Huawei refocusing on cloud business presence amid smartphone challenges

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Huawei is working on building up its cloud segment amid increasing challenges to its smartphone business, reports the Financial Times.

In May, the U.S. Commerce Department issued new export controls forbidding vendors from selling specific American developed technology to the conglomerate. However, the government agency provided Intel with a license to supply to the brand electronic components, including server processors.

The Shenzhen-based telecom is also looking to expand its footprint in Russia to bolster its revenues.

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Huawei’s Increasingly Important Cloud Business

In 2019, Huawei generated $122 billion in gross revenue, half of which came from its consumer products division. However, the long-term survival of the company’s mobile device business became questionable after the Commerce Department announced its new rules. Now, the firm’s cloud computing business has become increasingly important to its overall financial picture.

Although Huawei’s HiSilicon chip-making department designs well-regarded handset processors, it cannot manufacture them. Until May, the brand depended on the Taiwanese Semiconductor Manufacturing Company (TSMC) to make its chips. However, the industry-leading fabricator cut ties with its old client after Washington issued its new regulations.

Huawei wisely amassed a backlog of smartphone central processing units (CPUs) in anticipation of the new U.S. export policies being enacted. However, the conglomerate admitted last month that it is running out of handset chipsets.

According to the Financial Times, the telecom’s cloud computing and storage offerings are not as robust as the services provided by domestic market leaders Alibaba and Tencent. But, the Chinese government is currently interested in financially supporting local online data service providers.

For that reason, Huawei elevated its cloud unit to the same level as its smartphone and wireless gear groups.

Huawei in Russia

The South China Morning Post reports Huawei wants to increase its presence in Russia because of its recent struggles.

The publication notes Huawei founder, Ren Zhengfei, said his firm would move the money it used to invest in the United States to the Eastern European country. The brand is working to hire more employees from the region and increasing the pay of its existing Russian workers.

The news agency’s article did not state if the Huawei executive mentioned any particular market interests.

However, the company worked with Russian wireless carrier MTS to bring 5G service to Moscow last September. The brand also teamed with Sberbank, Russia’s largest financial institution, to offer cloud services to the area in March.

Will Huawei’s Pivot Prove Successful?

Given the uncertain status of its mobile device business, Huawei is in desperate need of a figurative life raft.

As the world’s largest provider of telecom gear, it still has another robust revenue stream to sustain its operations. However, recent developments have put that segment of its business at risk. India recently banned the company from participating in its 5G build-out. The British government also revealed it would not let the firm construct its fifth-generation mobile data infrastructure.

With rivals like Ericsson snapping up 5G contracts across the world, Huawei could lose relevance within the sector.

On the other hand, Huawei has a lot of room to grow in Russia. At present, the Eastern European nation lacks the resources to build its own 5G networks. If the firm becomes a leading wireless gear and cloud service provider in the region, it could generate billions of dollars in foreign revenue annually.

Russian and China also have a healthy relationship, which means Huawei is unlikely to encounter the problems it faced in the U.S. And since the federation is a world superpower, its officials could help the telecom secure contracts in countries where it has influence.

Right now, Huawei is on course to experience a massive global contraction. But its renewed focus on providing cloud services could prove extremely lucrative in the long-term.

The firm’s big pivot could end up being the crucial change that saves the entire company.

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