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Ren Zhengfei said the firm needed a “breakthrough” in cloud computing. Photo: Kyodo

Huawei looks to cloud services in 2021 as US sanctions strangle smartphone business

  • Firm’s founder Ren Zhengfei says the Chinese giant should learn from global leaders Amazon and Microsoft
  • Staff told to focus on some aspects of cloud computing and scale back to survive rather than trying to follow US giants or Alibaba

With US sanctions putting a chokehold on Huawei Technologies Co’s 5G and smartphone businesses, company founder Ren Zhengfei said the Chinese tech giant must make cloud computing its priority.

In an internal speech delivered in November and shared on a staff forum two days before the new year, Ren admitted that cloud services had not been a strength and the firm needed to make a “breakthrough”.

“It is impossible for us to simply follow the same path as Alibaba and Amazon … They have access to unlimited money in the US stock market,” he said, alluding to Huawei’s status as a non-publicly traded company.

“Our enterprise business needs to scale back its battlefront … If our strategy is too broad, we will lose our combat strength.”

Huawei is dead. Long live Huawei?

New York-listed Alibaba, which owns the South China Morning Post, and Amazon are both tech conglomerates whose vast businesses span e-commerce, video streaming and cloud computing among others. Huawei, on the other hand, has primarily focused on telecoms and smartphones.

Ren argued that Huawei should learn from the success of Amazon and Microsoft, the front runners in global cloud services, by focusing on infrastructure as a service (IaaS) and platform as a service (PaaS).

In IaaS, customers usually pay a fee to use computing resources such as networking and data storage.

In PaaS, they pay for a combination of computing resources and infrastructure for coding and delivering software over the internet.

The company should focus on securing major corporations and companies in major industries as its cloud clients, Ren said.

While Amazon and Microsoft lead the IaaS market worldwide, Huawei is already one of the major providers in China along with Alibaba and Tencent.

In the third quarter of 2020, Alibaba had more than 40 per cent of China’s market share, according to research firm Canalys. Huawei and Tencent owned roughly 16 per cent each.

Cloud services saw a dramatic surge in demand last year as organisations shifted activities online to cope with the coronavirus pandemic. In China, cloud spending was boosted by the government’s “new infrastructure” initiative that seeks to accelerate expenditure on areas such as 5G networks and data centres.

Huawei has been fighting to reinvent its business after being branded a security risk by the US government amid escalating tensions with China.

Since mid-2019, it has been banned from buying American products and services without Washington’s approval. US sanctions also require foreign chip makers that use US technology to apply for a licence to sell to Huawei.

Huawei’s rotating chairman said in September that the company still had enough chips for its enterprise business. On the other hand, its stockpile of smartphone chips has dwindled to a point that it was forced to stop shipping handsets with its high-end chips.
Late last year, the company chose to sell its budget handset brand Honor in hope that the “divorce” would allow Honor to shake off US sanctions.
It appears that Huawei has not entirely given up on its consumer business, though. It recently said that it plans to roll out HarmonyOS, its self-made alternative to Google’s Android operating system, on all of its smartphones and many other devices this year.
This article appeared in the South China Morning Post print edition as: Huawei to make cloud a priority