US sanctions killed the old Huawei. What will the reborn one look like?
- Recent efforts to build its own supply chain – independent of US control – may be signs that Huawei won’t abandon its hardware-based business model
- In 2021, without Honor sales under its belt, Huawei’s global smartphone share is projected to be only 4 per cent
It may be premature to write Huawei’s obituary, but one thing is clear – the company we once knew is no longer.
While China’s telecoms and smartphone champion will most likely survive in some form, it will look very different.
The old Huawei wanted to be the global leader in smartphones and 5G technology. Now, with Washington finding and closing the loopholes Huawei exploited to get around US sanctions designed to block its access to critical technologies such as semiconductors, it looks like those goals are forever out of its grasp.
Its ambitions for global 5G dominance, by providing the necessary hardware to power the next generation networks, seemed on track before the company was targeted by Washington as a national security risk.
04:43
How the arrest of Huawei CFO Meng Wanzhou soured China's relations with the US and Canada
As a result of US government pressure, Huawei has been shut out of most major Western 5G markets. It is still hanging on in a number of smaller countries but its dreams of world 5G domination are over.
The Huawei of old is dead. RIP. What will the reborn Huawei look like?
For starters, it will be smaller. Smartphones were a cash cow but that source of revenue is drying up fast. Market research firm TrendForce forecast that Huawei’s global market share will drop from 12.5 per cent in the third quarter to 8.6 per cent in the fourth quarter. In 2021, without Honor sales under its belt, Huawei’s global smartphone share is projected to be only 4 per cent.
US lawmakers create US$1.9 billion fund to remove Huawei, ZTE gear
A comeback on the global smartphone or 5G stage is highly doubtful. Although Huawei was able to hang on for longer than most thought, with the help of strong domestic sales driven by nationalist sentiment, the future looks grim with rivals like Xiaomi coming out with new models that are not restricted from using the latest US chip technology.
A further blow to its global image came after it was alleged that Huawei software was being used to identify Uygur muslims in China. That prompted Barcelona soccer star Antoine Griezmann to quit his sponsorship deal with Huawei.
So what is left to rebuild a new company on? Huawei still has a large portfolio of patents, especially in 5G technology, which presumably have considerable value and could be sold or licensed. And it has launched a beta version of its long awaited Harmony operating system, aiming to roll it out across many products next year.
That could point towards more of a services-based enterprise: Except that Huawei’s recent efforts to build its own supply chain – independent of US control – may be signs that it won’t abandon its hardware-based business model.
Before Huawei decides on what the new Huawei will look like, founder and CEO Ren Zhengfei might want to seek counsel from the US company he modelled the old Huawei on: IBM.
In the 1990s Ren visited IBM headquarters in the US and later engaged the computer company as a management consultant to teach Huawei’s leaders how to transform their operation into a global company.
From chips to TikTok – why China’s tech sector hit the headlines in 2020
IBM has a long list of technology breakthroughs to its name, from tabulating and computing in the early 1900s, to AI and memory storage in the latter half of the 20th century, and quantum computing more recently.
However, over the past 20 years IBM has transformed from a hardware company to a software company and now to a services company. It has constantly reinvented itself to stay competitive.
Huawei also needs to reinvent itself. But it seems to be going in the wrong direction, with reports that it is partnering with a Shanghai microelectronics lab to build a wafer fab.
Try as it might, Huawei will never be able to replicate the advanced chipmaking capability of TSMC, which was its primary supplier before the US sanctions cut off that source.
Ren should seek IBM’s advice again. When IBM sold its GlobalFoundries business in 2014, it was so keen to get the chip factory off its balance sheet that it paid the new owners US$1.5 billion as part of the deal.
A new start for Huawei – which may even require a new name – will also help distance the company from a long list of accusations of intellectual property theft.
US lawmakers create US$1.9 billion fund to remove Huawei, ZTE gear
The most recent came from German media Die Welt earlier this month, alleging that staff at Huawei’s Munich research centre were instructed to copy a product of rival Cisco.
There is also the ongoing FBI investigation into Huawei’s alleged theft of diamond glass technology from US company Akhan Semiconductor.
Then there’s the question of leadership. In the business world, rebirth means replacing the old guard with new blood. If founder Ren, who is 76, decides to retire, that would pave the way for such a change.
An opening for that could hinge on the outcome of the US extradition request for Ren’s daughter Meng Wanzhou, Huawei’s CFO who was arrested in Canada two years ago.
She faces US charges of bank fraud in connection with a case involving Huawei’s alleged contravention of US sanctions on Iran.
If Meng is released or wins her extradition fight in a Canadian court, Ren may feel it is time to step down and make way for new blood.
But if his daughter ends up in a US prison awaiting trial, Ren – who regularly invokes military jargon in his speeches to employees – is likely to double down and declare a “fight to the death”.
Then it really will be RIP Huawei.
Craig Addison is a production editor on the Post’s tech desk in Hong Kong. Follow on Twitter @craigaddison
