Why tough US tech sanctions aren’t hurting Huawei’s enterprise business unit

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.

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.