Huawei SA upbeat despite US-China battle

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In the most recent development in the US-China trade war, the US will allow expanded sales of US tech supplies to Huawei.
In the most recent development in the US-China trade war, the US will allow expanded sales of US tech supplies to Huawei.

Huawei’s South African operations are continuing with business as usual, following the partial lifting of the ban imposed on the Chinese telecommunications giant by the US.

The company has not received any official confirmation, says Likun Zhao, VP for Huawei Consumer Business Group Southern Africa, remarking on the latest developments in US president Donald Trump’s battle with Huawei.

“We will continue the existing plan,” Zhao states. “We have designed plan A and plan B. In terms of plan A, we will cooperate with Google for the Android system, and for plan B, we have our backup operating system (OS), but we have put plan A as first priority.”

Akhram Mohamed, CTO of Huawei Consumer Business Group SA, adds: “Prior to president Trump making his statement, as it was, for us, it’s the same. While we acknowledge his comment, nothing has come out of it thereafter.”

Mohamed continued to say from their side, there aren’t any further comments except to wait and see. “For us, it’s still business as usual.”

Elaborating on what plan B entails, Mohamed says this is the company’s own technology and OS, which Huawei has been working on for many years.   

According to Mohamed, this is something Huawei has full control of and not just a situation where it will have to be built tomorrow. “Either way, for us, it’s just deciding which direction to head into, but it’s not going to affect any future business or developments from Huawei.”   

Trade talks back on

In the latest development of the US-China trade war, last month, Trump said he would allow expanded sales of US technology supplies to Huawei, as the world’s two largest economies agreed to resume trade talks.

The US, which put Huawei on an export blacklist citing national security issues, has for months been rallying its allies to cut Huawei out of planned 5G networks, citing “national security threats” due to the company’s close ties to the Chinese government. Huawei has denied installing any backdoors in its networking equipment for alleged government spying.

The blacklist has seen firms such as Alphabet’s Google and British chip designer ARM limit or cease their relationships with the Chinese company.

In May, Trump issued an executive order, declaring a national emergency over ICT threats "posed by the unrestricted acquisition or use in the United States of information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries".

The US Department of Commerce then officially placed Huawei and 70 of its affiliates on the Bureau of Industry and Security’s “entity list”, effectively banning the firm from buying components from US companies without government approval.

The commerce ban does not stop US companies from buying Huawei gear, but instead bans Huawei from obtaining its supply chain components from US companies.

Smartphone confidence

Despite the Google ban, Huawei still has a good relationship with the Alphabet-owned company, according to Mohamed.  

The Chinese telco has, in the past, tried to reassure its customer base, saying it will continue to provide security updates and after-sales services to all existing Huawei and Honor smartphone and tablet products, covering those that have been sold and those that are still in stock globally.

Mohamed reiterates that all Huawei mobile phones that are in the market, those that have been produced and up for sale are fine.  

In terms of future devices, he says the company has the two options noted earlier. “The hardware is ready and we have full hardware capability, so the product cycles will still take place.”

He adds: “Right, we are waiting…if it’s for Android, there will be the customisation and working with them. We have been collaborating for a long time.

“Google, as a supplier, releases updates, tests and beta software much earlier, so we’ve been a key part of this ecosystem and development of it. For example, we’ll be rolling out beta of Android Q very soon for our older products.

“We have access to the platform; if it’s a go-ahead with Android, then we’ll continue business as normal because we have access to that and it will just mean loading it onto the phones.”

Commenting on why the company doesn’t immediately go ahead with its own OS, Zhao says plan B is not a first priority. “We think it will not be easy for the consumer to accept this new system, but we will continue if we have to implement plan B. We hope to follow plan A.”

Huawei launched the Honor 10 Lite in April.
Huawei launched the Honor 10 Lite in April.

Honor CEO Raymond Liu says despite the challenging climate, his company has managed to double its market share in the South African market since the launch of Honor 10 Lite in April.

Honor is the smartphone sub-brand of the Huawei Group. “Currently, we are well on track to be the number four smartphone brand through the channels we have been working with.”

Although there have been significant achievements this past half year, Lui highlights it hasn’t been easy, especially in light of the US-China trade war.

“As a new brand…it was painful for my business and also for me. However, we have managed business continuity because we have a strong foundation in terms of our technology.

“The support from our business and trust from our consumers has meant this incident has not beaten us down, but made us stronger. Google services are running normally.”

Partner ecosystem

According to Zhao, one of the main concerns from local partners has been about keeping Huawei users. “Huawei users are important and the main part of the partners’ user-base. The second concern for the business partners is balancing the competition of the different vendors.”

As of 16 May, all Huawei partners have been working together with the company to clarify the Google issues through a partner social plan, Zhao reveals. This action, he says, helped Huawei minimise concerns and worries for local consumers.

“We thank all our business partners, including operators, retailers, distributors and many suppliers.

Speaking to the US restrictions on the Huawei brand, Zhao notes by the end of June, the company had lost a little in terms of brand consideration.

However, at the same time, it recorded good progress in regards to innovative and leading technology. “In terms of awareness, we are still very high. But when it comes to consideration, we lost a little.”

Strength in numbers

Looking at revenue locally, Zhao says in June, Huawei’s Consumer Business Group grew by 30% compared to last year.

“I have full confidence that by end of this year, we can achieve positive growth revenue for the whole year.”

In March, Huawei said its revenue grew 19.5% in 2018, surpassing $100 billion for the first time.

However, last month, Huawei founder and CEO Ren Zhengfei said the US restrictions will take $30 billion off its top-line over the next two years, with revenue expected to decline to about $100 billion this year.

While many may expect day-to-day business and staff morale to be down at Huawei’s local office, Mohamed says things couldn’t be more opposite.

“The strength comes a lot from what we have built, globally and in South Africa, over the last couple of years. Of course, there will be some negativity and some decline, but not what people anticipate it to be. It’s still business as usual.” 

President Cyril Ramaphosa.
President Cyril Ramaphosa.

Presidential endorsement

Perhaps the best form of local support Huawei has received is the endorsement by president Cyril Ramaphosa.

This marked the second time Ramaphosa threw his weight behind Huawei. Last month, China’s Xinhua news agency reported the South African president met with his Chinese counterpart, president Xi Jinping, on the side-lines of the G20 Summit in Osaka, Japan.

Here, both presidents affirmed their commitment to mutual co-operation between the two countries, according to the news report.

Ramaphosa was quoted saying: “South Africa welcomes and supports Chinese companies, including Huawei, to invest and operate in the country, and is ready to intensify communication and co-ordination with China within such multi-lateral frameworks as the G20 and BRICS.”

Addressing attendees at the first South African Digital Economy Summit last Friday, Ramaphosa said the standoff between China and the US, where Huawei is being used as victim because of its successes, is an example of protectionism that will affect the country’s own telecoms sector, especially in the efforts to roll out 5G.

According to the president, telecom companies got together and wrote him a letter saying the tussle happening between China and US around Huawei is going to hurt them, expressing they can’t go to 5G without Huawei.

“We support a company that is going to take our country and indeed the world to better technologies, and that is 5G.

“We cannot afford to have our economy be held back because of this fight. We are pleased that at the G20 Summit, China and US were able to meet and they said they will relax some of the constraints being imposed on Huawei, so that it can continue to deal with other various companies,” said Ramaphosa.
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