China’s Huawei Looks to Ports, Factories to Rebuild Sales

As technicians in a distant control room watch on screens, an automated crane at one of China’s busiest ports moves cargo containers from a Korean freighter onto autonomous trucks in a scene tech giant Huawei sees as its future aftermath. of US sanctions crushing their smartphone brand. .

The backbone of the “smart terminal” at Tianjin port, east of Beijing, is a data network built by Huawei, which is reinventing itself as a supplier to autonomous cars, factories and other industries it hopes will be less vulnerable. The worsening of Washington’s dispute with Beijing over technology and security.

The ruling Communist Party is promoting automation in industries from manufacturing to taxis to keep China’s economy growing as the workforce ages and begins to shrink. His managers say the “smart terminal,” part of Tianjin’s 200-square-kilometre (77-square-mile) port, allows 200 employees to move as much cargo as 800 used to.

“We believe this solution in Tianjin is the most advanced in the world,” said Yue Kun, CTO of Huawei’s ports business unit. “We think it can be applied to other ports.”

Huawei Technologies Ltd., which makes smartphones and is the world’s largest provider of network equipment for telephone operators, ran into trouble after then-President Donald Trump cut off access to US processor chips and other technology in 2019 in a dispute with Beijing over security.

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Washington says Huawei is a security risk that could use its access to foreign phone networks to facilitate Chinese spying, a charge the company denies. The United States and its allies, including Japan and Australia, have banned or restricted the use of Huawei equipment by their carriers.

Smartphone sales outside China collapsed after Huawei lost Alphabet Inc.’s music, maps and other Google services that phone buyers expect to see preloaded. Its low-end Honor brand was sold in 2020 in hopes of jumpstarting sales by separating it from sanctions on its parent company.

Huawei, with a workforce of nearly 200,000, has remained the top maker of network equipment based on sales in China and other markets where Washington has been less successful in encouraging governments to avoid the company. .

“Huawei is already a key player” in data networks with a “wealth of knowledge,” said Paul Budde, an industry analyst.

The company has set up 20 teams to focus on factories, mines, hospitals, ports, power plants and other industrial customers. It says the auto unit has 3,000 people working on autonomous driving and invested $2 billion in the technology in 2020-21. Huawei was one of the first developers of “smart city” networks for traffic control and police surveillance.

“The big black cloud here, though, is geopolitics,” Budde said. “This will make it difficult for them to participate in foreign markets,” he said. “The problems are not technological but purely political.”

US pressure on Huawei escalated into an international standoff in 2018 after its chief financial officer, Meng Wanzhou, daughter of its founder, was arrested in Canada on US charges related to allegations of violating sanctions. trade against Iran.

China arrested two Canadians on espionage charges, trying to win Meng’s release. They were released in September 2021 after Meng was allowed to return to China under a deal with US prosecutors in which he took responsibility for misrepresenting Huawei’s dealings with Iran.

Huawei says its new approach is already helping to revive the company’s fortunes.

“In 2020, we successfully exited crisis mode,” Eric Xu, one of three Huawei executives taking turns as chairman, said in a December letter to employees. “American restrictions are now our new normal and we are back to normal.”

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Revenue last year was forecast to be little changed from 2021 at 636.9 billion yuan ($91.6 billion), Xu said. That was below Huawei’s double-digit growth of a decade earlier, but an improvement from the 5.9 percent drop in the first half.

It did not give a breakdown by business line, but Huawei reported 2021 sales to industrial customers of 102.4 billion yuan ($16.1 billion). Sales of smartphones and other devices fell 25.3 percent from a year earlier in the first half of 2022 to 101.3 billion yuan ($15 billion).

The automotive unit, which supplies components and software for navigation, dashboard displays and vehicle management systems, has played a role in five models launched by three Chinese automakers.

The ruling party’s urgency about implementing automation has increased as the size of China’s working-age population aged 16 to 59 declined after peaking in 2011. That group has shrunk by about 5 percent. hundred. Their share of the population slid from 70 percent to 62 percent.

Tianjin port administrators told Huawei they were already having trouble finding and keeping truck drivers, according to Yue.

“This can help address the problem of population aging,” Yue said.

Yue said Huawei has talked to “people outside of China” who might use its port technology, but gave no details.

The annual market for port-related network technology is modest at $2 billion, but global sales of equipment to connect factories and medical equipment, automobiles and other devices run to $600 billion a year, according to Budde. He said he has the potential to replace Huawei’s lost smartphone and other telecom sales, as long as foreign buyers aren’t put off by security concerns.

The Tianjin port’s fleet of 88 battery-powered autonomous trucks is powered by wind turbines, according to a port spokesman, Peng Pai.

“It’s much safer and uses clean energy,” Peng said.

In a third-floor control room with floor-to-ceiling windows overlooking the harbor, a dozen operators sit in front of screens with as many as six screens showing videos of computer-controlled cranes raising or lowering cargo boxes from ships. . . Each can monitor up to six cranes at a time, unlike a traditional operator servicing just one ship.

“People had to work on top of the cranes,” said Yang Jiemin, vice president of Tianjin Port Group. “Now our operators can sit in an office and monitor equipment remotely.”

Operators take control of a crane or truck if sensors indicate a problem, according to Huawei’s Yue. He said the port’s goal is to reduce that “acquisition rate” to 0.1 percent, or one container in 1,000, while computers handle the handling of the rest from start to finish.

The high-speed network allows a crane or truck to react to a command in 1/100 of a second, even if the ships are 500 meters (one-third of a mile) from the control room, according to Liu Xiwang, manager of the department of port information.

“You can’t feel the delay,” Liu said.

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Yue, the Huawei executive, was reluctant to say whether it needs processor chips or other foreign inputs that could be affected by US sanctions.

“I really don’t know the answer to your question,” Yue said after being asked twice about the sources of critical components. She compared it to buying a cup of coffee: “I don’t know who provides the cup, the coffee beans and the water.”

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