Opinion | The return of the Huawei

By Tom Fowdy

When the United States initiated aggressive sanctions against the Chinese telecommunications firm Huawei, which included the imposition of the "foreign direct product rule" to cut it off from the global semiconductor supply chain, many speculated as to whether the company was doomed altogether. Indeed, even its own founder and CEO Ren Zhengfei said the firm was in a struggle for survival. Some tough decisions were made in the wake of the damage, including the sale of its globally popular smartphone brand Honor to a private company, as well as in the inability to keep up its other leading brands due to chip shortages. In turn, its sales revenues tumbled.

However, 2021 will be looked back on as the year when Huawei's fortunes began to change for the better having previously "hit the bottom". Through the course of this struggle, the last 12 months has seen the firm plant all the seeds for its revival and prepare to emerge stronger than ever, whilst also simultaneously sustaining its lead as the single global leader in 5G despite Washington pushing many of its allies to ban it. If the United States has sought to destroy this company and curtail its global presence and rise, they have not succeeded. Now, the comeback is on.

The Making of a software giant

To offset the damage dealt to its smartphone business, Huawei spent most of the year reorientating itself into a software, IT and cloud provider, an area which the company deemed "bulletproof" from American sanctions. Very quickly, Huawei raced around the world investing in IT academies in various developing countries, as well as pledging $300 million for startups in South East Asia, as well as 35 million Euros in European IT talent. By May of this year, it was reported by American think tank CSIS that Huawei had secured "70 deals in 41 countries" pertaining to cloud.

In addition to this, 2021 also seen Huawei launch its own operating system, known as "HarmonyOS". Although often assumed to be simply a replacement for Google's Android after the imposition of US restrictions, the OS is designed to facilitate a wider vision of an "internet of things" spanning many devices including televisions, cars, household appliances and even a smart waterbottle! It currently has over 100 million users, and is to be launched globally in 2022. In conjunction with this, it continues to develop and expand the Huawei Appgallery store as its flagship provider of applications

Laying the foundations for a new supply chain

More exciting and less noticeable however, is Huawei's efforts towards rebuilding its supply chain in the wake of America's weaponization of the semiconductor industry against it. Throughout the year, the company through its various subsidiaries, such as Hubble Technologies, acquired operating stakes in a number of local semiconductor and lithography companies, showing a clear intention to develop the technologies which the US had sought to deprive from it. Rumours circulated by summer that Huawei would establish a "foundry" in Wuhan.

Then, on December 28th, it was announced that the firm had created a new subsidiary with 600 million Yuan capital known as "Huawei Precision Manufacturing"- the latter term being defined as "the manufacture of individual pieces with extreme accuracy. It is used to make parts for various machines, including medical, aeronautical, and any other industry that requires identical parts to be created in large quantities."

Huawei denied the new establishment was a chip making company, but told the press it "will produce optical communication equipment optoelectronic devices; electronic Components and semiconductor discrete device manufacturing." This led to a lot of speculation that despite the denial, the company was nonetheless affiliating itself with the chip industry anyway, in particular the construction of devices would then be sold to chipmakers. Either way, either way a significant breakthrough.

Powering ahead in 5G

But despite these other developments, 2021 soon established the reality that the United States had failed to deliver significant blows against Huawei's 5G carrier and network business, despite getting a number of allies to blacklist the firm. As of the end of the year, Huawei continues the hold the largest 5G market share in the world, almost double of that of its competitors, Nokia and Ericsson. It continues in tandem to hold the world's largest number of 5G patents. It has recently completed 5G networks in Bangladesh and Laos, is building in Brazil, whilst also winning contract with Ooredoo to build 5G in Qatar, Indonesia, Algeria, Iraq, Kuwait, Oman, Tunisia, Myanmar and Maldives.

"Building Back Better"

The slogan "build back better" has frequently been used by the Biden administration to describe anti-China initiatives, such as on infrastructure, yet ironically the term could not be more suited to Huawei, who has spent the last 24 months laying the foundations to bounce back from all of the government assault against its enterprise. Indeed, the return of Meng Wanzhou from house arrest in Canada had also become a symbol of the company's perseverance, as well as its change in fortunes. Huawei has been targeted because the United States wishes to curb China's rise in critical technologies, but their biggest mistake is ultimately underestimating the company's resolve, and by turning it into a political stakes battle, they have a lot to prove now. It's game on.

The author is a well-seasoned writer and analyst with a large portfolio related to China topics, especially in the field of politics, international relations and more. He graduated with an Msc. in Chinese Studies from Oxford University in 2018.

The views do not necessarily reflect those of DotDotNews.

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