Six months after the Trump administration dealt a crushing blow to Huawei Technologies Co.’s smartphone business, the Chinese telecommunications giant is turning to less glamorous alternatives that may eventually offset the decline of its biggest revenue contributor.
Among its newest customers is a fish farm in eastern China that’s twice the size of New York’s Central Park. The farm is covered with tens of thousands of solar panels outfitted with Huawei’s inverters to shield its fish from excessive sunlight while generating power. About 370 miles to the west in coal-rich Shanxi province, wireless sensors and cameras deep beneath the earth monitor oxygen levels and potential machine malfunctions in mine pit — all supplied by the tech titan. And next month, a shiny new electric car featuring its lidar sensor will debut at China’s largest auto show.
Once the world’s largest smartphone maker, the Chinese corporation has seen a series of U.S. sanctions almost obliterate its lucrative consumer business. With the Biden administration keeping up the pressure on Huawei, billionaire founder Ren Zhengfei has directed the company to grow its roster of enterprise clients in the transportation, manufacturing, agriculture, and other industries. Huawei is the world’s leading supplier of inverters and it’s now banking on growing those sales alongside its cloud services and data analytics solutions to help the 190,000-employee business survive.
“It’s very unlikely that the U.S. will remove us from the Entity List,” Ren said last month at the opening of a mining innovation laboratory partly sponsored by Huawei. “Right now, we just want to work harder and keep looking for new opportunities to survive”.
Ren said the new initiatives may offset the drop in its handset business “more or less within this year,” though the company declined to provide specific figures. Its consumer unit generated revenue of 256 billion yuan ($39 billion) in the first six months of 2020, more than half of the company’s total. It managed “marginal growth” in sales and profit last year, thanks to record 5G base station orders and strong smartphone sales in the first half.
Huawei has been exploring business opportunities beyond telecom gear and smartphones for years but the efforts took on new urgency after phone shipments tumbled 42% in the final three months of 2020, largely due to a Trump-era order that cut off its ability to obtain the most advanced semiconductors. The Biden administration has also informed some suppliers of tighter conditions on previously approved export licenses, prohibiting items for use in or with 5G devices, according to people familiar with the move.
The U.S. ban has had a limited impact on Huawei’s emerging businesses, as most of the components required are available from Chinese suppliers, according to a person directly involved in the initiative. To meet the increasing demand from contractors including Huawei, local suppliers are squeezing better performance from mature technologies that Washington hasn’t banned, the person said, declining to be identified discussing internal matters.
The most advanced chips in Huawei’s inverters used to convert the electrical output from solar panels, rely on 28-nanometer technology, which Chinese companies are capable of manufacturing. Other components, such as power modules, can be made by 90nm technology or older. Yangzhou Yangjie Electronic Technology Co. and China Resources Microelectronics Ltd. are among the top power diode producers in China.
Each inverter — slightly bigger than an outdoor unit of a central air conditioner — can sell for over 20,000 yuan, more than Huawei’s latest high-end Mate X2 foldable phone. The company is planning to roll out more of its photovoltaic inverters, as Beijing’s push to have carbon emissions in the world’s second-largest economy peak by 2030 drive investments in renewable energy.
Like its solar inverter business, the chips required for Huawei’s automotive systems are less sophisticated than mobile phone processors and can partly be sourced from European suppliers, according to one person familiar with the matter. That’s allowed Huawei to double down on the car industry, moving engineers from other business units to work on sensors for self-driving cars and power units for electric vehicles.News Source: Bloomberg