Huawei Technologies may soon lose its dominance in the global smartphone market because of tough US sanctions, but one of the company’s business groups has been relatively untouched by the drama.
For Huawei’s enterprise business group – which provides hardware-based products for a wide range of industries – it has more or less been business as usual. That was evident on Wednesday when the company staged its annual Connect 2020 conference for the global information, communications and technology (ICT) industry.
Huawei’s rotating chairman Guo Ping told delegates at the Shanghai event that although the company was scrambling to find alternatives for chipsets used in its smartphones – which are produced in the hundreds of millions every year – it had enough inventory to keep the communications equipment business going, including enterprise products.
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The enterprise business is the smallest of Huawei’s three main business groups. In the first half of this year, total company revenue grew 13.1 per cent year on year to 454 billion yuan (US$64.8 billion), with the enterprise business contributing 36.3 billion yuan, or less than 8 per cent. The other two key business segments – consumer and carrier – generated revenues of 255.8 billion yuan and 159.6 billion yuan respectively.
“Product volume in the enterprise business is lower than the consumer business, but the prices of, for instance, a storage array or optical switch, are obviously much higher. That’s why we can generate the same revenue selling less products,” Hank Stokbroekx, vice-president of Huawei enterprise services, said in an interview on Thursday. “A lower product volume also means that the number of components and chips needed is smaller.”
Besides needing fewer chips, enterprise products do not rely on leading edge semiconductors to work.
Huawei’s Kirin 980 chipsets – designed by its HiSilicon unit for Huawei brand smartphones – use the advanced 7nm manufacturing process, whereas communications gear only needs lagging edge 28nm technology which was first introduced by Intel Corp and Taiwan Semiconductor Manufacturing Co (TSMC) a decade ago.
Kirin chipsets, manufactured by TSMC in Taiwan before the US ban kicked in, are too advanced to be produced in mainland Chinese wafer foundries. However, local fabs including Shanghai-based Semiconductor Manufacturing International Corp are able to mass produce semiconductors using the 28nm process.
“Enterprise products are generally bigger than a smartphone. So component size, which is critical for a smartphone, is less critical for enterprise products [which can] use simpler chip technologies,” added Stokbroekx.
Huawei’s Connect 2020 event showcased how it was working with a number of customers in areas such as connectivity, computing, cloud and artificial intelligence (AI).
At Shenzhen airport, Huawei hardware is used as part of an AI system that can automatically allocate an empty terminal gate to arriving aircraft. Over the span of one year, the improved efficiency means that 4 million passengers do not have to take a shuttle across the tarmac to board their aircraft or after they disembark.
“The US ban on chipsets has not had a big impact on our collaboration with Huawei,” said a Shenzhen airport spokesman, who declined to be named.
Another Huawei customer, the Shenzhen Metro, has applied intelligent maintenance systems to cut the workload of track equipment inspectors by 70 per cent. The metro, which carries 7.1 million passengers daily, also uses big data and a Huawei neural network-based system to locate outages and cut labour costs by 60 per cent.
Huawei’s enterprise business, which also serves customers in finance, health care and education, “has a much longer horizon to grow”, said Stokbroekx. Still, he said the US sanctions are having an impact on the way business is conducted.
“The sale cycle has become longer …. Now when we meet customers, we must first address cybersecurity issues [raised by the US government] … the focus and attention is on the security concerns before [we discuss] production, technology and solutions,” he said.
“Normally, these decisions [on enterprise products] can be made at the mid-management level, but now their [senior] executives also get involved to make sure everything is fine.”
Huawei Cloud, the telecoms equipment maker’s independent cloud and AI services unit, is ranked No 2 behind Alibaba Group Holding’s cloud business in the mainland Chinese market for the second consecutive quarter, according to research firm Canalys. Huawei Cloud held 15.5 per cent of the market in the June quarter, up from 14.1 per cent in the March quarter. Alibaba owns the South China Morning Post.
Intel, a key supplier of chips for servers used in cloud computing, has received approval from the US to supply “certain products” to Huawei, Reuters reported on Tuesday, citing an unnamed Intel spokesman.
More from South China Morning Post:
- Huawei plans more cuts to jobs, investment in Australia amid strained Beijing-Canberra relations
- Chinese chip maker SMIC applies to renew licence to supply Huawei: state media
This article Why tough US tech sanctions aren’t hurting Huawei’s enterprise business unit first appeared on South China Morning Post