LightCounting reports from Huawei Analyst Summit and the Financial Times weekend festival
In May 2020, the US government announced restrictions on Huawei’s access to the advanced semiconductor technologies, including chips manufactured by Taiwan’s TSMC. The motivation was to address the US national security concerns, but this was a de-facto declaration of a new cold war between the US and China. Two years later, a new cold war proxy conflict between Ukraine and Russia escalated to a point where the world is closer to a nuclear war than it has been since the Cuban missile crisis in the 1960’s.
Henry Kissinger, a former US Secretary of State, commented on this situation at the Financial Times weekend festival held in Washington DC on May 7, 2022. Dr. Kissinger is known for orchestrating the opening of diplomatic relations between China and the US in the early 1970’s. He will be turning 99 years old next month, but his mind is as sharp as ever.
The success of Dr. Kissinger’s strategy in the 1970’s was based on treating the adversaries equally and waiting for an opportunity to take advantage of an opening between them. The US sanctions against Huawei, distanced China from the US and brought it a lot closer to Russia. Mr. Putin would have never taken the risk of escalating the war in Ukraine, without a consent from China. A new set of economic sanctions against Russia has brought it a lot closer to China. Finding an opening between them now will be very problematic.
Former diplomats and policy experts, presenting at the Financial Times weekend festival, agreed that big questions rarely have big answers: solving big problems is best accomplished in small steps. Making a small step away from a cliff’s edge would be a big step forward now. This would certainly improve the US national security a lot more than sanctions on Huawei.
Apple and Samsung have certainly benefited from the US sanctions on their main rival in the smartphone market. Huawei was forced to sell part of its smartphone business and focus on other opportunities. Ericsson and Nokia gained market share in wireless networking at the expense of Huawei, but if and when this will improve the US national security remains to be seen.
Huawei was forced to re-structure, but the company has doubled down on talent recruitment and R&D spending. It strives to hire the best and brightest people from anywhere, as was mentioned repeatedly to the HAS2022 audience. Few companies can afford to invest to overcome US sanctions on the scale that Huawei has. As one of China’s largest tech giants Huawei spent $22.1 billion in research and development in 2021, an increase to 22.4% of the company's total revenue. Huawei noted that this amount ranks it #2 globally in terms of R&D expenditures for 2021 (Google was #1).
Huawei’s rotating Chairman Ken Hu commented that the company’s goal in 2022 is to “strive to survive but live with quality”. Living with quality means to ensure product quality and provide continuous services, operate steadily by abandoning low-quality and high-risk transactions, while continuing to diversify the business.
Huawei plans to shift the focus of its consumer business from mobile phones to products for sports, health, smart homes, smart travel, smart offices and video entertainment. In the networking business the focus is shifting from mobile to fixed networking in 2022. Chairman Hu made it clear that Huawei’s F5.5G network strategy is the key to provide 10Gbps everywhere by 2025, as illustrated in Figure 2. WiFi-7 and 50G PON are enabling technologies for F5.5G strategy.
The full text of the research note with highlights from HAS 2022, held on April 26 and 27 at Huawei’s home base in Bantian, Shenzhen, China is available to LightCounting subscribers by logging into their accounts.