Can Huawei’s 5G-powered Tianjin Port redefine its enterprise business?

The road through northern China’s biggest seaport in Tianjin cuts through two worlds. At the berths on the road’s right, quay crane operators sit in cockpits 50 metres (160 feet) above ground, deftly manoeuvring cargo containers between trucks and ocean-going vessels, moving between 28 and 30 boxes an hour.

At Terminal C on the left of the road sits Tianjin Port’s “Smart Hub”, a fully digitalised and automated wharf where quay cranes, gantry cranes, stackers and forklifts are all controlled by a command centre miles away. Powered by Huawei Technologies’ 5G telecommunications infrastructure, the smart port can move 36 20-foot boxes (TEUs) per hour, much faster than humans.

Digitalisation “is the industry trend, a direction not just for Chinese ports, but for all global ports”, said Tianjin Port Group’s vice-president Yang Jiemin during a recent visit by the South China Morning Post. “Our goal is to build a digital twin to Tianjin Port in the next three to five years”.

Tianjin Port is the latest technological showpiece of Huawei, as the world’s largest provider of phone network equipment reinvents itself after nearly four years of crushing US sanctions, which have eviscerated its once-successful smartphone business and driven almost all its network gear out of North America, Europe and Australia.

The Shenzhen-based behemoth – with 195,000 employees on staff in 2021 and one of the world’s largest research budgets, surpassing even Google and Microsoft – is now promoting the advantages of 5G-enabled digitalised services to modernise the backbone of China’s industrial production in coal mines, ports and even hospitals.

The benefits of automation are clear. A staff of 200 operators and engineers can manage 1 million TEUs in annual throughput at Tianjin Port’s Terminal C, about 25 per cent of the employees needed in a typical year during its pre-digital age. The future has more in store: artificial intelligence (AI) for predicting congestion, big data analysis for parsing traffic trends and driverless trucks – all made possible by the ultra-fast exchange of data in 5G networks.

Huawei made it into the US government’s cross hairs when Donald Trump took over the White House in 2017. A security review ordered by the Obama administration in 2012 found no evidence of Huawei spying for the Chinese government, although deficiencies in its products’ security threatened its customers.

Still, Trump banned the telecoms equipment made by Huawei and ZTE from being in US government networks in 2018, citing national security, and put them on a so-called Entity List of export restrictions a year later to deny them access to US hardware and software.

As the US stranglehold tightened around Huawei’s access to critical technology, the company’s smartphone business – which beat Apple to become the world’s second-biggest smartphone maker in 2018 -came under tremendous pressure. Deprived of Google’s Android operating system and short of vital components, Huawei sold its Honor budget smartphone business in 2020, one of the biggest drivers of its spectacular success.

Huawei then pivoted back to its mainstay enterprise business, opening up new data-heavy products and services for customers to increase their usage and dependence on its 5G telecoms infrastructure.

The company established so-called “legions” to spearhead the effort, a nod to the military parlance much-liked by its founder Ren Zhengfei, who served in the People’s Liberation Army. These cross-departmental business units were established to help clients digitally transform their products and services in mining, customs clearance and ports, energy savings at data centres, smart highways, and the photovoltaic industry.

In June last year, Huawei added five legions, bringing the total number to 20. While Huawei has not disclosed details about each legion, the chief executive of its airport and road legion Li Junfeng said Huawei was hopeful about the digitalisation of transport.

“Airports and roads are also key infrastructure and it is difficult to expand in the overseas market. So we do not have plans for global expansion in the short term, but we will make some changes next year,” Li said last November, according to the state-owned Securities Times financial newspaper.

For Huawei, hopes are high that such industrial infrastructure can turn into a source of steady revenue – at least domestically – although the company has declined to divulge the financial details of its showcase applications.

Huawei’s efforts to forge deeper ties with traditional industries build on its past work with the world’s private enterprises, leveraging its 5G connectivity and computing power to automate and upgrade various verticals, says Matthew Ball, chief analyst at the research firm Canalys.

“Overall, this is an extension of what Huawei has done for years, even before the US sanctions, particularly its enterprise business which had a strong vertical focus on delivering solutions across its portfolio,” Ball said. “It’s just that its smartphone business has received more headlines.”

The jury is still out on whether Huawei can survive US sanctions, especially given Western reluctance to allow the Chinese giant future access to potentially sensitive data and network infrastructure contracts on national security grounds. The company has already undergone huge change since former Trump added it to a trade blacklist in May 2019, barring it from doing businesses with US partners without special permits.

Huawei’s rotating chairman Eric Xu said in a new year’s message that the company had exited “crisis mode” and was ready to go “back to business as usual” in 2023. The bleeding has been staunched after it reported preliminary revenue of 636.9 billion yuan (US$93.8 billion) for 2022, little changed from the previous year.

The pressure continued on Huawei, even after Trump lost his re-election bid. Reports emerged last month that Joe Biden’s administration is considering cutting off Huawei from all of its US suppliers, including Intel and Qualcomm, which produce the semiconductor chips critical to the Chinese company’s telecoms gear.

Huawei has been reporting its annual financial results since 2000, even if it is not subject to public disclosure regulations, a practice from bidding for tender contracts in public telecoms networks.

The share of China revenue in its overall business has increased from about half in 2018 to about two-thirds in 2021, due to a retreat from almost all overseas markets, including Asia-Pacific, the Americas and Europe, Middle East and Africa, according to its results.

Its consumer business – mainly smartphones and devices – has been hobbled by lack of access to advanced chips. At one point, Huawei briefly surpassed Apple and Samsung Electronics to become the world’s biggest handset vendor, but is now out of the top 5. By the third quarter of 2022, it finally ran out of less advanced in-house-designed semiconductors for its handsets.

Huawei’s carrier unit – once its bread and butter business of selling telecoms gear – has slipped as China telecoms operators gradually complete network upgrades. In 2021, Huawei’s carrier business revenue was 40 per cent lower than in 2019 when China began 5G infrastructure installation.

That leaves enterprise as the only segment with growth, notching up a 2.1 per cent revenue increase in 2022, although its contribution was still less than one sixth of total sales. At the beginning of 2021, Huawei founder Ren told employees that the company must make cloud computing its priority, and personally endorsed the company’s partnership with coal mines.

The company is developing customised 5G mobile base stations that are resistant to dust, dampness and even shock waves from an explosion for the coal mining industry. These devices are expected to support stable and fast upload of real-time data from unstaffed machinery, sensors and high-definition cameras, which would help China’s most dangerous industry cut back on the number of people sent to work underground in the pits.

In June last year, Huawei added five legions, bringing the total number to 20. While Huawei has not disclosed details about each legion, the chief executive of its airport and road legion Li Junfeng said Huawei was hopeful about the digitalisation of transport.

“Airports and roads are also key infrastructure and it is difficult to expand in the overseas market. So we do not have plans for global expansion in the short term, but we will make some changes next year,” Li said last November, according to the state-owned Securities Times financial newspaper.

For Huawei, hopes are high that such industrial infrastructure can turn into a source of steady revenue – at least domestically – although the company has declined to divulge the financial details of its showcase applications.

Huawei’s efforts to forge deeper ties with traditional industries build on its past work with the world’s private enterprises, leveraging its 5G connectivity and computing power to automate and upgrade various verticals, says Matthew Ball, chief analyst at the research firm Canalys.

“Overall, this is an extension of what Huawei has done for years, even before the US sanctions, particularly its enterprise business which had a strong vertical focus on delivering solutions across its portfolio,” Ball said. “It’s just that its smartphone business has received more headlines.”

The jury is still out on whether Huawei can survive US sanctions, especially given Western reluctance to allow the Chinese giant future access to potentially sensitive data and network infrastructure contracts on national security grounds. The company has already undergone huge change since former Trump added it to a trade blacklist in May 2019, barring it from doing businesses with US partners without special permits.

Huawei’s rotating chairman Eric Xu said in a new year’s message that the company had exited “crisis mode” and was ready to go “back to business as usual” in 2023. The bleeding has been staunched after it reported preliminary revenue of 636.9 billion yuan (US$93.8 billion) for 2022, little changed from the previous year.

The pressure continued on Huawei, even after Trump lost his re-election bid. Reports emerged last month that Joe Biden’s administration is considering cutting off Huawei from all of its US suppliers, including Intel and Qualcomm, which produce the semiconductor chips critical to the Chinese company’s telecoms gear.

Huawei has been reporting its annual financial results since 2000, even if it is not subject to public disclosure regulations, a practice from bidding for tender contracts in public telecoms networks.

The share of China revenue in its overall business has increased from about half in 2018 to about two-thirds in 2021, due to a retreat from almost all overseas markets, including Asia-Pacific, the Americas and Europe, Middle East and Africa, according to its results.

Its consumer business – mainly smartphones and devices – has been hobbled by lack of access to advanced chips. At one point, Huawei briefly surpassed Apple and Samsung Electronics to become the world’s biggest handset vendor, but is now out of the top 5. By the third quarter of 2022, it finally ran out of less advanced in-house-designed semiconductors for its handsets.

Huawei’s carrier unit – once its bread and butter business of selling telecoms gear – has slipped as China telecoms operators gradually complete network upgrades. In 2021, Huawei’s carrier business revenue was 40 per cent lower than in 2019 when China began 5G infrastructure installation.

That leaves enterprise as the only segment with growth, notching up a 2.1 per cent revenue increase in 2022, although its contribution was still less than one sixth of total sales. At the beginning of 2021, Huawei founder Ren told employees that the company must make cloud computing its priority, and personally endorsed the company’s partnership with coal mines.

The company is developing customised 5G mobile base stations that are resistant to dust, dampness and even shock waves from an explosion for the coal mining industry. These devices are expected to support stable and fast upload of real-time data from unstaffed machinery, sensors and high-definition cameras, which would help China’s most dangerous industry cut back on the number of people sent to work underground in the pits.

The mining industry would be the first to use the model where scientists and experts from different corporate departments can come together to find solutions to specific industry problems, Ren said in 2021 in the Shanxi provincial capital of Taiyuan.

Enhancing end-to-end user experience, real-time processing of massive data, and the operation, maintenance and management of complex networks will all become challenges for the financial industry in the future, according to a June speech by Cao Chong, the head of Huawei’s digital finance legion, the Securities Times reported.

Huawei has also made a foray into the electric vehicle (EV) sector, with the high-profile launch of Aito cars, a brand launched jointly with Chinese electric carmaker Seres. However, competition is cutthroat in China, and Huawei ranked only sixth among Chinese EV start-ups with a total of 76,180 units by the end of 2022. The company has also forged ties with a series of carmakers offering smart car components.

The change in Huawei’s business is visible to consumers. On the ground floor of its Shenzhen flagship store, a three-storey building with a huge glass facade, customers approached a row of Aito cars during a recent visit, asking sales representatives about vehicle specs and available discounts. At the other end of the show room, Huawei’s latest smartphones and tablets were on display on long wooden tables.

While analysts are generally sanguine on Huawei’s new enterprise business moves, the digitalisation push is not expected to result in a short term revolution. “The enterprise business should be able to generate rapid growth in the next five to 10 years,” said Ivan Lam, senior analyst at Counterpoint Research.

But the ongoing threat of US sanctions remains the biggest obstacle for Huawei, according to Lam, especially for products that require advanced computing power like smartphones, servers and car components.

“Huawei has never treated existing sanctions as the last, and it has been preparing for new restrictions in various ways, such as adoption of domestic technologies,” Lam said. “We expect Huawei to reap the benefits of these efforts in upcoming years and close the gap in key technologies.” South China Morning Post