Huawei is focusing on its start-up cloud business, which, despite sanctions against the company, still has access to US chips to ensure its survival.
The Chinese group’s cloud computing business, which sells computing power and storage to companies, including providing access to artificial intelligence, is far behind Alibaba and Tencent, market leaders in China. However, it is growing rapidly and in January Huawei put the unit on par with its smartphone and telecommunications stores.
A Chinese supplier named Huawei said the cloud business was key to stabilizing Huawei in the domestic market, as Beijing would increasingly support the company through public cloud contracts.
Several people involved in Huawei̵7;s cloud business said the unit was intensifying its offerings. “We will continue to provide customers with a package [cloud] services and products, “said a person at Huawei familiar with the strategy. “The quality of the chips in it may not be as good as before, but for other products that are not affected, we will offer something with a little better quality and customers can accept it.”
The change of focus was necessary because the outlook for Huawei’s smartphone and other consumer products was “hopeless” in the face of a ban in the US that would stifle its access to mobile chips, a business person said. The consumer unit was responsible for half of Huawei’s revenue last year of $ 122 billion.
Meanwhile, industry executives and analysts said that suppliers of semiconductors needed in cloud computing continued to be able to supply Huawei and other components were available on the open market.
“Intel was the core network vendor [central processing unit] for Huawei servers because it secured a license last year that allows it to continue selling Huawei, “said the semiconductor CEO, who declined to be named because he was not authorized to speak to the media.
After the US Department of Commerce added Huawei to a list of companies banned from doing business with US companies last year, hundreds of companies have applied for temporary licenses to release them. Notwithstanding the rules imposed by the U.S. government in May and August 17 and prohibit the sale of any chips designed or manufactured using U.S. technology or equipment in any transaction involving Huawei, these licenses remain in effect.
“This rule has no effect on licenses issued before August 17,” a Commerce official told the Financial Times. “The scope of the rule has not changed for those previously issued licenses.”
Last year, most licensing companies focused on chip and software design because the industry did not expect Washington to reach the entire supply chain, including manufacturing.
Industry experts said the exemption has lost its meaning for these Huawei suppliers because the latest rule prohibits chip companies from shipping to Huawei. However, some in-house chip manufacturers have been licensed. Industry leaders and two analysts said Intel was among them.
The Ministry of Commerce does not disclose which companies receive licenses. Intel has confirmed that it has delivery licenses for Huawei.
If Intel processors remain available, Huawei could use them to replace Kunpeng and Ascend, whose cloud processors were developed internally based on designs by the British chip company ARM, which can no longer be manufactured due to recent bans.
Analysts said other electronic components, including power management integrated circuits, memory chips and passive components, can be obtained through retailers. “Channels like WPG have them on offer,” said YC Yao, a chip analyst at Trendforce, an industry research firm, referring to Asia’s largest semiconductor component distributor. “I don’t think such transactions can be monitored to the extent that you prevent sales to a specific end customer like Huawei.”
Additional reports from Richard Waters in San Francisco