From "Hole Filling" To "Survival", Huawei Faces New "Extreme Challenges"

After the US Department of Commerce planned to modify the export rules for Huawei, huge uncertainty enveloped the entire semiconductor industry. While waiting for Huawei's voice, we explored new cooperation models.

On May 18, at the first meeting of Huawei Global Analyst Conference, Guo Ping, Huawei's rotating chairman, said in his opening speech: "The past year has been a very difficult year for Huawei. When we entered the physical list last year, we were in a hurry. We have been communicating with customers, partners, and Huawei employees, and most of them can understand it. Now we are still communicating. The ban has brought great pressure on our operation and risk management, but the good news is that we are still alive and developing , inventory has increased significantly. "

Under the challenge of "mending holes", Huawei passed through 2019 safely, and the peak in 2020 was even more precipitous. Guo Ping said frankly: "Survival is Huawei's theme now."

In the face of further actions by the United States, Huawei has made predictions, "As for the new regulations two days ago, many situations are still unclear. It is still in the process of evaluation, and there is still no clear judgment on the development of subsequent businesses. Huawei, as an ICT equipment and terminal company, can design integrated circuits. However, it does not have the ability beyond that, so we are trying to find how to survive." Guo Ping told the media including the 21st Century Economic Report.

On the same day, Huawei also made a formal response to the new export control rules: Huawei strongly opposed the modification of the direct product rules of Huawei only by the U.S. Department of Commerce, "This revision of the rules will not only affect Huawei, but will also have a serious impact on relevant industries around the world. In the long run, the trust foundation of global cooperation in chip and other industries will be destroyed, and the conflicts and losses in the industry will be further intensified. The United States will use its technological advantages to suppress enterprises in other countries, which will certainly weaken the confidence of enterprises in other countries in the use of American technology elements It is America's own interests that will be hurt finally. "

A new round of competition has begun. Guo Ping said: "It is expected that our business will inevitably be affected. We will try our best to find solutions, and hope that customers and suppliers will work with Huawei to eliminate the adverse effects of this discriminatory rule."

Face difficulties and strive for survival

In the face of pressure, in 2019, "hole filling" became the main theme of Huawei. "Technological development was severely restricted, so Huawei increased its R&D investment in the past year. The R&D expenditure alone was 131.7 billion yuan, up 30% year on year, and the inventory was up to 167.4 billion yuan, up 73.4% year on year." Guo Ping told reporters, "We have paid a lot of efforts and costs, including redesigning more than 60 million lines of code, more than 1000 new boards, making new choices with new supplies, and so on. These investments have led to uninterrupted service."

Wang Yanmin, President of Huawei Consumer BG Global Ecological Development Department, talked about the progress of terminal ecological HMS overseas: "After the Google ecology cannot be used, (we) Forced to develop HMS ecology. In the past year, we have increased investment, especially in the use of platforms and technology platforms by developers. After May 16 last year, the investment in HMS ecology was increased. At present, there are more than 1.4 million developers, an increase of 150% compared with the beginning of 2019. "

From the performance in 2019, Huawei has maintained its growth. However, Guo Ping said that last year's revenue was about 12 billion dollars different from the original plan, and the growth of each quarter of last year was also declining. At the same time, it was more difficult to obtain contracts than before.

Although the United States is putting more and more pressure on Huawei, Guo Ping said that Huawei is struggling to survive and strive to move forward, and insists on globalization rather than isolation. In 2019, Huawei purchased up to US $18.7 billion from the United States. As long as the US government allows, Huawei is very willing to continue to purchase American products, but it will also cultivate more suppliers.

While Huawei continues to strengthen the "spare tire", it is also accelerating the remodeling of the supply chain. This time, the United States changed its export rules, mainly aiming at Huawei's chip manufacturing related industrial chain. As the core supplier of Huawei's chip OEM, TSMC told the media on May 18 that the company did not disclose the details of specific customer orders, and TSMC has always complied with laws and applicable regulations, and is evaluating the impact of the new export control measures.

On the other hand, Huawei is also preparing for the winter by increasing its inventory reserves. CITIC Electronics said in the report: "From Huawei's balance sheet, we can see that Huawei's inventory increased significantly in 2018 and 2019, mainly raw materials. In 2018, the proportion of raw materials in inventory reached a peak of 37.5% in recent years, and in 2019, the proportion of inventory in revenue reached a new high of 19.5%. Therefore, we can reasonably infer that Huawei stocked a large number of related components and products in 2018 and 2019 For a rainy day. On the whole, in history, it took about two months from the beginning of the self cutting of American suppliers to the resumption of supply to Huawei. Huawei itself has a certain inventory cycle. Although it may face some pressure in the short term, it is highly unlikely that the supply will be completely stopped. "

A semiconductor practitioner also told the 21st Century Business Herald reporter that the temporary license may be granted to enterprises after the ban is issued, as it was last year. The details of the rules are still unclear.

The United States is pressing

In fact, the suppression of Huawei by the United States is not a sudden impulse in the past two years. In the past 20 years, the United States has been continuously investigating and prosecuting Huawei. However, in these processes, Huawei has not become weak, but has grown to become a leader in the communications industry.

According to the reporter, there are three key points in the history of Huawei in the United States. In the past two years, there have been many ferocious means, but the logic of the United States has its continuity. It is still competing for interests in the communication industry, underlying technology, intellectual property rights and other aspects.

The first node was Huawei's early rise in 2003. Cisco sued Huawei, believing that Huawei had infringed its intellectual property rights. At the end of the lawsuit, Huawei and Cisco finally issued their own statements of reconciliation. One year later, in 2004, Huawei was in difficulty in business and almost decided to sell to Motorola, but finally it failed to reach an agreement. At that time, Ren Zhengfei, the founder of Huawei, put forward the assumption of extreme survival. If Huawei continues, it will be ready to compete with the United States one day.

As expected, the normal competition started soon. Since 2007, the United States has taken actions against Huawei almost every year, and a series of acquisitions have been blocked. From 2007 to 2012, Huawei's acquisition of 3com, 2Wire and 3Leaf was stopped, and the bidding in the United States was also interfered.

In 2012, Huawei ushered in the second wave of hard war. In October 2012, the United States House of Representatives released a report, believing that Huawei and ZTE, two Chinese communication equipment manufacturers, may pose a threat to the national security of the United States, blocking the two enterprises from the United States market. Cisco was also mentioned in the report of the House of Representatives, because the report said that "there is evidence that Huawei ignores the intellectual property rights of American companies and entities".

In 2013, Huawei became the first company in the communications industry in terms of revenue and ascended the throne. It can be seen that in the past 10 years, there have been many repeated lawsuits and issues. The competition between various purposes and the communication industry makes the hunting event around Huawei extremely complicated and involves a wide range. However, over the years, the United States has not mentioned Huawei's "hammer", but has "washed away" Huawei in another way.

Until 2018, the third critical turning point will come. In August 2018, the US National Defense Authorization Act for Fiscal Year 2019 was passed. Article 889 of the Act requires that all US government agencies are prohibited from purchasing equipment and services from Huawei. Then, at the end of the year, the Huawei senior management incident occurred. Then, on May 16, 2019, the United States directly included Huawei in the list of entities, cutting off the cooperation between some American enterprises and Huawei. Huawei had to readjust its direction and take out the spare tire that had been studied with great concentration for a long time. Its chip design company Hisense came into the public's view. This year, the United States pointed directly at Hisense to cut off the manufacturing process of chips.

More importantly, semiconductor is also the underlying foundation to support communication and 5G development. It is worth noting that in 2016, something happened in the communication industry. In 2016, Huawei's Polar Code scheme became an eMBB scenario coding scheme for the 5G control channel. In 2019, Huawei won more votes than Qualcomm and was elected president of the Global 5G Standards Association. Although China has not pressed the U.S. communications industry, this indicates that Chinese communications manufacturers have a higher voice in the 5G era, and the industrial boundaries between the two countries are colliding.

On February 6, 2020, U.S. Attorney General William Barr said in his speech that China's technological offensive posed an unprecedented challenge to the United States. 5G technology is at the center of the emerging future technology and industrial world. 5G relies on a series of technologies, including semiconductors, optical fibers, rare earths and materials. China has begun to nationalize all these elements. In the next five years, the 5G global map and application dominance pattern will become. Can the United States and its allies compete enough with Huawei to maintain and occupy sufficient market share and maintain a strong competitive position? This time window is very short, so the United States must act quickly.