Huawei Shifts Toward Software as US Sanctions Continue to Hurt Hardware and Smartphone Businesses

By Avi Ben Ezra Monday, April 26, 2021

Huawei, a major China-based tech company, said it plans to shift its focus from cloud computing and developing smart car units after its hardware business took a heavy blow from US sanctions.

Huawei logo.

New Products Launch as Huawei Pivots Away From Smartphones

The Chinese company rolled out new cloud computing solutions on Sunday as it aims to take on bigger companies, such as ecommerce business titan Alibaba. Huawei said it hopes the shift on cloud and software will “eventually increase the proportion our software and service business has in our total revenue mix.”

The move comes after US sanctions sent Huawei’s smartphone sales tumbling. In 2019, the US government placed the company on the so-called “Entity List,” a blacklist that bans companies from accessing certain US technology. Furthermore, in 2020, the US government also banned the Chinese tech company from accessing key chip supplies.

“Huawei is doubling down on pivoting to a software/cloud and services company,” Neil Shah, research director at Counterpoint Research, said.

Moreover, a China-based producer of EV units, Arcfox, rolled out their latest electric vehicle (EV) that utilizes Huawei’s latest technology. The latest EV model from Arcfox uses HarmonyOS as well as a system powered by an artificial intelligence (AI) system.

Arcfox Alpha S EV, the official name of the latest EV unit, is co-developed by Arcfox and Huawei. The Chinese tech company said it does not plan on producing cars itself but instead developing the technology that powers them.

Because of Washington’s decisions, the Chinese company is not able to ”procure critical semiconductor components and related tech” from the US, Shah added. Instead, the tech business is making efforts to emulate Google, Shah says, as most of the smartphones in the world are powered by Google’s Android operating system. Google also develops its own in-car software and runs a strong cloud computing business.

The tech business upgraded its Harmony operating system and made it compatible with multiple devices, including smartphones, TVs, cars, and more.

“The smartphone business is facing challenges, they have another mobile platform which is the car for them to utilize HarmonyOS. The car could be a big mobile platform to apply and use HarmonyOS,” said Will Wong, research manager at IDC.

The shift could make the tech business a much more serious competitor to Chinese tech giants. At the moment, Alibaba dominates the Chinese market when it comes to cloud computing, while the competition in the EV market is rapidly increasing as new entrants join the fight, including Huawei rival Xiaomi.

Apart from trying to leverage opportunities in cloud and auto markets, Huawei’s shift also represents a means of protection from potential geopolitics and further sanctions from the US.

Even though the US government has successfully cut off Huawei’s access to semiconductor supplies, hurting its software operations will not be as easy.

“It will be more protected when talking about geopolitics from the US,” Wong added, before adding that chips used in cars also require less sophisticated manufacturing effort compared to smartphones.

Huawei launched six new "innovative and revolutionary" cloud products and services to lure developers’ interest and reinforce its ecosystem.

Summary

Chinese tech company Huawei announced it’s shifting its focus to cloud and technology that powers smart cars and EV units after US sanctions battered its core smartphone business.

About the Author


Headshot of Avi Ben Ezra

Avi Ben Ezra is the CTO and Co-founder of SnatchBot and SnatchApp (Snatch Group Limited). He leads the Group’s long-term technology vision and is responsible for running all facets of the tech business which includes being the architect of the platforms and UI interfaces.

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