This Is Huawei’s Striking New Billion-Dollar Gamble To Take On Apple, Google (And Tesla)

Zak Doffman, Contributor

May 7, 2020

As we fast approach the 12-month anniversary of Huawei’s blacklisting by the U.S. government, the technical landscape between China and the U.S. has never been more complex. Smartphones and 5G base stations may still take all the headlines, but it is a new, media-shy business unit tucked away on Huawei’s campus that’s the perfect representation of where China’s tech giant goes next.

Huawei’s loss of Google, forcing them to replicate the Play Store and its underlying services, has sent China’s tech giant down an Apple-shaped path. A leading device manufacturer with its own app ecosystem, mobile services framework and OS. But suggest that to Huawei, suggest that if it can’t have Google it wants to be like Apple—end-to-end, closed, secure—and the company will push back. This is about openness, it will say, it’s about building a unique, open ecosystem.

Behind the scenes, this seems to matter more than marketing spin. If you want to get inside the strategy now being formulated in Shenzhen, forget Google’s Play Store, ignore the will he/won’t he press speculation around the U.K. prime minister’s potential reversal of the Huawei 5G decision, and look instead to a post-coronavirus vision of the intersection of AI, 5G and IoT automation.

China leads the world on 5G investments and smartphone take-up, a boon that has generated enough domestic revenue to catapult the company into overseas markets. But the country is also the world’s largest car market, and is likely to become the largest and most accepting market for electric and autonomous vehicles as well. No industry on the planet better captures the intersection of all these new technologies than automotive—that’s why everyone is playing.

Huawei will not be making cars—despite its chairman Eric Xu reportedly saying back in January that “if Tesla can do it now, we can all do it.” The company has no such plans. In its view, there’s no point, with some 70% of next-generation cars being more smart devices than mechanics. The value, the company believes, is in the electronics not the drivetrain. And this is the remit of its Intelligent Automotive Solution (IAS) business unit, to leverage investments in AI and 5G, utilising new chipsets and OS innovation to provide a 70% bolt-on to car-making OEMs.

Huawei says it invested more than 10% of revenues back into R&D last year, as it does every year. I’m told it was significantly more than that. No data is available as to how much was invested in IAS, the newest business unit, but the Huawei recipe remains constant—invest high to disrupt. The IAS business unit remains quiet, little of substance is being said—kind of like Apple’s. You can expect that to change.

“Huawei has set an internal goal of becoming the leading Chinese platform provider for self-driving vehicles by 2025,” the Nikkei Asian Review reported in March, citing industry sources. “Huawei’s attitude toward autonomous driving has turned very aggressive,” one of those sources said. “We have been asked to prepare a lot of tests [this year] even if the industry is under coronavirus threats.”

Huawei has two things in mind: First, to supplement its softening international smartphone business where the loss of Google continues to bite, and, second, to become China’s leading autonomous vehicle tech player as the likely east-west split extends to this sector as well. Domination in domestic markets will likely be a necessity for players in the space. Huawei can see what is going on at Google stablemate Waymo and at Apple in the U.S., it does not want to miss the opportunity to replicate its smartphone home market share in this sector as well.

Forget the little fleets of taxis jaunting around test sites and quiet city streets—this is about developing the AI to power military and industrial superiority. It’s the coming together of Huawei’s investment in silicon and the “un-Americanization” of its supply chain. It aligns with its dominance of China’s vast 5G deployments and the investments pouring into the firm’s newish Cloud and AI business.

Huawei’s main competition is in the U.S. Notwithstanding it has no ambitions—it says—to build the cars themselves, it wants to build and control the smarts, the self-driving AI systems that will define the space. In its sights is the hyper-scale Californian elite—Tesla, Google’s stablemate Waymo, Apple. Huawei’s strategy, as in most things these days, seems to echo Apple’s—albeit the company refutes this.

As ever with Huawei, you can see that its strategy clearly aligns with the strategy in Beijing—the automotive industry is undergoing huge disruption, and China sees this as an opportunity to elbow itself more onto the world stage. Tesla recognizes that it needs to match automotive engineering with OS and app development. Whether or not Apple is developing a car or just the ICT components, it’s clear that user cockpit experience is the primary focus. Huawei has been influenced by this and wants to stamp its good quality/lower price badge on the industry. This is how it disrupted the smartphone sector and network infrastructure before that. Now it has its eyes on AI chips and cloud services. And automotive.

Back in October, headlines suggested Huawei was developing plans, helping China keep pace with innovative manufacturers in Europe and the U.S. Those plans are now firming up. “We have worked extensively with 18 leading automakers and integrators on autonomous driving and applications for other related domains,” the company said in its last annual report. “The ongoing integration of cars with ICT is transforming our very concept of vehicles, with ICT gradually overtaking the importance of purely mechanical systems.”

Huawei’s automotive play brings together five separate dimensions from across its wider business: New AI chips that can connect multiple sensors and power the algorithms that make autonomous driving a reality; a smart cockpit designed as an extension of its HarmonyOS cross-platform user experience; power management leveraging its rarely discussed investments in that field; and then its “internet of vehicles” and “vehicle cloud services” to bring it all together.

The question facing Huawei now is how a tightening of U.S. restrictions might impact on its non-5G, non-smartphone business units. How will the U.S. take to this Chinese giant muscling into the tier-one next-gen automotive space while sitting atop China’s vast domestic market and with access to its balance sheet. This isn’t really about cars or phones, of course. This is about a geopolitical split between the U.S. and China that will fracture long-term big tech alliances east and west. The prizes are generational, and Huawei is now quietly stretching its goals

Source: Forbes “This Is Huawei’s Striking New Billion-Dollar Gamble To Take On Apple, Google (And Tesla)”

Note: This is Forbes’ article I post here for readers’ information. It does not mean that I agree or disagree with the article’s views.

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