In the face of declining smartphone sales, Huawei continues to diversify its product line with a focus on its other connected devices, including laptops and smart TVs, which saw strong growth last year. Hard hit by US sanctions, the Chinese giant is now relying on its wide range of products to look good against its local counterparts, including Alibaba and Tencent, who are all looking to expand their international presence.
Huawei recently posted poor results, with annual operating profit plummeting for the first time in more than five years, to $ 11.09 billion in 2020. China remains the firm’s last corner, however. of Shenzhen, the latter posting revenues up 15.4% in 2020. In all other markets where the Chinese giant is present, revenue declines were recorded, ranging from 8.7% to almost 25%.
On the side of the Chinese giant, these exceptional losses are attributed to the decline in smartphone sales, affected by the current US export sanctions, which have blocked the access of Huawei-branded smartphones to Google’s Android ecosystem. U.S. export bans have also reduced the Chinese supplier’s access to basic chips, which Huawei says has disrupted its supply chain.
“1 + 8 + N”
To cope with this new situation, the technological giant has diversified its chip suppliers as well as its product line. In the earnings briefing, Huawei’s rotating chairman Ken Hu said the vendor would seek to focus on the company’s other connected devices, including smart TVs, laptops and watches. smart.
Referring to the company’s “1 + 8 + N” strategy, in which “8” refers to its line of connected devices, Huawei management says revenues from these eight devices cushioned the impact of declining sales of smartphones. These 8 devices indeed recorded a 65% increase in their sales year-on-year last year, with a turnover of 136.38 billion dollars. As a reminder, “N” includes Huawei’s IoT ecosystem while “1” refers to the Chinese giant’s smartphone activity.
For the rotating president of Huawei, it is of course diversification that must be bet to build an ecosystem that extends beyond just smartphones. In an interview with , Huawei vice president for the Asia-Pacific region, Jay Chen, was unable to provide an update on US sanctions, but noted that they have a considerable impact on confidence in the entire global value chain. While stressing that these sanctions will also have a long-term impact on the growth of American companies.
Focus on the cloud
Despite the pressure on its chip supply, the executive says Huawei will continue to launch new phones and seek to maintain its position in the market. He reiterates the company’s goal of diversifying its partners and its chip supply chain. And despite the struggles of the past year, the supplier remains optimistic about its growth potential in the wider Asia-Pacific region, outside of China. Jay Chen cites accelerating digital transformation efforts in the region as a key driver and significant growth potential.
Outside of China, Asia-Pacific is the fastest growing region for Huawei’s cloud business, according to Hunter Shao, Huawei Cloud vice president of industrial development for Asia-Pacific, who notes that the supplier has seen its revenues triple from one year to the next. The leader adds that the goal is to be among the world’s top three providers of cloud computing services over the next three years.
Asked how Huawei is working to address the security concerns that persist today, Jay Chen stresses that security is a key component across Huawei’s entire product line, whether it is cloud or 5G equipment. It is also integrated into all internal processes and product design, he adds. It specifies that the vendor adheres to industry standards for network security, which is critical to building trust.
Referring to competition from his Chinese counterparts like Xiaomi, Tencent and Alibaba – the latter two also targeting cloud growth internationally – the Huawei executive again stressed that Huawei’s diverse product portfolio, which includes software and of services, along with its “strong material DNA”, were key competitive advantages. It remains to be seen whether this displayed confidence will be enough to support poor growth in 2020.