Huawei Technologies is looking at new emerging markets and new strategies in response to setbacks and sanctions on its expansion plans in the West, company chairman Liang Hua said at a business forum held in Shenzhen this week.
Liang said at the “Connectivity+: Innovate for Impact” forum on Wednesday (Nov. 23) that Huawei plans to provide telecommunications services to 120 million rural people in 80 countries by 2025. Specifically, he said the Chinese tech giant is targeting new markets in Southeast Asia, Africa and the Middle East.
That marks a difficult strategic pivot for the controversial technology company. In May 2019, the US Department of Commerce listed Huawei and its 70 affiliates on its entity list and banned the sale of hardware and software containing US technology to Huawei and its subsidiaries.
Those punitive measures, imposed in the name of national security, include a ban on the use of Huawei-made products in the US and blocks on the sale of US-made high-end chips to the company. The US has also banned Huawei from using Google’s Android operating system.
The United Kingdom, Australia, New Zealand, Canada, Japan and Taiwan have all said they will follow suit. Some European countries, such as France and Germany, have not formally announced official bans on Huawei’s products, but analysts believe even those countries have “implied” bans.
Those sanctions torpedoed Huawei’s business results. The company announced in August that net margin in the first half of 2022 fell by almost 50%, from 9.8% to 5%, compared to the same period last year. Huawei’s net profit fell 52% to 15.1 billion yuan over the same period.
In response, Huawei founder CEO Ren Zhengfei wrote in an internal memo at the end of August that the company will close or reduce its unprofitable operations and focus more on its high-end lines in the coming years.
“Our grace period is 2023 and 2024. We are not sure if we can achieve these two year breakthroughs,” Ren said in the memo. “That’s why everyone should not present concepts now, but talk about reality, especially in business forecasting.”
Six main things
Wednesday’s forum seemed to outline at least one aspect of the company’s new international strategy.
The event was attended via the internet by ministers and regulators in Cambodia, Nigeria, Bangladesh, Pakistan and South Africa. Industry experts from South Africa, Belgium and Germany were also present virtually.
Liang said that Huawei’s six main businesses are information and communication technology infrastructure, terminal equipment, digital energy, cloud, intelligent automotive solutions and its fabless semiconductor business under the Hisilicon brand name.
“Our vision and mission are to bring digital technologies to every home and organization,” said Liang. “We will apply innovative technologies to our solutions so that we enable connectivity and reach people’s lives.”
“Over the past few years, we have put a lot of effort into solving the problems with our products, solutions and services,” he said, commenting on Western sanctions. “We will continue to work on our delivery issues so that we can continue to deliver our products and services to our customers in the future.”
As it expands abroad, Liang said Huawei would also be aware of its social responsibilities. He said one of the company’s latest attempts was to join the International Telecommunication Union’s Partner2Connect digital alliance.
The ITU is a United Nations specialized agency responsible for information and communication technologies (ICTs) that aims to facilitate international connectivity in communication networks and improve access to underserved communities around the world.
Huawei on Wednesday signed an agreement to join P2C and focus on delivering connectivity to about 120 million people in remote areas in more than 80 countries by 2025. Currently, the company has already served 60 million people overseas in a dozen countries connected, it said.
Malcolm Johnson, ITU Deputy Secretary General, said expanding telecommunication services in rural areas refers not only to connectivity, but also to affordability.
Johnson said Huawei’s commitment to the P2C alliance would help improve connectivity and digital skills in rural areas.
Siddharth Chatterjee, United Nations Resident Coordinator in China, said policymakers, telecommunications service providers, academia and civil society must join forces to end the “digital divide” that accounts for a third of excludes the world’s population from connectivity.
In 2018, Huawei launched a pilot program called RuralStar in the African country of Ghana to connect people in remote areas.
Cao Ming, president of wireless solutions at Huawei, said he hopes developing countries will open up their markets and launch supportive policies to expand internet connectivity across more roads and into rural areas.
Cao said a lack of affordable terminal equipment is the biggest problem for low connectivity in rural areas.
“We all know that 4G is ten times faster than 3G. But in Africa, upgrading 3G terminal devices to 4G costs an additional $8 per person, leaving most users to stick with 3G services,” he said.
Cao said Huawei has successfully reduced costs by erecting poles instead of building expensive towers and bases, and using solar energy to power the equipment in rural areas in Ghana. He said about 2,000 RuralStar sites have connected 3.2 million people, with each pole serving about 1,000 to 2,000 people in Ghana.
Cao added that the model has been adopted in a dozen other countries as local governments and telcos are now more motivated by the shorter payback period, which he says is now around one to three years.
Middle East and Southeast Asia
Last year, the US urged the United Arab Emirates to remove Huawei from its telecommunications network lest it cancel an earlier agreement to supply the country with F-35 fighter jets. In July this year, Washington signed an agreement to develop 5G and 6G networks in Saudi Arabia to reduce Huawei’s influence in the oil-rich kingdom.
In October 2021, Huawei Digital Power, a part of Huawei Technologies, said it had won a contract to set up a solar power system for the Red Sea Project, a mega real estate project in Saudi Arabia. The company will integrate its digital information technology with photovoltaic and energy storage technologies in the project.
“We expect the Middle East to become an important technology center in the future,” Liang said. “The Middle East can build more data centers and use their powerful computing power and artificial intelligence technologies to build smart cities and boost the digital economy.”
Liang said the Middle East can use solar power more easily than other places because of the longer day.
He added that Southeast Asian countries such as Indonesia already have a well-developed infrastructure and so now is a good time to develop more applications by integrating 5G and AI technologies into manufacturing and agricultural businesses.
He said online education, medical services and e-government provide good business opportunities for Huawei in the region.
Read: Huawei profits collapse as US sanctions bite
Follow Jeff Pao on Twitter at @jeffpao3