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Huawei Xu Zhijun: Cooperating with three auto companies to launch sub-brand cars, this year’s goal is still to “survive”

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Produced | Sohu Technology

Author | Zhang Yating

On April 12th, at Huawei’s 18th Global Analyst Conference, Huawei’s rotating chairman Xu Zhijun responded to many hot topics such as “future goals”, “whether to build a car”, and “frequent adjustments to cloud business”.

He pointed out that Huawei’s goal this year is still to survive, “There is hope for survival, and strive to live better.”

Regarding the topic of car building, Xu Zhijun said that after years of discussion, Huawei’s conclusion of not building a car has been discussed. At a meeting in Sanya in 2018, Huawei decided not to build a car. This decision has remained unchanged until now. This year, Huawei’s investment in the research and development of smart auto parts reached US$1 billion.

He said that after discussing with German, Japanese and other car companies, he found that the industry does not need Huawei branded cars, but needs ICT capabilities to help them build future cars. When working with car companies, we hope to create new business models and jointly build some sub-brand cars with car companies to make cars truly face the future.

“We selected three car companies to launch three sub-brand cars, such as BAIC ARC FOX. A series of cars will be launched in the fourth quarter. We have also cooperated with Chongqing Changan and Guangzhou Automobile.”

Regarding the cloud business, Xu Zhijun said that the business model of Huawei Cloud is different and more developed in an independent manner. “When the Cloud and Computing BG was established, it was hoped to integrate servers and storage, but later discovered that the energy of the cloud was consumed in the development process. Now I hope to concentrate on developing the cloud and increase the proportion of software service revenue.”

The following is the full text of the Q&A of the analyst conference:

1. “South China Morning Post”: At present, we have seen many companies deploying in the field of smart cars. Under this circumstance, Huawei does not build cars. Will this strategy stick to it? The payback cycle of the auto industry itself is relatively long. Was this strategy made by Huawei to reduce the pressure of liquidity and the pressure of chip shortages? Can you share more development plans in the field of smart cars and the reasons behind them?

Xu Zhijun: I have been asked this question many times. I have explained the answer to this question in detail in the process of communicating with friends in the auto industry media at the Beijing Auto Show and the Shanghai Auto Show. Of course, I also understand everyone’s aspirations. Everyone thinks that Huawei should build a car. Huawei has the brand and technical capabilities and should build cars. Why not build cars like everyone else? Companies such as Xiaomi are building cars. But I tell everyone that Huawei made this decision after years of discussion. Huawei started to conduct car-related research in 2012, when we established a car networking laboratory under the 2012 laboratory. At that time, there was no concept of smart cars, no concept of autonomous driving, only the concept of electric cars. We first wanted to study the technology needed for electric vehicles.

But as research continues to move forward, the automotive industry is constantly changing, from a simple electric car to an autonomous car. From 2012 to the present, the entire future-oriented car has undergone tremendous changes, and the technology has also undergone tremendous changes, especially after the rise of artificial intelligence technology. It turned out to be a “three-electric” system, and then it was discovered that we were to be a “driver”. In fact, the automatic driving system is to be a driver instead of driving. Later, our research found that all the technologies and capabilities that Huawei possesses are being applied more and more widely in vehicles. We believe that ICT capabilities are becoming more and more valuable for the various technologies and components required for future autonomous driving and electric vehicles.

From 2012 to the present, I have also communicated with the chairman and presidents of all Chinese auto brands, as well as the senior executives of German and Japanese auto companies, and found that the industry needs Huawei more, not the Huawei brand, but Huawei’s ICT Ability to help them build future-oriented cars. Therefore, in 2018, our management team met in Sanya and made a decision: clarify that Huawei will not build cars and help car companies build good cars. This decision has not changed so far.

Of course, as a company in the ICT industry and dealing with the automotive industry, we also hope to create some new business models. Therefore, we will choose some partners for in-depth cooperation, and then we will use the “Huawei inside” approach to support car companies to build their sub-brands, empower some car companies, and truly make future-oriented cars. We have now selected three partners to support them in building their own sub-brands. You may already know that we support the ARCFOX brand created by BAIC New Energy and will soon launch a series of cars for the market. ARCFOX brand series cars will fully combine all of Huawei’s (ICT) capabilities and BAIC’s (complete vehicle) capabilities to give consumers a different experience. We have similar cooperation with Changan and Guangzhou Automobile in Chongqing. We will have options for this kind of cooperation, not too many.

We designed a brand logo called “HI” for the “Huawei inside” model, which stands for Huawei Inside. Seeing the HI logo in the future will prove to be a car built by Huawei and this partner. However, not all vehicles provided by Huawei can be marked with the HI LOGO. Only vehicles using our autonomous driving solution can be marked with the HI LOGO.

2. “China Business News”: Last year, Mr. Xu, you said that the biggest goal is to survive and make a financial report. We see that this year’s financial report has achieved a relatively stable growth. You mentioned just now that the entire external environment this year is still relatively complicated. What are our new challenges or goals this year?

Xu Zhijun: The goal this year is to survive. But this year we hope to have some time to think about the next steps and see if we can live a little bit better. Everyone knows that we are spending time in 2019 and 2020 to deal with the three sanctions imposed by the United States, so there is not much time to think about whether we can really survive in the future and whether we can live better. After so long of inventory and business adjustments, I found that it is still very promising to survive, but we still have to strive to live a little better. So I hope that next year’s annual report conference will be held normally, and the analyst conference will be held normally. Of course, it is the best that it can be held every year. I can meet everyone and you can also see me.

3. IDC: I have two questions I would like to ask. The first is about HUAWEI CLOUD, because we noticed that not long ago, HUAWEI CLOUD made very frequent organizational structure adjustments, and finally changed from BG to Cloud BU with Xiao Xu as the chairman. Finally, Cloud BU is in Huawei’s organizational structure. What exactly is the position of? What changes or adjustments will the corresponding HUAWEI CLOUD strategy have in the future?

The second is about the Kunpeng industry. Not long ago, ARM just released the instruction set of the V9 architecture, and said that V9 is not under the control of the US administrative export license. What is Huawei’s authorization for ARM V9 now? Is it a complete authorization or a perpetual authorization? In addition, in respect of the corresponding Kunpeng industry, how will the future problems of our chip design, production, and foundry be solved? please explain it.

Xu Zhijun: The business model of Huawei Cloud is an online business and a subscription business model. Therefore, Huawei Cloud has always been an independent BU operating end-to-end and relatively closed-loop. When we set up the cloud and computing BG, we hoped to be able to coordinate the operation of servers and storage with Huawei Cloud, but some problems were discovered during the coordinated operation, which instead consumed the energy of our cloud team. So we are now returning the server and storage to let Cloud BU focus on developing cloud services.

We strengthened the positioning of HUAWEI CLOUD BU, which is actually a measure of our company to strengthen software investment. HUAWEI CLOUD invests more in software and has its own industry rules. We hope that it will be more independent and develop more freely to increase the proportion of software and services in Huawei’s total revenue.

Regarding Kunpeng, it itself is an ARM ecosystem, but we have named it in China. No one dares to give us foundry chips now, at least I don’t think it will be solved in the short term. However, we are unswerving to develop Kunpeng’s ecology, and this will not waver. Once Kunpeng’s ecology develops, I believe that other companies will design CPUs. It is just a matter of strength and weakness. This also provides another option for the whole of China.

Regarding ARM V9, whether it is the CEO of ARM or the vice president of marketing, it has been very clear that it is not restricted by the US export control. Unrestricted means that we can carry out normal business cooperation with ARM. , Cooperate as you want.

4. IHS Markit: In recent years, more and more new cars are equipped with interconnection technology. With the improvement of the level of autonomous driving and the addition of various technology companies, more and more rich applications and ecology have been integrated on the car. In the 5G era, cars, as nodes of IoT devices, are interconnected with everything, such as the interconnection of cars and cars, the interconnection of cars and roads, the interconnection of cars and devices, and the interconnection of cars and hybrid clouds. First question, what changes does Huawei think 5G technology and future 5.5G technology will bring to smart cars? Second question, please share the recent progress of Huawei’s smart car product line?

Xu Zhijun: Actually, there are different opinions on how much value 5G has for autonomous vehicles. People who do traffic more hope that the vehicle and the road can be coordinated to realize the automatic driving of the vehicle and give full play to the coordination of the road and the vehicle. In this case, whether 5G or 5.5G, its value is greater. But there is a question. Without 5G or 5.5G, can this car realize autonomous driving? Do you want to achieve autonomous driving?

Another point of view is that in order for a car to realize autonomous driving, it must realize autonomous autonomous driving and cannot rely on others. Just like every normal person of us, all your behaviors are managed independently by you, without relying on others, unlike a blind person who has to rely on a crutch. If a car must rely on 5G or 5.5G in order to achieve autonomous driving, it will be miserable. What if a 5G base station is broken? This puts too high a requirement on the network of mobile operators. The network must cover any place, and it must be ensured that there will be no problems under any circumstances. It must have strong resilience, which is unrealistic.

So from this perspective, whether 5G or 5.5G, it cannot be necessary. Of course, 5G will be better, but it is more of an auxiliary capability. I have always believed that 5G has been politicized and its capabilities have been exaggerated. I once attended a conference and listened to everyone talking about 5G, and the talk was full of enthusiasm, but I couldn’t understand which G they were talking about 5G. Our mobile communication technology has evolved from 1G to 2G, 3G, and 4G every ten years or so. 5G is to evolve one generation and upgrade one generation on 4G technology, which is not much different from the evolution generation of 2G and 3G. Of course, do you say that 5G is better than 4G? That’s not realistic, after all, it was built after the industry has spent ten years and huge investment. Of course, it will be better than 4G. However, it is an exaggeration to say that 5G is the foundation of everything, as everyone said.

Smart car BU is our key investment industry. It has its own sales, delivery and other organizational capabilities. It is our company’s most complete BU except for consumer BG. We have invested more than US$1 billion in the research and development of smart auto parts this year. China now needs 30 million vehicles a year, and there will be more in the future. We believe that even if we only focus on the Chinese market, an average annual income of 10,000 yuan from each vehicle is enough. Of course, Huawei hopes to be a global industry in any industry, not just limited to the Chinese market.

Now every component we make has been introduced to the market and is gradually gaining application. At the Shanghai Auto Show in April, the “Huawei inside” cooperation mode car will provide everyone with an autonomous driving experience in densely-vehicle urban areas. Our team told me: They are the best, able to autopilot without intervention for 1,000 kilometers in the urban area, which is much better than Tesla. You can go to Shanghai to experience it after this meeting.

5.Guardian: Two issues. First, under the sanctions imposed by the United States, Huawei is actually facing a series of supply pressures including chip supply. Now the sanctions will not disappear in the short term, so is Huawei? The future still depends on the reserves prepared before the sanctions? Second, after the Biden administration took office, how did Huawei judge the US sanctions and the future relationship between the US and Huawei?

Xu Zhijun: I think all the customers, partners and people who care about Huawei all over the world are squeezing their sweat for Huawei: How much inventory is there? Our annual report conference has clearly stated that we have no problem meeting the needs of To B customers, but not always.

To cope with this problem, we mainly rely on two points. One is to use these stocks to support us to live as long as possible. For this reason, we focus more on some regional markets and customers. Second, Huawei is a large global purchaser of semiconductor chips and devices. We originally ranked third in the world, second only to Apple and Samsung. We have huge demand. At the same time, China is a huge chip market with nearly 400 billion U.S. dollars in purchases each year. Many Chinese companies are worried that they will be suppressed similarly to Huawei, and they also have similar needs to Huawei. If there is such a big demand, there will always be companies willing to invest, to see if they can find a way that can not only meet the regulatory rules of the United States, but also meet the needs of Huawei and other Chinese companies. We hope that our global partners can do this at a certain time. If our inventory consumption happens to be in line with this, then our problem will be solved. I believe this day will come!

Of course, after the Biden administration came up, we are also paying attention, but we have no illusions about Huawei being removed from the list of entities. We think we will work and live on the list of entities for a long time. We cannot formulate the company’s strategy under assumptions and illusions. Our current overall strategy and specific measures are based on Huawei’s long-term survival and development under the entity list.

6. “Jakarta Global”: Many countries in the Asia-Pacific region have proposed digital transformation plans. From the perspective of Huawei, how do you view the future development of the entire digital transformation in the Asia-Pacific region? What role will Huawei play in this process?

Xu Zhijun: Except for a few countries, the Asia-Pacific region is still relatively backward in terms of digitalization. This new crown epidemic has fully let all government departments, consumers and enterprises see the value of digitalization.

Huawei’s vision is to bring the digital world to everyone, every family, and every organization, and build an intelligent world with all things connected. Therefore, our company’s mission and everything we do is to help the digital transformation of all walks of life.

We have been working in the Asia Pacific for more than 20 years, and Huawei has been working hard to promote the digital transformation of various industries in the Asia Pacific. I believe that this is an opportunity for Huawei. I also believe that through Huawei’s efforts, the digitalization process in the Asia-Pacific region can be accelerated. We can bring advanced technology and digital transformation experience to every country in the Asia-Pacific, as well as every industry, enterprise and government organization in every country.

7.ITR Research: In your introduction, you mentioned 5G and 5.5G. My question is, you just mentioned some visions in 2030, but now many operators and manufacturers are already talking about 6G in 2030. Then I would like to ask what is Huawei’s strategy on 6G?

Xu Zhijun: We believe that 6G should be introduced to the market around 2030. But what 6G is now, we don’t know yet. Our industry hopes that around 2030, like 4G and 5G, there is one thing to contribute to consumers and enterprises, so now we are mainly doing two aspects. First, we work with the industry to work hard to define what 6G is. We may soon release the 6G white paper, hoping to discuss with consumers and all walks of life what 6G will look like in the future. Second, we are doing some basic research and research on cutting-edge technology around the vision and the definition of 6G, hoping to realize the 6G we jointly defined.

Maybe our imagination is limited, or all the industries in the world have limited imagination, and we find that we can’t find 6G application scenarios anyway, then maybe 6G is not needed. If 5G or 5.5G can help realize the scenarios and applications you imagine, then 6G is not needed.

So we may have to wait for the next generation of us, who are smarter than us, or their consumer needs are different, they play differently, and they find that 5G can’t handle their needs. There must be a 6G, which may be the value of 6G. In the past, I discussed with the wireless team, I said that we have achieved 5G from 2G, can this group of people stop doing 6G. But we found that people always come to discuss 6G with us, so we can only organize everyone to study 6G. Therefore, the president of wireless products and I said that we must find a group of young people to do it with us, so that in the 6G era, those of us will retire, because we have no room for imagination and can’t imagine it. At that time, this When a group of people grow up, they can continue to imagine and continue to do it.

So let me summarize our views on 6G: We look forward to 6G, but not necessarily 6G. But we still have to prepare, do research, and invest for the possible arrival of 6G.

8. Nihon Keizai Shimbun: Under the pressure of the United States, how does Huawei maintain cooperative relations with Japanese companies? In 2019, Huawei purchased 1.1 trillion yen in parts and components from Japanese companies. What is the amount in 2020? What about this year? Thank you!

Xu Zhijun: All cooperation between Huawei and Japanese companies is still in a normal state. Our cooperation is mainly in three aspects: First, we provide products and solutions to Japanese operators to help operators serve their customers. Second, we participate in the digital transformation of Japanese companies. Third, we are facing the future together with the Japanese industry to build industries and standards.

Our purchases from Japan in 2019 are about 10 billion U.S. dollars, and in 2020 it will be about 8 billion U.S. dollars, a decrease of 20%. Therefore, Japanese companies are typically treated by unfair trade and non-free trade, because Japanese companies need the approval of the US government to sell a chip or a device to Huawei. This is a typical unfairness and a typical hindrance to free trade. And it’s not just Japanese companies that are affected.

9. DBS Bank: My question is about HiSilicon. Under the pressure of the United States, advanced manufacturing processes cannot help HiSilicon to manufacture chips. I want to know what HiSilicon’s future business model will be?

Xu Zhijun: First of all, any chips developed by HiSilicon now have nowhere to be produced and processed. Secondly, for Huawei, HiSilicon is just a chip design department, not a profitable company, so we have no desire for profit by itself. Now we are raising this team and moving forward as long as we can afford it. Of course, this team can continue to do some research, technology development, and technology accumulation to make some preparations for the future.

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