Huawei's repositioning strategy

A WEEK ago, Huawei hosted a virtual tour of its Galileo Exhibition Hall in Shenzhen, China.

The tour leaned heavily into more recent telecommunications history and, more specifically, Huawei's significant presence in 4G and 5G infrastructure development.

The company finds itself in the odd position of being, simultaneously, a heavy investor in the heavy iron that makes mobile telecommunication possible while being blacklisted by the biggest First World markets of the West. Huawei remains on the US Entity List, blocked from access to modern software technologies, chip designs and chipsets, which have led to a lockout of the company's smartphone business in the US and stalled the adoption of its newest smartphones, which cannot be loaded with the commercial version of Google's Android operating system.

Meanwhile, Huawei remains an aggressive developer of 5G technology, having invested US$4 billion over the last ten years on developing cutting edge, ever more compact 5G transmission hardware. It has operated in Trinidad and Tobago for more than a decade, supplying local telecoms companies with infrastructure for 4G networks.

The company employs 197,000 workers, 53.4 per cent of whom are in research and development departments at the company. Huawei invests a hefty 16 per cent of its revenue in R&D, the majority which goes to developing mathematical algorithms and designing new chipsets.

Asked about the company's plans to manage the Entity List freeze, Hazel Chen, Huawei's senior public relations manager, said, "It's been a difficult time for the company because of geopolitical situations. The Honor brand was divested to be able to access parts for its supply chain in November."

Honor was a US subsidiary brand developed as a lifestyle entry for the company's smartphone business.

The divestment to Shenzhen Zhixin New Information Technology Company was described then as "a market-driven investment." The new company promised to "follow market rules for fair transactions."

The company has clearly shifted its business emphasis to infrastructure equipment. There were no smartphones on show in the Galileo Hall, just miniature towers, IOT technologies, broadcast equipment and wireless base stations. The problems with chipset supply isn't as pronounced for back office hardware, which uses fewer chips.

"The Enterprise Business Group had 23 per cent growth because of pandemic-related acceleration of development as becoming more digitally agile has become more important," said Chen.

Making time to talk to journalists from Jamaica and TT makes business sense for the company, which has been developing mobile infrastructure in TT for more than 15 years and has made investments in Jamaica. In November 2019, the company announced a smart city surveillance project in Guyana.

Despite setbacks to its business, Huawei reported profits of US$9.9 billion, up 3.2 per cent, with revenue from China accounting for 65.6 per cent of its total income.
Since the election of President Biden, there has been no indication of change on the US's hardline market stance against China, and no easy way forward for Huawei.

The company's investments in R&D and chipset design are simply necessary for its continued survival.

The Honor divestment points to a potential migration of the considerable intellectual property assets it has created for its smartphone line to a company with a chance of making them competitive in the market.

Huawei's future seems focused on developing the telecommunications infrastructure for the rest of the world, the nations who can officially shrug when the US frets over their use of the Chinese company's technology.

Fortunately, there are a lot of countries with a need for fast internet access across vast geographic regions and wireless broadband is a solution that works for many of them.

Mark Lyndersay is the editor of technewstt.com. An expanded version of this column can be found there.