‘We have survived!’: China’s Huawei goes local in response to US sanctions




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In Huawei’s head office last month, staff gathered to celebrate the in-house development of software to replace a US system that, thanks to Washington’s export controls, the Chinese technology company was no longer able to purchase.

“Three years ago, we were cut off from the old ERP [enterprise resource planning] system,” said Tao Jingwen, a Huawei board member and president of its quality, business process and IT management department. “Today we are proud to announce that we have broken through that blockade. We have survived!”

Tao was speaking at the Huawei campus in the southern city of Dongguan, on a stage decorated with banners proclaiming the “heroes fighting to cross the Dadu River”, a reference to a gruelling march by the ultimately victorious Communist army in China’s civil war.

This latest declaration of progress offers a glimpse into how Huawei, helped by government grants and funding from Beijing, has tried to lead the way for Chinese companies eager to reduce their reliance on western technology as geopolitical tensions rise.

Since 2019, Washington — which claims Huawei is a security risk and fears it might facilitate Chinese spying — has barred American suppliers from selling to Huawei without export licences and prevented the company from using any US technology for chip design and manufacturing.

Huawei’s sales, profit and market share plunged after the controls were introduced. Its mobile phone business, once the world’s biggest by unit sales, has been decimated. Lack of access to chips meant it was forced to stop making 5G phones, a situation a company official described as a “joke”. In 2021 its revenue plunged by a third, though its profit was buoyed by the sale of Honor, a smartphone brand. Last year, the company said it was back to “business as usual”, forecasting a return to annual revenue growth this year.

Central to the Huawei strategy has been the desire to supplant established western technologies with local products, a long-term aim of Beijing that has proven costly and difficult.

With this in mind, China awarded Huawei government grants worth Rmb6.55bn ($948mn) in 2022, double the amount from the previous year. The company also received conditional funding tied to specific research projects of Rmb5.58bn, triple that of 2021, according to its annual report. In a statement, Huawei said: “Government support for high-tech research programs is par for the course in most countries. Huawei is no different from other companies in the industry that apply for this kind of support. For Huawei, this type of support accounts for an extremely minute portion of our total R&D spend.” It added that it spent a quarter of its revenue last year on research and development.

Source: Financial Times