Recently, ByteDance (the company behind TikTok) announced the purchase of $5.6 billion worth of Huawei advanced chips. These new Ascend AI chips are expected to fill the shortage caused by export restrictions on Nvidia’s chips, even though the US has allowed some versions to be sold in China.
But this is not just about a mega chip deal; it’s about Huawei, which generates approximately $118 billion in annual revenue and billions in profit. This is the company that was sanctioned by the US in 2019 and lost its deal with Google to use the Android system.
Despite the bottlenecks, the Chinese mega-manufacturer has staged a comeback with smarter devices, a smoother operating system, a line of electric vehicles that go head-to-head with Western car manufacturers, and the production of highly advanced chips. It is hard to say that any other firm has staged a more successful return after being sanctioned by the US. Huawei hails from Shenzhen. In 1987, Ren Zhengfei founded the company after leaving the Chinese military. Its main products at the time were telecom gear and equipment used in hotels to connect telephones from different rooms.
China in those days was opening up to the world. Western firms made big cities like Shanghai and Hong Kong their favorites and poured in investments. That’s where Huawei differed. Instead of targeting big cities brimming with competition, Ren Zhengfei decided to target smaller towns. There, Huawei established a strong presence. Ren Zhengfei encourages innovation and creativity within the firm. The R&D department now receives 20% of the company’s revenue, with half of its employees working in this sector exclusively. A collaboration with IBM in the 1990s helped make the supply chain and manufacturing smoother and more efficient.
Even before the rise of smartphones, Huawei had become a market leader in telephone and networking gear. Huawei uses a unique management technique where three major leaders rotate the role of running the company every six months. This helps maintain flexibility and prevents the company from being dependent on a single individual. Just before the major US sanctions, Huawei was the biggest global provider of telecommunication equipment. It still retains a top position, holding significant market share outside mainland China alongside competitors like Nokia and Ericsson.
In 2019, the US cited national security concerns, which were followed by blacklisting Huawei from receiving US-manufactured chips and using Google’s Android system. The impact was significant, amounting to a loss of up to $30 billion in 2019. However, it didn’t take long for the tech giant to introduce its own operating system. On August 9, 2019, HarmonyOS was introduced to replace Android on Huawei’s smartphones. New smartphones were launched that were homegrown with domestically produced chips.
While some believed China could not develop its own high-end chips, Huawei proved them wrong. The new smartphones sold quickly across the mainland. The company even introduced its own app marketplace, the AppGallery, which is now one of the largest in the world with nearly 600 million users. By 2023, with the support of the Chinese government and a large local market, Huawei’s revenue bounced back. Today, the company has expanded into cloud services, green energy, and cutting-edge electric vehicles. It remains a key player in 5G network technology in Asia, Latin America, and Africa. The restrictions from the West appear to have enabled Huawei to develop its own technology to rise again.