Huawei Employees-Chairman Meeting Paint a Grave Situation for Corporation

Guo Ping
Huawei Rotating Chairman Guo Ping

A few days ago, Huawei Rotating Chairman Guo Ping had a one-on-one with employees for the Chinese tech corporation. The discussion was presented in minutes titled Don’t Waste A Chance at A Crisis.

According to the Chairman, the US trade ban that listed Huawei in the Entity List admittedly created a crisis for the company. However, Guo Ping added that the ban created an opportunity for Huawei as well.

The meeting was also marked by key questions from employees.

One of them, for instance, brought up the issue of chips, especially for mobile devices.

The U.S. crackdown on chips may have an impact on the mobile phone business we do, what are the company’s expectations and strategic goals for the future consumer business, especially mobile devices? 

The Chairman’s answer was cavalier at best, citing that the crackdown was started more than one year ago (May 2019).

“GMS was disabled last year. We bravely launched the HMS system, which is a very difficult thing, a mobile phone company to build the ecology,” says the Chairman.

For context, the halt from doing business with American companies was echoed in May when it was revealed that TSMC would no longer be taking new order from Huawei.

TSMC is the world’s largest chipmaker, and according to the company, ‘TSMC has stopped taking new orders from Huawei after the new rule change was announced to fully comply with the latest export control regulation.’

However, the order is not going to affect orders that Huawei had made for production – and the chips are said to be shipped before the mid of this September.

The question is important because Huawei usually announced new Kirin chips for its Mate devices around this time (during IFA, which has since been concluded). Huawei did not make any announcement at the summit – which makes us think it will ship the Mate 40 series of devices with Kirin 990 5G as seen in the P40 line.

To this end, Huawei will reportedly cut the production of the Mate 40 by 30 percent, most likely due to a drop in interest and shipment.

Nevertheless, Huawei’s goal is to build IC chips, a chip manufacturing plant, and chip fabs that will help it print designs without seeking the help of American semiconductor manufacturers.

Huawei’s printing plants will start producing chips using 45nm FinFET technology (to refer to transistor architecture) by the end of 2020. Huawei will then move to a 28nm line.

Still, the Chairman added, “But after this year we have achieved very good results, exceeding expectations. Now the crackdown on Kirin chips, our terminals, especially high-end mobile phone business will have some difficulties, but I believe we can solve.”

Another key question was raised:

The difficulties of GMS, to the overseas terminal business, has brought great challenges. I would like to know how you feel about HMS and GMS user barriers, and what kind of hope and advice do you have for those of us who are gnawing hard bones of these new employees?

For context, Huawei phones still run Android, but that operating system does not ship with GSM – meaning it does not have Google apps. Even more devastating is that there is no easy way to install GSM. As such, customers, especially in other markets besides Huawei are limited to AppGallery and other third-party app stores.

Huawei has been trying to address the app situation with an inhouse ecosystem replacement named HMS. However, it is obvious that the ecosystem will take an extended period to pick up especially in markets that are used to Google services.

The Huawei case deteriorates with the fact that there are competitors from its home turf that are ready to take its space in the mobile space or have already done so in select markets. The rivals are not battling Huawei issues.

To add salt to injury, customers move on fast, and while some are bound to loyalty, they can only wait for so long.

And to answer the question, the Chairman acknowledges that going the HMS way was a difficult decision.

“Our decision to make HMS is not a simple decision, very difficult, very challenging! But the progress so far has been better than we expected, and the world is looking forward to a new open system. In the fall of 2007, when Google launched Android, the first to announce its support was HTC, and Huawei was the second. So, since Huawei can help Android succeed, what reason does our own system not push for success?” asks Guo Ping.

We understand that Huawei has to say that, but one thing we have come to learn is that it is very, sometimes impossible to spur a revolution in the current tech space. The majority of users are invested in their platforms, and this is obvious because Huawei subtly anticipated it: in Q4 2020, its projections target to sell 8 million phones only.

Right now, Huawei is probably praying for one outcome: that the November US elections see a Joe Biden win.

This, probably, will help the company negotiate its way out of the Entity List. Of course, there are many hurdles that need to be jumped (meaning it will not be easy).

For the time being, Huawei is stalling as much as it can with new product development and announcement, likely till the end of the year when the political climate in the US will likely change it position for the better, or continue burying its business.