How has Huawei changed since you came aboard in 2010?
It’s an interesting company in the way that it’s come up on the global stage, because up until we mainstreamed our consumer business we’ve largely been a B2B company, and in the telecommunications infrastructure industry, the universe of customers for firms like Huawei numbers in the hundreds. And so, from a brand-building perspective, it’s less about what you would perceive in terms of traditional brand awareness and perception and marketing, and more building really innovative stuff that’s efficient and well-priced. And again, given that your target customer is very discreet, you’re really relying on word-of-mouth on steroids.
I started in 2010, and our revenues that year were around $27 billion. But we were largely unknown outside that universe of infrastructure customers. 2011 we hit $32 billion; by 2013 it was $39 billion and by last year it was $46 billion. The jumps to the $39 billion and $46 billion are showing the growth of the consumer business. What you’re seeing is that the company has ventured away from B2B and complementing it with the consumer business is a recognition of the need of brand.
And with the Mate 8 smartphone being highly regarded by industry experts, what do you expect to achieve with it?
On the consumer side Huawei, like most companies in the devices space, has to earn its chops. And you generally do that when you start out by releasing heavy-feature phones. We are almost two years into mainstreaming the consumer business, and we have pioneered something we’re calling affordable smart, which is that we recognize that there was a significant population of consumers that was locked into feature phones. So we pioneered the affordable smartphone, which was basically a fully-featured Android device for sub-$149, the idea there being that we could unleash that consumer population to be better consumers of richer data, which is a benefit to the consumer but also to our carriers, who are looking to get involved in those revenue streams.
With the new devices, we’ve proven ourselves in terms of quality and reliability. We’ve now introduced a couple of beautiful flagship devices in the P Series, as well as the Mate Series. And moving forward we’re looking at another segment for the market: the folks who set the trends. So we’re also designing products for them that are going to be what an early-adopter wants to experience. It gives them a choice that until now has been populated by a very small number of handset vendors. What we’re looking to do is bring back choice. Last year open channel accounted for almost 41% of devices revenues. And if you look at our sub-brand, we shipped 20 million smartphones last year, $2.5 billion revenues. So we’re driving multiple channels over multiple devices to meet multiple lifestyle needs, which gives quality for broader brand awareness than some of our competitors, which could be described as one-or-two-trick ponies.
How important is it for that brand awareness that Huawei has become China’s biggest smartphone manufacturer?
The China market has always been very important for us. What we’re doing across our business, however, is 75% outside China. So it’s wonderful to have the home-market brand recognition. But it’s critical to extend that globally. We’re looking to extend our consumer brand especially in the United States.
With what’s been said in the U.S. media recently about Huawei and security, what can the company do to best extend its business there?
We’ve been very busy improving channels in rural markets in the U.S., which is very similar to what we began with in China. So you’re seeing smaller carriers in markets that are not as well-served. We are trusted in 170 different markets, and in this market we need to extend that understanding – by working with carriers, and looking to connect the unconnected. Increasingly it doesn’t really matter where the vendor is headquartered. We’re all reliable on the same global supply chains. We’re all building infrastructure globally. We have $46 billion revenues – we spent $8 billion procuring American suppliers. The flags become increasingly less relevant, and the political stuff falls by the wayside.
There’s also been a large amount of investing in cloud computing announced recently. How integral is that market to Huawei’s future?
About three-and-a-half years ago we created an enterprise business group that was carved out of what had been an existing infrastructure business group. What we realized was that a lot of what we were doing, in terms of telecommunications and increasingly IP infrastructure, for carrier customers, easily translated into enterprises that were looking to come up with campus or localized solutions. And in the infrastructure business we had also been at that time midwifing what would become Huawei Cloud, and distributing a business storage product line, which is what is coming out from the enterprise business.
So you look at the three businesses: you’ve got the networks business – that was last year, $31 billion revenues, 174 LTE networks across 100 capitals, which is pretty cool. Then you’ve got the devices business, that was $12 billion, and that was 30% increase year-on-year. Then you have enterprise, which is young, and revenues last year were a little over $3 billion, which was a 25% increase, but that business has great promise – and we recognize that there’s a lot of expertise in that industry. Our strategy is about being integrated; collaboration and working with partners like SAP and Accenture.
How does that increased convergence decide the company’s direction in terms of structure?
Well, do you remember WAP? It was heralded at the time, including by my then-employer Nokia, as being the end-all mobile internet experience. It wasn’t. Similarly, for the last 12 to 24 months we’ve been hearing people talking about the Internet of Things. It’s a vision, and one which will be gradually realized, then go on and we’re anticipating that by the year 2025 you will have 100bn connections, with tens of Gbs of speed and latency that is practically immediate. And in the context of over 100bn connections, the convergence of traditional telecoms and enterprises is that all the companies that are leaders in this industry are going to get challenged to meet that level of demand. We’re not concerned about one segment eclipsing or harvesting from another. The challenge is how can we meet that demand?
On a similar note, how will increased virtualization affect how Huawei approaches telecoms?
Part of that is what Huawei is already starting to do, which is taking the cushioned intelligence out of the physical network and into the cloud. And what we do by doing that is, those who are operating those networks – these telecoms or IT service providers, you’re reducing their costs by commoditizing the physical equipment and pushing the intelligence out to where you have much more scale and much more ability to manage more complex networks that you do when it’s built into multiple nodes.
Then if you get into it from a computing power perspective, you’ve seen the solutions introduced in the past three to five years, where companies have come up with various ways to take commodity off the shelf and virtualize them into a supercomputer. There are several flavors of this, but what everyone recognizes is that we’re going to need affordable processing at affordable prices.