Huawei bets on ports and factories to recover

TIANJIN, China (HPD) — As technicians in a distant control room watch screens, an automated crane at one of China’s busiest ports moves cargo containers from a Korean cargo ship onto remote-controlled trucks. It’s a scene that tech giant Huawei sees as its future after US sanctions weakened its mobile phone brand.

The backbone of the “smart terminal” at Tianjin port, east of Beijing, is a data network built by Huawei, a Chinese company that has had to reinvent itself as a provider of autonomous vehicles, factories and other industries it hopes will be less vulnerable to escalating Washington’s feud with Beijing over technology and security.

China’s ruling Communist Party is promoting automation in various industries — from manufacturing to taxis — to keep China’s economy growing as the workforce ages and shrinks. 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, site managers say.

“We believe this solution in Tianjin is the most advanced in the world,” says Yue Kun, director of technology in Huawei’s business unit for port management. “We think it can be applied to other ports.”

Huawei Technologies Ltd., which makes mobile phones and is the world’s largest provider of network equipment to phone companies, ran into serious trouble after then-President Donald Trump cut off access to US microprocessors and other technology in 2019 as part of a dispute with Beijing over national security issues.

Washington alleges that Huawei poses a security risk because it could use its access to foreign telephone networks to facilitate Chinese espionage, 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.

Mobile phone sales outside China collapsed after Huawei lost access to music, maps and other services from Google, an Alphabet Inc. company, that consumers expect to see preloaded on their phones. In 2020 Huawei sold its low-end Honor brand in hopes of reviving sales, cutting it off from sanctions on its corporate parent.

Huawei, with a workforce of almost 200,000, has remained the top maker of networking equipment thanks to its sales in China and other markets where Washington has been less successful in encouraging other governments to shy away from that venture.

“Huawei is already a key player” in the field of data networks, with a significant “stock of knowledge,” says industry analyst Paul Budde.

The company has created 20 work teams to focus on the needs of factories, mines, hospitals, ports, power plants and other industrial customers. It says its auto industry unit has 3,000 people working on self-driving vehicles and invested the equivalent of $2 billion in 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, however, is geopolitics,” Budde adds. “That will hinder their participation in foreign markets… The problems are not technological, but purely political,” he asserts.

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

China then arrested two Canadians on espionage charges as part of its efforts to win Meng’s release. Ultimately, the Canadians were released in September 2021 after Meng was allowed to return to China under a deal with US prosecutors in which she took responsibility for misrepresenting Huawei’s dealings with Iran.

Huawei says that with its renewed focus it is helping revive the company’s trajectory.

“In 2020, we successfully exited ‘crisis mode,’” Eric Xu, one of three Huawei executives who take turns as chairman, said in a letter to employees in December. “The US restrictions are now our new normal and we are back to business as usual.”

Revenue last year is forecast to be little changed from 2021, at 636.9 billion yuan (91.6 billion U.S. dollars), Xu added. That was below the double-digit growth Huawei had a decade earlier, but it was a rebound after falling 5.9% in the first half.

Xu did not disclose the breakdown by business line, but in 2021 Huawei reported sales to industrial customers of 102.4 billion yuan ($16.1 billion). Sales of phones and other devices fell 25.3% 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 been involved 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 declines after reaching a peak in 2011. That group has shrunk by about 5%. Their share of the population slid from 70% to 62%.

Tianjin port managers told Huawei they were already having trouble finding and keeping truck drivers, according to Yue, Huawei’s chief technology officer for ports.

“This can help address the problem of population ageing,” he adds.

He 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 networking 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 believes he has the potential to replace Huawei’s lost sales in cellphones and other telecommunications, as long as foreign buyers don’t turn away over security concerns.

The Tianjin port’s fleet of 88 autonomous trucks is loaded with wind turbines, according to a port spokesman, Peng Pai.

“It is much safer and uses clean energy,” Peng added.

The terminal’s brain is in a control room on a third level, with floor-to-ceiling windows overlooking the port. There are a dozen operators seated in front of up to six screens each, showing videos of computer-controlled cranes lifting cargo boxes up or down from ships. Each operator can monitor up to six cranes at a time, unlike a traditional operator, who tends to a single ship.

Previously, “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 direct 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 “direct control rate” to 0.1%, that is, one container in 1,000, while computers manage 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.

“There is no perceived delay,” Liu said.

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

“I really don’t know the answer to your question,” Yue replied 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 or the water.”

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