Huawei diversifies business with new focus on ports, data centres, highways, solar industry amid stifling US sanctions

The telecoms giant has established four new business units to ramp up efforts to diversify its operations, as the company struggles with US trade sanctions
It marks Huawei’s latest tactical move to expand its revenue sources, while working to stay relevant in the smartphone and telecoms carrier equipment markets

Huawei

Jane Zhang

Published: 9:00pm, 12 Oct, 2021

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Chinese telecommunications giant Huawei Technologies Co has established four new business units to ratchet up its diversification efforts, as its core smartphone and mobile carrier equipment operations around the world struggle under US trade sanctions.

The new units are focused on digital transformation products and services for customs and ports; technologies to reduce the energy consumption of data centres; and smart systems for highways and the photovoltaic industry.

Leaders for the new business units were selected from internal candidates, according to documents signed by Huawei founder and chief executive Ren Zhengfei in September. A Huawei spokeswoman on Tuesday confirmed the creation of the new units and the leadership appointments.

“Operating as independent legions, [the new units] break the existing organisational boundaries [in Huawei] so they can quickly gather resources … improving efficiency,” Ren said in the internal announcement. “[Each of these units] should dig deep into one field, be responsible for its business success and produce more ‘food’ for the company.”

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Xun Su, an executive who has worked at Huawei for more than 20 years, was named head of the new customs and ports unit. Yang Yougui, previously president of Huawei’s Middle East regional office, now heads the data centre energy efficiency unit. Ma Yue and Chen Guoguang serve as the heads of the smart photovoltaic and smart highway units, respectively.

It remains unclear how the new business units will be positioned alongside Huawei’s core consumer, carrier and enterprise operations.

Their creation marks the latest tactical move by Huawei to expand its revenue sources, while working to stay relevant in the global smartphone and telecoms carrier equipment markets.

“Huawei’s efforts to diversify its operations will focus on businesses that rely less on high-end chips,” said Yang Guang, director of the service provider group at research firm Strategy Analytics. “The photovoltaic and automotive industries, for example, do not require advanced chips like those used in smartphones.”

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Privately held Huawei, the world’s largest telecoms equipment maker and formerly China’s biggest smartphone vendor, was added to Washington’s trade blacklist in 2019. It has scrambled to adapt its operations to tighter restrictions imposed last year, covering access to chips developed or produced using US technology, from anywhere.

The company’s first-half revenue fell 29.4 per cent from a year ago to 320 billion yuan (US$49.6 billion), as US sanctions on essential hardware components and software hammered sales at its core smartphone business.

While no separate business unit was announced for this move, Huawei has also sharpened its focus on China’s coal mining industry, where it is applying the benefits of advanced 5G technology. This initiative develops customised 5G mobile base stations that are resistant to dust, dampness and even shock waves from an explosion for an industry known for its dirty and dangerous working conditions.

“Over the next two to three years, we aim to work with hundreds of coal mines, iron and steel plants, and ports,” Ren said during a round table meeting in Taiyuan, capital of northern Shanxi province, in February.

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That marked what Ren described at the meeting as Huawei’s “self-reliance in production” programme, known as “Nanniwan”. This refers to the company’s expansion into new vertical markets, while also broadening its consumer product line to include television sets and tablets.

Since late last year, Huawei has pursued initiatives to diversify its operations. These include expanding its cloud services operations in the Asia-Pacific region, helping domestic enterprises cut their carbon footprint, supplying more 5G base stations and core network gear to China’s major telecoms operators, increasing patent licensing deals, establishing partnerships for its HarmonyOS mobile platform and divesting its Honor budget smartphone business.

Although China’s enterprise market is fragmented and require customised solutions, projects in the coal mining, steel and port sectors are mostly large-scale, which is why Huawei is taking part in those industries, according to Strategy Analytics’ Yang.

This article appeared in the South China Morning Post print edition as: Huawei sets up new units to diversify business areas