Huawei closes its enterprise business unit in Russia

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Financial Associated Press, December 19th, according to the “Kommersant” report, Chinese telecommunications equipment manufacturer Huawei is closing its enterprise division in Russia, which is responsible for providing information and communication technology solutions to corporate customers in the country. The newspaper said Huawei would continue to maintain its research and development centers in Moscow, St. Petersburg, Nizhny Novgorod and Novosibirsk, which are developing 5G technology, speech processing and generation, and computer vision technology, augmented and virtual reality systems and machines study etc.

Further reading:

Financial Times: Huawei faces a dilemma in Russia?

April 1, 2022

According to the “Financial Times” report on March 31, in 2014, Russian President Vladimir Putin asked Huawei for help in rebuilding and upgrading the communication infrastructure in the Crimea region. Hosuk Lee-Makiyama, a telecommunications expert at the European Center for International Political Economy, said that in Crimea, Russia “dumped Western telecom equipment players in highly militarized areas and replaced them with Huawei and ZTE”. He believes that if Nokia and Ericsson really withdraw from Russia completely, Moscow will “need Chinese companies more than ever, especially Huawei.”

Despite an initial slump in handset shipments, Huawei’s handset sales in Russia rose 300 percent in the first two weeks of March, while sales of other Chinese brands Oppo and Vivo also rose, according to analysts at Russia’s largest mobile operator MTS. triple-digit growth.

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Source: Financial Times

Huawei has four research centers in Russia and is hiring dozens of engineers, including machine learning scientists in Novosibirsk, speech recognition researchers in St. Petersburg and big data analysts in Nizhny Novgorod. Huawei has also added new sales and business development opportunities in Moscow. But experts say Chinese technology companies such as Huawei and Xiaomi risk violating sanctions if they continue to ship mobile phones and telecommunications equipment to Russia.

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Huawei’s consumer business (red curve) has been hit hard in recent years Data source: Financial Times

The “Financial Times” stated that Huawei may be subject to more sanctions from Washington-just as Trump launched the sanctions against ZTE in the past. Kevin Wolf, a former Commerce Department official, said: “Huawei and other Chinese mobile phone manufacturers cannot legally export to Russia. It’s hard to believe that they can’t make a cell phone or a base station without relying on American technology to make a chip.”

Huawei has struggled to wean itself off the U.S. semiconductor supply chain since sanctions imposed by the Trump administration cut off its access to chips. Guo Ping, the company’s rotating chairman, told reporters on Monday that Huawei is working hard to redesign products to bypass the U.S. supply chain and get the same performance from chips with mature processes.

Huawei said on Monday that the sanctions had hit its smartphone business the most, causing revenue from its consumer business to shrink by 50% last year. Huawei’s total revenue fell 29% year-on-year to 636.8 billion yuan ($100 billion) last year, but sales in its telecom and enterprise business lines were roughly flat.

Huawei CFO Meng Wanzhou said: “The Huawei team has been under a lot of pressure in the past few years, which makes us more united and makes our strategy clearer.”

The withdrawal of Apple and Samsung from Russia, and the suspension of operations by Ericsson and Nokia in Russia, have left a gap in the supply of telecom equipment for broadband and mobile network infrastructure, which needs to be maintained and upgraded. Russia was one of the destinations for Huawei’s first foray into foreign markets more than two decades ago, and U.S. sanctions on Russia have deepened their relationship.

As in 2014, Russia needs a tech-savvy company to provide hardware support for Mir, the new sanction-resistant national payment system. Analysts say Huawei has already won most of the contracts to roll out 4G and 5G networks in Russia.

Huawei and Chinese peer ZTE have about 40 to 60 percent of the wireless network equipment market in Russia, with Nokia and Ericsson accounting for most of the rest, according to market research firm Dell’Oro. Huawei’s market opportunity could also tap into other Russian anti-sanctions projects, including the Hongmeng operating system it developed for its phones after losing access to Google’s mobile services. Vladimir Puzanov, CEO of Russian phone maker BQ, told Russian media last week that the company is considering installing Harmony OS on new devices.

“Huawei has a huge market share in Russia, and now the sanctions are like a 200-pound weight on their heads. What’s so scary about adding 20 pounds? However, as a commercial entity, Huawei may wait and see for a while.”

Matthew Borman, an export official at the U.S. Commerce Department, threatened on Tuesday that Chinese companies would face tough sanctions if they circumvent Russian sanctions. Borman said Washington has granted numerous export licenses to allow foreign suppliers to continue selling to Huawei, but those licenses could be revoked. Guo Ping said the company was “carefully assessing” the new sanctions. (Proofreading/Aaron)

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