Huawei’s quest to find back business

For Huawei, it was the war before the war. The Chinese technology company started having tough times even before the trade war was launched by the Trump administration.

During the pandemic, when global giants in Internet and telecom services saw a boom, Huawei was hearing the death knell.

While struggling to somehow stay in the smartphone business, it is now reinventing itself with a new business strategy to strengthen its foothold in cloud services, which is reflected in its Bangladesh's operation as well.

The Chinese tech company has already withdrawn its device distribution team from Dhaka that used to look after its smartphone business in Bangladesh.

Instead, the device unit was handed over to the local IT products distribution company Smart Technologies Ltd.

On the other hand, Huawei Technology (Bangladesh) Ltd is now branding cloud solution services in different sectors, including telecom, banking, manufacturing and education sectors.

However, Huawei Bangladesh said there is no way to link the United States ban on consumer devices with the withdrawal of the distribution team from Bangladesh.

"And our cloud services are not a new thing, we started it a few years back," said an official at the Huawei Dhaka office.

Officials said they have already inked deals with some Bangladeshi conglomerates, including IFAD Group, to provide cloud services.

Huawei smartphone ranking in the global market has dropped to the third position from the top that it secured in last April, says market analyst TrendForce's data.

The company's brand share in Bangladesh has started to fade out the same way as it has experienced in the global market – dropping to below 1% from around 4% back in 2019, according to data from the Bangladesh Mobile Phone Importers Association.

At present, Huawei's smartphone sales in Bangladesh market dropped below 3,000 units, while the demand is more than 25 lakh units annually.

Huawei's market competitors said distributors shut down some of its outlets across the country and switched to other brands.

A sales manager at one of Xiaomi's Bashundhara outlets said Huawei's presence in the mall has now shrunk to half a dozen outlets whereas it used to have around 20 in the large shopping centre.

However, denying the apparent winding up of the phone business, Huawei's existing distributors claimed that they were still opening new distribution outlets across the country.

Abdullah Al Mamun, national sales manager at Smart Technologies Ltd, who looks after the Huawei device, said the impact on devices because of the US ban is undeniable, but the brand's market in Bangladesh is progressing gradually.

"We have around 100 brand outlets across the country and 200 personnel who are employed for Huawei smartphone and device distribution," he said.

Besides the US, some European countries, including Britain and Germany, have blacklisted the Chinese tech provider on the same allegation of being a national security threat to the US, Europe and allied countries, something the company has strongly denied.

Due to such imposition and bar, Huawei's mobile and smart devices shipments to the US, the European Union, Australia and Canada have reportedly decreased.

Meanwhile, the Bangladesh Telecommunication Regulatory Commission (BTRC) is planning to launch 5G technology at the end of 2021.

When asked whether the regulatory authorities have any stance on Huawei, BTRC Chairman Shyam Sunder Sikder told The Business Standard, "At present, we do not have any decision on Huawei.

"We will think about it once we roll out 5G services."

Fall of a fast-growing brand

Huawei has primarily been focusing on telecom operations and smartphones that have driven the company to the top position in the world in the ICT infrastructure and smart device sector.

As per Huawei's annual report, the company has registered more than 200% growth in the last five years, which drove it to become the world's top brand.

However, the brand has started to feel the negative trend in its business since mid-2019, when the Trump administration started to impose various sanctions on it after deeming it a national security risk.

Under the US ban, Huawei's new devices cannot get access to US-based software, such as Android, Google Play Store and Gmail.

Due to this adverse business environment, users started to avoid the brand in fear of being left with limited functionality devices. Thus, Huawei has lost its dominant position in the global smartphone market.

Focus turns from smartphone to cloud

It all started from a US lawsuit, and in just two years, the company found itself fending a slew of allegations from American and European governments and businesses. Subsequent restrictions shut the doors one after another for the Chinese company's smartphones with the allegations of "backdoors inserted into devices to spy".

The measures initiated by the US and followed by the EU and others set a rare instance in global corporate history, pitching one single company against almost the whole world.

Huawei is finding ways to survive the storm, the worst in its history and maybe severest in the corporate world's experience.

Struggling under the US sanction and its impacts throughout the West, the smartphone maker is now looking towards cloud services as its primary focus, over its smartphone and 5G operations.

The global cloud services market is estimated to grow to $36 billion in the next five years with a 13% annual growth, and Huawei seeks to make its mark there.

Huawei's global public cloud business was launched in 2017 in China. However, observing the decline of its smartphone market, the Chinese tech company has started to increase investment in the cloud business.

According to Synergy Research Group, Huawei's share was 15.5% of the total $4.3 billion Chinese investment in cloud infrastructure until the second quarter of 2020.

The company has already set up cloud data centres in Brazil, Mexico, Argentina, Peru and Chile.

To ensure its domination on cloud business, the tech giant is gradually entering the regional markets, including Thailand.

The company's founder Ren Zhengfei said the company must build up its strength in cloud services, said a report of South China Morning Post early this month.

At the moment, Huawei has already been a leading cloud service provider in China. But its presence in the global cloud services market is still insignificant.

As part of its business transformation moves, the Chinese telecom giant has also reshuffled its management. Richard Yu, head of Huawei's smartphone business, has been tasked with the company's cloud and artificial intelligence unit from February 2021.

The man who was behind Huawei's advent as a top smartphone vendor will now see what happens to its smartphone business and how to race for a slice in the fast-growing cloud services market.

Ending the smartphone business?

Is it then washing its hands off from smartphones, its flagship business just months back?

Huawei has already seen its smartphone market share plunge outside China, effectively slowing its business growth. Consumer division, which includes smartphones, was Huawei's biggest revenue earner in 2019. It sold off its budget smartphone brand, Honor, and was in talks to sell its premium brands of smartphones Mate and P, says a Reuters report trashed by Huawei as "rumours".

"Huawei has no such plan. We remain fully committed to our smartphone business," says a Huawei statement.

The company has developed its own operating system, Harmony OS, to run its devices. The Shenzhen-based company's operating system has been updated further to make it able to "connect everything" in the future.

Company executives label it as a potential alternative to other operating systems like Android. In Bangladesh, a number of leading businesses are converting to this new operating system, a source aware of Huawei operations in Bangladesh disclosed.