As US sanctions push Huawei to the wall, the embattled Chinese telecom vendor is beginning to weigh other choices to stay in business.
Bloomberg reported that Huawei will invest $1 billion on researching self-driving and electric-car technologies, accelerating plans to compete with Tesla Inc. and Xiaomi Corp. in the world’s biggest vehicle arena.
The Chinese telecom giant was leading the global 5G roll out before the United States, based on security concerns, blacklisted the phonemaker on many fronts.
According to the report, the Chinese telecom giant will partner with three automakers initially to make self-driving cars that carry the Huawei name as a sub-brand, said Xu, one of three executives who take turns to fill the post. It will keep its circle of partners small and get its logo onto cars — not unlike how Intel Corp. calls attention to its microprocessors on PCs — that adopt its autonomous driving technology, he added. The mobile giant has so far agreed to team up with BAIC Group, Chongqing Changan Automobile Co. and Guangzhou Automobile Group Co.
“The smart car business unit receives one of the heaviest investments from Huawei. We will invest more than $1 billion in car component development this year,” Xu said. “China adds 30 million cars each year and the number is growing. Even if we don’t tap the market outside of China, if we can earn an average 10,000 yuan from each car sold in China, that’s already a very big business for Huawei.”
China is the biggest market for electric vehicles, and divestment to carmaking will protect Huawei from the effects of US sanctions.
The United States has succeeded in rallying its allies against allowing Huawei to lead or involve in deployment of their 5G infrastructure, leaving the Chinese telecom company nearly crippled.
The teleco’s hope to use openings allowed by the sanctions to keep its telecom business alive was dashed by further sanctions.
In August, the US Bureau of Industry and Security (BIS) in the Department of Commerce announced that Huawei and its non-US affiliates on the Entity List have been restricted access to items produced domestically and abroad from US technology and software.
The BIS restrictions, which added another 38 Huawei affiliates to the Entity List, prevent Huawei’s attempts to circumvent U.S. export controls to obtain electronic components developed or produced using U.S. technology.
The pandemic-induced global chip shortage compounded Huawei’s woes, throwing its smartphone and gadget production into jeopardy.
To stay alive, the Chinese company is learning to ply its trade in other sectors. Huawei’s billionaire founder Ren Zhengfei is directing the firm toward new growth areas such as smart agriculture, health care and electric cars.
It hopes for a seat at the table with tech giants vying to define the rapidly evolving fields of connected vehicles, homes and workplaces, Bloomberg said.
These new areas of interest have the potential to win the US’ friendship. The pro-green Biden’s administration is welcoming plans geared toward green energy as it pushes to implement the Paris Climate Accord. Huawei stepping into the EV industry may well paint it in a good light before Biden’s administration that has shown few signs of taking a different approach from Trump.
However, Huawei’s new choice of business in an industry already dominated by Tesla, Nio, Xpeng Inc. and other EV makers in the China market, will face a mammoth of competition challenge.
Last month, Xiaomi, Huawei’s rival in smartphone and gadget making, unveiled plans to invest about $10 billion over the next decade on manufacturing electric cars. Search giant Baidu Inc. and Geely Automobile Holdings Ltd. are also said to be teaming up to build vehicles.
Research firm Canalys estimates that EV sales in China may climb more than 50% this year alone as consumers embrace cleaner automobiles and costs tumble, but it takes more than high demand and lower cost to win market shares.
The Huawei team believes they have what it takes to compete in the crowded Chinese EV market.
“I don’t know if they were bragging, but my team said they can have cars driving on their own without human intervention for 1,000 kilometers. That’s way better than Tesla,” Xu said Monday.