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Huawei is focusing on its fledgling cloud business, which still has access to US chips despite sanctions against the company, to ensure its survival.
The Chinese group’s cloud computing business, which sells computing and storage power to companies, even giving them access to artificial intelligence, lags far behind Alibaba and Tencent, the market leaders in China. But it is growing rapidly, and in January Huawei placed the unit on an equal footing with its telecommunications equipment and smartphone businesses.
A person from a Chinese supplier to Huawei said that the cloud business was key for Huawei to stabilize in its domestic market because Beijing would increasingly support the company through public cloud contracts.
Several people involved in Huawei’s cloud business said the unit was stepping up its offerings. “We will continue to provide customers with a package of [cloud] services and products, ”said a Huawei person familiar with the strategy. “The quality of the chips may not be as good as before, but for the other products that are not affected, we will offer something with a little better quality and customers can accept it.”
The shift in focus was necessary because the outlook for Huawei’s smartphone and other consumer products unit was “desperate” in the face of a US ban that will disrupt its access to mobile chips, said a person familiar with the business. . The consumer unit was responsible for half of Huawei’s $ 122 billion revenue last year.
Meanwhile, industry executives and analysts said semiconductor vendors needed in cloud computing could still ship to Huawei, and other components were available on the open market.
“Intel has been the supplier of the main [central processing unit] for Huawei’s servers, as it obtained a license last year that allows it to continue to sell to Huawei, ”said a semiconductor industry executive who declined to be named because he is not authorized to speak to the media.
After the US Department of Commerce added Huawei to a list of companies that were banned from doing business with US companies last year, hundreds of companies applied for temporary licenses exempting them. Despite rules that the US government imposed in May and August 17 that prohibit the sale of any chip designed or manufactured with US technology or equipment. In any transaction involving Huawei, those licenses are still valid.
“The rule has no effect on licenses issued before August 17,” a Commerce Department official told the Financial Times. “The scope of the rule did not change for previously issued licenses.”
Last year, most companies that applied for licenses focused on chip design and software because the industry did not expect Washington to crack down on the entire supply chain, including manufacturing.
Industry experts said that for those Huawei suppliers, the exemption made no sense because the latest rule prohibits companies that make the chips from shipping Huawei. But some chipmakers with their own manufacturing plants obtained licenses. The industry executive and two analysts said Intel was among them.
The Commerce Department does not publish which companies are licensed. Intel confirmed that it has licenses to ship to Huawei.
If Intel’s CPUs remain available, Huawei could use them to replace Kunpeng and Ascend, its internally developed cloud CPUs based on designs by the British chip company ARM that can no longer be manufactured due to recent bans.
Other electronic parts, including integrated circuits for power management, memory chips and passive components, could be obtained through dealers, analysts said. “Channels like WPG have them on offer,” said YC Yao, chip analyst at Trendforce, the industry research firm, referring to Asia’s largest semiconductor component distributor. “I don’t think that such transactions can be monitored to the extent that sales to a particular end customer like Huawei can be avoided.”
Additional information from Richard Waters in San Francisco
