Huawei Must Scale Back Businesses, Focus on Cloud Services: Founder Ren Zhengfei

Huawei founder and CEO Ren Zhengfei said it is time for the company to adjust business strategies and prioritize its cloud services. (Source: Caixin)

As US sanctions continue to pile pressure on Huawei Technologies’ 5G and smartphone businesses, founder and CEO Ren Zhengfei said it is time for the Chinese tech giant to adjust strategies to scale back businesses and focus on cloud computing services.

In a speech delivered at a company event in November and shared on an internal forum on Dec. 30, Ren said Huawei’s enterprise business may “lose its combat strength if its strategy is too broad,” saying that the firm needs to “scale back its battlefront” and concentrate on areas of strategic focus. 

Ren admitted that developing cloud services is not the company’s forte, and a breakthrough is needed. The Shenzhen-based company has primarily been focusing on telecom operations and smartphones.

He also asked staff to learn from the success of Amazon and Microsoft, the biggest companies in the cloud-computing business, while taking advantage of Huawei’s 30 years of network experience when building infrastructure as a service (IaaS) and platform as a service (PaaS) categories.

IaaS, which is the most flexible category of cloud services, allows users to rent IT infrastructure servers and virtual machines, storage, networks, and operating systems on a pay-as-you-go basis, while PaaS is a complete development and deployment environment in the cloud and does not provide as much access to the operating system.

“But Huawei cannot take exactly the same path as Alibaba and Amazon, since we don’t have access to ‘unlimited cash’ from the US stock market,” cautioned Ren as Huawei is not publicly traded.

“Alibaba Cloud, Tencent Cloud, and AWS are launching more and more hardware-software fusion solutions. Huawei’s advantage lies in our hardware capabilities. We must strengthen the software and application ecosystem and not forgo advantages flowing from our hardware capabilities,” Ren said, adding that the company should focus on attracting major corporations and government enterprises as cloud clients.

To build a leading Information and Communications Technology (ICT) infrastructure, Huawei must win in three areas: connectivity, computing and enterprise storage, and Huawei Cloud, he added. So far, Huawei Cloud has launched more than 200 services and is used by more than 1.5 million developers while attracting nearly 20,000 partners. 

SEE ALSO: Huawei CEO Ren Zhengfei Expects Company to Grow 10% or more in 2020

China, the world’s second-largest cloud services market, invested $4.3 billion in the second quarter of 2020 in the industry, fueled by increased demand during the pandemic and government stimulus measures, according to a Canalys report.

Since mid-2019, the Trump administration has been imposing various sanctions on Huawei after deeming it a national security risk.

The latest, ordered in August, restrict foreign semiconductor companies from selling chips produced using US technology to Huawei, without first obtaining a license to do so. Caixin also reported that Huawei will stop making its flagship Kirin chipsets due to US pressure on suppliers.

The US alleges that Huawei could conduct intelligence for the Chinese government and has urged its allies to exclude Huawei from its telecommunications networks. Huawei has denied these accusations. 

In November, the company sold its budget brand smartphone unit Honor to a consortium of over 30 agents and dealers in a bid to keep it alive amid the sanctions. 

Huawei said in a statement that its consumer business has been under “tremendous pressure” due to the “persistent unavailability of technical elements” for its phone business.