• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • SCB YouTube
  • Login
  • Subscribe
  • Logout
  • My Profile
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Supply Chains in Crisis
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • THINK TANK
  • WEBINARS
    • On-Demand Webinars
    • Upcoming Webinars
    • Webinar Library
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Inside Huawei: The Driving Force of China’s Tech Aspirations

Inside Huawei: The Driving Force of China’s Tech Aspirations

Inside Huawei: The Driving Force of China’s Tech Aspirations
December 13, 2018
Bloomberg

The surprise arrest of Meng Wanzhou, chief financial officer of Huawei Technologies Co., has thrust the company into a political firestorm and deepened a core threat: that more and more countries will blacklist its switches, routers and phones out of growing concern that they could be hijacked by foreign spies.

Yet inside Huawei’s Shenzhen headquarters, a secretive group of engineers toil away heedless to such risks. They are working on what’s next — a raft of artificial intelligence, cloud-computing and chip technology crucial to China’s national priorities and Huawei’s future. As the trade war drags on, China’s government has pushed to create an industry that is less dependent on cutting-edge U.S. semiconductors and software.

Meng’s detention, far from slowing these ambitions, will instead speed the fall of this “silicon curtain,” when the U.S. and China will no longer provide chips to one another, Gus Richard, a Northland Capital Markets analyst, wrote in a recent report. "Huawei is the icon of the rise of China industrial power,” he wrote.

Though Meng was granted bail by a Canadian court, she must remain in the Vancouver area as she awaits possible extradition to the U.S. on fraud charges.

The company is investing massive resources in next-generation technology, seeking to replicate the success it has had in other areas. Over the past decade, the closely held firm has quietly emerged as a titan in networking and telecom gear, now second only to San Jose, California-based Cisco Systems Inc.

Then Huawei entered the smartphone market, and in a surprise to most observers toppled Apple Inc. in market share earlier this year. In the September quarter, the Chinese company had 15 percent of the world’s shipments, trailing only Samsung Electronics Co., according to data from IDC. Just two years earlier, it had about 9 percent of the market.

Huawei’s technical expertise, combined with its ties to China’s blue-chip firms and government, could let it engineer another surprise in what many see as the critical backbone of future technology.

Those ambitions are consistent with the government’s goals. President Xi Jinping wants China to be a self-sustaining leader in semiconductors — Huawei is showing it can. Xi wants China to have a global footprint — Huawei has one. Xi wants China to move from basic manufacturing to more lucrative industries, with the country capturing the benefits — and Huawei does that, too.

A sprawling room at its Shenzhen campus is filled with digital mock-ups of how banks, retail stores and city streets would look like with Huawei’s technological capabilities. That tech is created a short drive away, inside a research lab nicknamed the "White House." Visitors there are rare. Yet the mock-up room, called the "vertical industries exhibition hall," welcomes guests and imagines a future where companies and governments use Huawei’s cloud and AI to crunch data, spur sales and make cities see and hear everything.

Huawei’s Enterprise Business Group, which trails networking and smartphones in sales, sells components and services for internet-connected devices, smart cities and cloud products. It will net more than $10bn in revenue this year, about a 10th of the company’s overall total, Qiu Heng, the division’s chief marketing officer, said in an interview in November.

The company expects enterprise sales to double every two years. That means the business would lap $100bn in 2025, the year China’s government has set to reach independence in technological production. And those projections are without an American business — Qiu said estimates for his division exclude the U.S., where Huawei is a political pariah.

In one area, Huawei has a head start. In the past two years, the largest internet companies formed semiconductor units to improve their cloud offerings and AI applications, such as image recognition and voice assistance. Huawei’s chip design unit, HiSilicon, has been around since 2004. It started working on customized chips to handle complex algorithms on hardware before the cloud companies did. Research firm Alliance Bernstein estimates that HiSilicon is on pace for $7.6bn in sales this year, more than doubling its size since 2015.

“Huawei was way ahead of the curve,” said Richard, the analyst.

Yet in terms of sales and operations, Huawei’s cloud business is meager next to its larger rivals. The company spent about $13bn on research and development in 2017, up more than 17 percent from the previous year. Its rivals in the cloud market have cut similarly sized checks. “Huawei has concluded that if it does not offer future solutions via the cloud, where its customers are migrating, someone else will,” said Siow Meng Soh, a research manager for GlobalData Plc.

While Huawei is pressing ahead with its research, there are some signs Meng’s detention is starting to affect the company’s operations. A Japanese supplier of industrial robots said Huawei has frozen orders for its machines after the arrest.

In software, Huawei is playing also a bit behind rivals. In AI fields, such as deep learning and computer-vision systems, the company is “feverishly seeking to catch up” to U.S. titans, said Oren Etzioni, head of the Allen Institute for Artificial Intelligence. "Huawei has data and government support, but are at a substantial disadvantage when it comes to AI,” he added.

Still, if any company could erase that hindrance quickly, it would be Huawei.

Recent research from computer scientists in Zurich looked at the processing chops of Android phones and put the chips from HiSilicon at the top. Like its rivals, Huawei is throwing everything into its cloud package. It recently debuted a set of AI software tools and in October released a new specialized chip, called the Ascend.

“No other chip set has this kind of capability of processing,” Qiu said.

Few chip-makers have such easy access to customers ready to invest deeply in AI. In Huawei’s case, that customer is the Chinese government. The company sees a massive opening in the national ambition to plug every city street, camera and piece of infrastructure into a digital grid. Huawei’s aim, said analyst Soh, is to become the “nerve center” for smart cities. Police in Shenzhen, which is just across the border from Hong Kong, are using Huawei’s chips for several traffic cameras. Qiu said a single chip set can process video footage for as many as 16 cameras, a fourfold jump in computing power.

The cloud business allows Huawei to rely on its home market. While its overall sales are split about evenly in and outside of China, close to 60 percent of the enterprise business comes from China, Qiu said. In the U.S., Huawei’s size makes it a ready target for national security hawks; it loomed behind President Donald Trump’s decision to block a $117bn merger.

Qiu said the company’s products are compliant with Europe’s General Data Protection Regulation, meaning that its clients, not Huawei, own and store data used in the applications. Huawei must tread carefully in Europe, where it has cloud partnerships with several carrier clients including Germany’s Deutsche Telekom AG. In the months before the CFO’s arrest, U.S. officials have reportedly asked counterparts in Germany and several European nations to drop Huawei equipment for 5G networks over security concerns. A Deutsche Telekom representative declined to comment.

In a statement, a Huawei spokesman said the company operates in more than 170 countries and criticized the reported moves by U.S. officials. “If a government’s behavior extends beyond its jurisdiction, such activity should not be encouraged,” the spokesman said.

GlobalData’s Soh suggested that Huawei should turn to more welcoming markets across Latin America and Africa for its enterprise business, particularly after Meng’s arrest in Canada. “As long as they stick to the game plan, they still have a lot of room to grow,” he said. “Unless the U.S. manages to get their allies to stop buying them.”

RELATED CONTENT

RELATED VIDEOS

Global Trade Management Sourcing/Procurement/SRM Supply Chain Planning & Optimization Supply Chain Visibility Technology Business Strategy Alignment Global Supply Chain Management Global Trade & Economics Supply Chain Security & Risk Mgmt High-Tech/Electronics
KEYWORDS Business Strategy Alignment China Global Supply Chain Management Global Trade & Economics Global Trade Management High-Tech/Electronics SC Planning & Optimization SC Security & Risk Mgmt Sourcing/Procurement/SCM Supply Chain Visibility Technology
  • Related Articles

    Inside a Heist of American Chip Designs, as China Bids for Tech Power

    Will the Trade War Force a Rethinking of High-Tech Sourcing Strategies?

    Trump’s Throttling of Huawei Could Backfire on U.S. Tech

Bloomberg

Amtrak Bottleneck Turns Biden’s Focus to His Favorite Rail Route

More from this author

Subscribe to our Daily Newsletter!

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • A MAN IN A SUIT SHAKES HANDS WITH A WOMAN IN A HARD HAT, NEXT TO A STACK OF CONTAINERS

    Three Procurement Technology Evolutions for 2023

    Sourcing/Procurement/SRM
  • DOCUMENTS BEARING THE INSIGNIA OF US CUSTOMS AND BORDER PROTECTION LIE ON A TABLE

    New CBP Regs Call for Greater Diligence by Brokers in Reporting Security Breaches

    Freight Forwarding/Customs Brokerage
  • The blank stare of a child's eye who is standing behind what appears to be a wooden frame

    The Alarming Continued Rise of Modern Slavery in Supply Chains: How Procurement Can Help Reverse the Trend

    Sourcing/Procurement/SRM
  • A WORKER IN A WAREHOUSE, SUPERIMPOSED WITH GRAPHICS SHOWING SUPPLY NETWORK

    Enabling Intelligent Visibility With Supply Chain Analytics

    Data Management (Big Data/IoT/Blockchain)
  • A GROUP OF WORKERS RANGED IN AN OFFICE, OF DIVERSE RACE, GENDER, AGE AND PHYSICAL ABILITY

    Podcast | The Supply Chain Workforce of the Future Is Already Here

    HR & Labor Management

Digital Edition

Scb nov 2022 sm

2022 Supply Chain Innovator of the Year

VIEW THE LATEST ISSUE

Case Studies

  • New Revenue for Cloud-Based TMS that Embeds Orderful’s Modern EDI Platform

  • Convenience Store Client Maximizes Profit and Improves Customer Service

  • A Digitally Native Footwear Brand Finds Rapid Fulfillment

  • Expanding Apparel Brand Scales Seamlessly with E-Commerce Technology

  • How a Global LSP Scaled its Security Program and Won More Business

Visit Our Sponsors

Orderful Yang Ming Alithya
Barcoding Blue Yonder BNSF Logistics
CoEnterprise Data Capture Deposco
E2open GAINSystems Generix
Geodis GEP GreyOrange
Here Honeywell Intelligrated IFM
Infor Inmar Keelvar
Kinaxis Korber Lean Solutions Group 2H
Liberty SBF Locus Robotics Logility
LogistiVIEW Lucas Systems MCA Connect
MPO Nvidia Old Dominion
OpenText ORTEC Overhaul
Parsyl PMMI QIMA
Redwood Logistics Ryder E-commerce by Whiplash Saddle Creek Logistics
Schneider Dedicated Setlog Holding AG Ship4WD
Shipwell Tecsys TGW Systems
Thomson Reuters Tive Trailer Bridge
Vecna Robotics Verity
Verusen
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • On-Demand Webinars
    • Upcoming Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2023 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing