Huawei has been forced to adopt the mentality of a startup as a result of US and other Western countries' continued sanctions.
How do you define a startup?
The question was prompted reading an article late last week in the UK’s daily newspaper The Guardian, in which Catherine Chen, a senior VP and board member of Chinese conglomerate Huawei, said the company has been forced to adopt the mentality of a startup as a result of US and other Western countries’ continued sanctions.
The cause of the sanctions have been the allegations, constantly denied by Huawei, that it has been building backdoors into its communication equipment for espionage purposes, and strong ties to the Chinese Communist Party.
The move by the US to prohibit from supplying semiconductors manufactured with American equipment to companies allegedly behaving such as Huawei, and all its subsidiaries, has hugely impacted the behemoth in both its mobile phone and communications infrastructure business segments. It has also fueled the on-going trade war between the US and China.
Chen told the newspaper Huawei would survive the onslaught and gradually shake free of the attempted shackles using its technical expertise and enter new markets and revenue sources where it would be less dependent on Western technologies, such as electric cars, smart devices, and AI.
The path forward was clearly telegraphed by noting that “we now realise that many of the technologies we developed can be applied to industries outside communications and create value. In addition, these technologies are independently developed by Huawei, meaning they rely very little on US technologies.”
As well as the stringent trade sanctions, many European governments, led by the UK, have mandated their network operators from using gear from the Chinese group to build their 5G networks, and indeed, much to their chagrin and costs, to strip some existing gear from their existing communications infrastructure.
She does of course have a point when claiming that many of these decisions were “based on political considerations.”
The depth of the troubles was highlighted in the company’s last trading statement, which indicated global revenues fell by 38% compared to the previous year.
“The challenge we face is not the result of some internal problem. Instead, it’s external pressure. In fact, this challenge has reignited the passion of our over 190,000 employees,” she told The Guardian.
About half of these work in research and development, which has driven the company’s amazing rise over the past years. “Our investment this year will remain around $20 billion (€16.8 billion).
According to a report from Europe, Huawei has ranked as one of the top R&D spenders for 10 consecutive years,” she stressed.
And, to be fair, Europe has been a beneficiary of that huge effort to lead in many sectors of the communications equipment sector, with highly regarded advances at several of its European laboratories.
But that vast number (and salary bill), of course, utterly contradicts her suggestion that Huawei could be regarded as a startup, rather than, as this correspondent’s experiences over the years have indicated, being perhaps the most bureaucratic and hierarchical of corporations
Chen also admitted that Huawei currently has no solution to the restrictions on advanced chips that it faces, “so our revenue from this business has suffered. The chances are that companies in China, Europe or other will address the obstacles to advanced chips. At this time, Huawei might make a comeback in the smartphone business.”
And in a last, defiant, dig at the countries that have imposed such stringent sanctions against its products, she asserted: “I think most countries would choose to work with Huawei if they made decisions based solely on technological considerations.”
Having said all that, Chen was not entirely out of order referring to Huawei’s startup ambitions.
Last year, the company launched what it calls Spark — a hybrid accelerator project to support a sustainable ecosystem for the Asia-Pacific region. Last month, it said it would pump a further $100 million (€840 million) so that companies can use its cloud software. It said the purpose of the initiative was to “incubate and accelerate startups for a fully connected, intelligent world, as a friend and partner.”
The target and not so hidden agenda, of course, is to become Asia’s leading cloud provider, and thus expand its international digital power. It plans to recruit 1000 startups into the program and shape a tenth of these into ‘scale-ups’.
Huawei has already been helping companies in Singapore, Hong Kong, Malaysia, and Thailand build startup hubs, and at last month’s inaugural Spark Founders Summit, said it would add companies in four other countries to the scheme — in the Philippines, Vietnam, Sri Lanka, and Indonesia. It is working with local governments, incubators and established VC firms and top universities on the initiative.
Opening the summit, Chen noted: “Startups and SMEs are the innovators, disrupters and pioneers of our times.”
She could not stop herself referencing that Huawei was itself a startup 34 years ago, with just 5000 dollars of registered capital. “Recently, we have been thinking: How can we leverage our experience and resources to help more startups address their challenges?” noted Chen.
How public spirited.
This article was originally published on EE Times Europe.