Huawei Needs to Dissolve, Disperse and Seed China’s High-Tech Future

October 23, 2021

HUAWEI, a Chinese company that symbolizes the collapse of Sino-US relations, is a perfect business school case study. Less than two years ago, based in the southern boom town of Shenzhen, the company has surpassed its Nordic rivals Nokia and Ericsson to become one of the world’s leading suppliers of telecommunications infrastructure. It also overtook Samsung to become the largest seller of mobile phones. As with all good case studies, there are vibrant characters, from the founder Ren Zhengfei’s former Army officer and engineer to his daughter Meng Wanzhou, who was just released from the lead role in the first high-tech Cold War prisoner exchange drama. .. An epoch-making company. Like Sony in Japan in the 1980s, it helped transform homeland perceptions from one of the cheaper knockoffs to an eye-catching innovation. And that future may be at stake. The long arm of US law enforcement agencies hangs around the neck, which is constrained by lack of access to cutting-edge technologies such as 5G smartphone chips.

The question is what Huawei should do next. If U.S. sanctions and hopes tighten, global vice president Victor Zhang said last year’s research and development (R & D) budget reached $ 21.8 billion, driving a new set of business activities to be redefined. I hope I can do it. That future? Or do you need to quietly disband instead and disperse an army of 105,000 powerful engineers to seed a surge in new ventures? In short, should it remain a tall poppy or should it bloom a hundred small flowers?

It’s a pretty safe bet for Huawei to choose the first option. After all, it’s an employee-owned company with intense confidence. It has a business culture that never dies. The sales person is famous for drinking the person under the table to pursue a deal. It has the potential to become the national champion of President Xi Jinping’s mission to make the country more self-reliant in technology. And the Beijing government would hate the idea that it would wither under pressure from Uncle Sam.

However, the tough-it-out approach can be challenging. More than half of revenue in 2020 since the U.S. government branded Huaweis 5G gear as a national security threat in 2019 and restricted corporate access to chips made from U.S. equipment a year later. The smartphone business that was created has grown rapidly. According to research firm Dan Wang of Gavekal Dragenomics, sales plummeted from more than 60 million units in the last three months of 2019 to about 15 million units in the third quarter of 2021. In China, modern phones do not have a 5G connection.

Huawei remains the world’s number one supplier of telecommunications equipment, but its North and South American allies have banned it from 5G networks and other customers are worried about its long-term viability. Sales and market share are shrinking. Nevertheless, Huawei has a brave face. In Zhangs’ words, this is in the second startup phase. Every year, we spend at least one-tenth of our revenue on R & D (with a share of almost 16% in 2020). Zhang adds that this will help build new core ventures. It is expanding in a variety of areas, from supporting smart cars and semi-autonomous coal mining to infrastructure for cloud computing and power supply coordination in the energy market. None of these opportunities rely on state-of-the-art semiconductors.

Promoting that startup culture internally may work. But new initiatives don’t generate anything like Huaweis smartphone and network business revenue. One analyst describes a coal venture as a dying company meeting a dying industry. A better and bolder step is to embrace the Shunpetarian beliefs of creative destruction. Kill old companies and spawn new ones to disperse capital, ideas and talents.

Silicon Valley sets an impressive precedent. In 1957, eight so-called traitors left the Shockley Semiconductor Laboratory to establish Fairchild Semiconductor. Fairchild has become the backbone of a high-tech, risk-taking culture and has founded many other companies, including chip giant Intel and venture capital veterans like Kleiner Perkins. A Huaweis engineer at HiSilicon, a chip design unit, can do the same. This has the potential to advance China’s growing ambitions in the chip industry. This is demonstrated on October 19th when technology giant Alibaba announced a state-of-the-art server chip with a new custom build.

Huawei has no plans to spin off HiSilicon, Zhang said. The tactical withdrawal of companies in the smartphone business shows what the smartphone business can and cannot do. Last year, it sold its niche smartphone brand, Honor, giving it the freedom to circumvent US export restrictions. Honor student’s new phone now has access to American chips and software and services from American tech giant Google, but Huawei still doesn’t. Despite questions about how entrepreneurs will be honored with the support of the Shenzhen government, the industry’s reaction to the sale has been very positive in China and abroad, the company said. Ben Stanton of research firm Canalys reports. In addition, he believes Huawei’s best smartphone engineers have moved to Honor to maintain the engineering and sales culture of older companies.

Tall poppy syndrome

Not surprisingly, the honor also drew the attention of US foreign policy hawks, including Republican Senator Marco Rubio, who called it a threat to the Chinese Communist Party’s military and foreign policy on October 14, and Joe Biden. It urged the president to blacklist. This reminds us of how difficult it is for the companies behind Huaweis to shake off such accusations, whether true or not. Instead, engineers should be free to roam. If what Wang calls the China Putnik moment causes an explosion of domestic innovation, they could be more creative within a small group than within a company. The Brainbox released by Huawei may teach the United States a lesson on how counterproductive Nijerk technism is possible.

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This article was published in the printed Business section under the heading “Let’s make a hundred flowers bloom”.

Sources 1/ https://Google.com/ 2/ https://www.economist.com/business/2021/10/23/huawei-should-dissolve-disperse-and-seed-chinas-high-tech-future The mention sources can contact us to remove/changing this article

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