remake itself after US sanctions crippled its smartphone business.

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Despite venturing into multiple business fronts from coal mining to car systems, the Shenzhen-based company with its 195,000-strong staff worldwide has yet to find a steady revenue source that can match the profitability of its once-lucrative smartphone unit.

Huawei’s sales last year shrank by nearly a third from 2020, although profits surged by 76 per cent thanks mostly to the one-off income from disposing of its Honor budget smartphone business.

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According to an internal memo showing Ren’s discussions with employees last month, the CEO asked Huawei’s scientists and experts to hold cross-disciplinary discussions and “speak freely” about which direction the company should be headed. The memo was published on Huawei’s employees’ forum on Monday.

“Huawei’s strategy should not be decided by a handful of people … it should come from tens of thousands of experts who study their future direction and the path to get there,” Ren said, urging Huawei’s 6,000 experts and hundreds of thousands of engineers to join the discussions, alongside external scientists and consultants.

Ren said the ideas raised should be conducive to “value creation”.

“The transformation from ideas to projects and products will depend on the review by decision makers, and I hope everything the company does is within boundaries and creates short or long term value,” Ren said. “Your innovation should have business value, rather than just being an idea.”

Ren’s speech came amid Huawei’s ongoing efforts to diversify its business to counter the impact of US trade sanctions, which have cut off the company’s access to advanced US origin technology, including cutting-edge chips.

Huawei’s consumer business, which includes smartphones, has borne the brunt of the sanctions, with last year’s revenue down by half from a year earlier to 243.4 billion yuan (US$38.24 billion).

Huawei continues to maintain its mid to high-end smartphone lines after selling its Honor budget phone brand to a consortium led by the Shenzhen government.

This week, Huawei launched its new Nova 10 handset in mainland China. While the new model has a friendly starting price of 2,699 yuan, it does not support 5G, making it difficult to stand out among a plethora of options coming from Chinese rivals eager to replace Huawei, which is becoming increasingly irrelevant in the country’s smartphone market.

While Huawei is also pushing into China’s competitive car market, the company has repeatedly said it would not make vehicles itself, but would instead continue to work with carmakers to supply components and in-car systems.

On Monday, Huawei launched Aito M7, its latest model developed in partnership with Chinese automotive brand Seres. The six-seater, priced from 319,800 yuan to 379,800 yuan, is equipped with the HarmonyOS Smart Cockpit.

Huawei’s previous model, the Aito M5, sold 11,296 units in the past four months, said Richard Yu Chengdong, head of Huawei’s consumer business group and automobile unit, at Monday’s event.

The executive said Huawei’s brand name was so powerful that the company could survive just by “making shoes and socks”, according to a report by Chinese tech media outlet IThome.

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Huawei’s revenue falls another 5.9 per cent in first half, but the decline is slowing amid cloud-computing lift

Huawei Technologies Co saw its revenue shrink further in the first half of 2022, but the pace of decline narrowed as the company continued to further diversify its revenue streams with cloud computing and new sales engines after its handset business was decimated by US sanctions.

First-half revenue fell 5.9 per cent year on year to 301.6 billion yuan (US$44.7 billion), according to data released on Friday by the Shenzhen-based telecoms equipment maker, paring back the much steeper 13.9 per cent first-quarter drop.

Performance in the first half was "in line with forecasts", the company said in a statement.

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Revenue from the device business group, which includes smartphone sales, fell 25.4 per cent to 101.3 billion yuan, from 135.7 billion yuan in the same period last year, as it continued to lose market share, both in China and abroad, because of a lack of access to advanced chips resulting from US sanctions.

Its network gear business, which sells to telecommunications network operators, grew 4.24 per cent to 142.7 billion yuan in the first half.

The company's enterprise business has been a bright spot thanks to growth in cloud computing and other services. The unit recorded a 27.5 per cent jump in revenue to 54.7 billion yuan.

The cloud business has achieved "healthy" sales and rapid growth in the first half of 2022, William Dong, president of Huawei Cloud Marketing, said in a written statement.

The company did not break out cloud-only revenue for the first half, but the unit grew 30 per cent last year to reach 20.1 billion yuan.

"Profitability is not a priority for us," Dong said. "We will continue to increase their investment in artificial intelligence and other technologies that can help their clients Excellerate efficiency."

Dong added that the cloud unit will actively explore new fields such as new energy and drug discovery after gaining ground among government agencies, financial institutions and carmakers.

Huawei, which is privately held but has been reporting financial results for more than a decade, said its net profit margin was 5 per cent for the first half.

"While their device business was heavily impacted, their ICT [information and communications technology] infrastructure business maintained steady growth," Ken Hu, Huawei's rotating chairman, said in a statement.

"Moving forward, they will harness trends in digitalisation and decarbonisation to keep creating value for their customers and partners, and secure quality development."

The telecommunications giant is struggling to diversify its revenue streams after US sanctions curbed its access to advanced chips, all but killing the company's once-lucrative smartphone business.

Since 2019, Huawei has found itself at the centre of a US-China trade war, superseded by a full-blown tech war, which bars the company from buying software, chips and other technologies from American companies.

Huawei, which once briefly overtook Apple and Samsung Electronics in global smartphone sales, saw revenues at its consumer business group - as the devices unit was then known - slump 49.6 per cent year on year in 2021, after 3.3 per cent growth in 2020 and a 34 per cent increase in 2019.

To revive its consumer device segment, Huawei has been pushing its own operating system HarmonyOS as an Android replacement. Last month, the company released the third generation of the software, HarmonyOS 3.

The tech firm has also made strides in new business areas including the auto industry as it seeks to remake itself as an enterprise services giant. Cloud computing and other digital solutions for government and corporate clients have been central to this pivot.

In May, the company set up five new so-called legions to focus on specific industries that include digital finance, energy, machine vision, manufacturing digitalisation and public services, adding to the existing legions - essential cross-departmental teams - established by Huawei since starting the initiative in October last year.

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