Where does Huawei go when it doesn’t build complete vehicles and parts?

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By Chen Shilei
Source: Chinese business strategy (ID: hstl8888)
Original title: where does Huawei drive?
In the face of fancy rumors in the market, Huawei has repeatedly declared that it “will not build a car”. However, based on the past history of claiming not to make a mobile phone and finally entering the track, many people are still full of various conjectures about Huawei’s car making.
1. Can Huawei build cars?
In May 2019, Huawei’s organization underwent a major change. Ren Zhengfei issued a document approving the establishment of Bu, a solution for intelligent vehicles.
Huawei currently has five BGS: operator BG, enterprise BG, consumer BG and cloud & AI BG. In Huawei, BG refers to the business group of the company, not the functional department of the company. Bu (business unit) refers to the business unit. Although Bu is weaker than BG, it also represents Huawei’s future strategic direction.
For example, cloud & AI BG rose from Bu to BG in January 2020.
Organization chart of Huawei in February 2020
Since Huawei set up Bu, a smart car solution, rumors about Huawei’s car manufacturing have been heard all the time.
On November 25, 2020, shortly after the integration of Bu, a smart car solution, into BG, a consumer of Huawei, there was news from unknown channels that “Huawei car has been built and will be launched at the end of next year and will be released in December or the first quarter of next year.”
As soon as the news came out, the stock prices of Chang’an Automobile and Qiming Information Co., Ltd., which cooperated with Huawei, rose in a straight line, and touched the trading limit before the closing of the morning market of the same day. On the other side of the news, two companies engaged in intelligent cockpit, Desai Xiwei and Zhongke Chuangda, both plummeted.
In the afternoon of the same day, Huawei published an internal document entitled “resolution on business management of smart car parts” in Xinsheng community, which once again reiterated: “Huawei does not build complete vehicles.”. At the end of the article, there is a cruel sentence: “who will advise to build a car and interfere with the company in the future can be transferred from the post and look for another post.”
Source: Huawei official website
According to an investor who pays close attention to the auto sector, “the rumor behind Huawei’s car making is mainly driven by interests. People will make profits when the stock market rises or falls sharply. Therefore, for those who spread rumors, as long as there are profits, rumors will always exist.”
In the face of fancy rumors in the market, Xu Zhijun, Huawei’s CEO in office, has repeatedly stated: “Huawei does not build cars. Instead, it will focus on ICT technology and become a supplier of incremental components for intelligent connected vehicles to help car companies build good cars.”
Even so, there are still some people in the market who take “Huawei says it doesn’t make mobile phones, but it makes mobile phones” as an example and have expectations for Huawei to make cars. However, looking back at that period of history, we can find that Huawei entered the mobile phone market in those years because the European market demanded that in order to build base stations in Europe, it must provide cheap and easy-to-use 3G mobile phones for Europe.
In 2003, Huawei wanted to build 3G network base stations in Europe, but the European operators who had already obtained 3G license gave their own dilemma: “we are not in a hurry to build 3G base stations, what we lack is 3G mobile phones. Without 3G mobile phones, consumers will not use 3G networks, and telecom operators will not be able to make money on 3G networks, so they will not have the capital to build 3G base stations. ”
The mobile phone has become a necessary stepping stone to the market. Huawei has to stick to its head and set up the mobile phone business unit in July 2003.
Before 2011, Huawei’s mobile phones were all customized for operators. The so-called customization, one is that the customers are responsible for their own profits and losses, and the mobile phone only has the logo of the telecom operator; the other is that the telecom operator and Huawei share the risk, and everyone shares it according to the sales volume, and the mobile phone is printed with the dual logo of the telecom operator and Huawei.
A former employee of Huawei’s mobile phone business department once mentioned in an interview: “customization is a hard work. To make a mobile phone, the net profit margin is only about 5 points. Customers provide market forecast, many materials need to be placed three months in advance. If the market forecast is not accurate, the materials may fall on Huawei. ”
Chen Guolong, who was in charge of the European market of Huawei’s mobile phones, once jokingly called himself the “cannon fodder” of Huawei’s mobile phones in media interviews.
So, either way, in fact, the mobile phone business didn’t make money at that time.
In 2008, after stabilizing the overseas base station market, Huawei hoped to sell 49% of the shares of mobile phone companies to find “professional partners” for the future development of mobile phone business. But the deal came to an end when the US subprime mortgage crisis broke out in September 2008.
After three years of precipitation, in 2011, Huawei mobile began to usher in a new starting point relying on k3v2.
Looking back on this period of history, we will find that, unlike the dilemma of not being able to sell base stations without making mobile phones, Huawei now has strategic cooperation with more than 20 auto companies, such as BYD, Changan and Volvo, so there is no need for Huawei to set foot in complete vehicles.
Therefore, unless we encounter the “once mobile phone dilemma”, otherwise “getting involved in the whole vehicle” is probably only Huawei’s alternative.
2. Can Huawei build cars?
Back to the topic of Huawei’s car making, since Apple announced the launch of Carplay in 2014, Google, NVIDIA, AMD, Qualcomm and many other companies have released smart car solutions before 2018.
Among them, the discussion about Apple’s car making is the hottest, and it is rumored that Apple will enter the whole vehicle manufacturing. However, from the perspective of iPhone manufacturing mode, Apple will only be involved in the core areas of automobile, such as chips, automatic driving and car engine system, while most of the hardware may be realized through the mode of purchasing and OEM.
It is worth noting that apple and Huawei have their own advantages. Huawei’s strength lies in the 5g related car Internet, while Apple has more advantages in car applications relying on the huge ecology behind the iPhone.
Therefore, if both companies enter the auto market, Huawei’s model will be more like Google and Qualcomm’s, while Apple will continue the iPhone OEM.
According to the information circulating outside at present, Huawei is actually aiming at Bosch, which has the global Tier1 status.
Picture of Bosch building source: Zhihu

Tier1 means a first-class supplier, which is a source technology company that supplies directly to vehicle manufacturers.
For example, most of the current automobile enterprises are only responsible for automobile manufacturing, and then use the purchased power system and electronic system to form a complete automobile.
The booth of Bosch 2020 Beijing Auto Show
Tier1 is the company that provides chip, circuit and power system support for these auto companies.
The analysis report of CITIC Securities team points out that the Tier1 system integration market in the automotive electronics industry chain is currently in an International Oligopoly pattern, and the top ten automotive electronics suppliers in the world have a market share of 70%. In the Chinese market, Bosch is also a dominant company.
Huawei put forward the concept of “cloud management end” for “car building” in 2010. The meaning of “cloud management end” here is: Internet of vehicles platform, Internet of vehicles infrastructure and Internet of vehicles end side hardware. In 2013, Huawei released the me909t vehicle module supporting 4G, and established the “Internet of vehicles business department”.
Take the end side construction of Huawei’s Internet of vehicles as an example: Huawei released AI chip shengteng 310 and shengteng 910 in October 2018, and then launched atlas Artificial Intelligence Computing Platform Based on shengteng AI chip in April 2019. In the construction of “management” (infrastructure of Internet of vehicles), Huawei also takes advantage of its own communication equipment manufacturer to bring 5g to the forefront of the Internet of vehicles era through Balong 5000 baseband in 2019.
Combined with the oceanconnect cloud platform released by Huawei in 2018, Huawei achieved the initial closure of “cloud management end” two years ago.
According to Huawei’s own statement, Huawei’s existing hardware platform is enough to support L4 (fully automatic driving) level automatic driving. Only based on the style of low-key work, this news was not officially made public until the Shanghai auto show in 2019.
In addition to the core breakthrough of “cloud management end”, Huawei has also integrated its own technology in order to implement the concept of “helping car enterprises build good cars”. For example, at the 2020 Beijing auto show, Huawei released a multi in one power solution. In Huawei exhibition area, there are two products related to this scheme, one is a three in one electric drive system integrating motor, motor controller and reducer, and the other is a multi in one electric drive system driveone integrating motor, MCU, PDU, OBC, DCDC, reducer and BCU.
Huawei multi in one electric drive system driveone
According to a Huawei employee in charge of explanation, this product has realized the deep integration of mechanical components and power components. In other words, if an automobile manufacturer wants to cooperate with Huawei, the power system doesn’t even need to be debugged by itself, and it can be used directly after buying it.
This makes the automobile enterprises cooperating with Huawei to make a car like building blocks, which not only greatly reduces the threshold of making a car, but also greatly shortens the R & D cycle of the car because it does not need debugging.
Based on this accumulation, Xu Zhijun was asked how far Huawei would go in the automotive field. He said frankly: “we can do everything Tesla can do now.”
Facing the problem of whether Huawei can build a car, an automobile practitioner said: “Huawei’s car building is not a choice of whether it can or not, but a choice of whether it can or not.”
3. Why doesn’t Huawei build the whole car?
Since Huawei can build complete vehicles, why didn’t it?
The answer to this question may be found in the history of Samsung.
People who know Samsung should also know that Samsung is a diversified world-class technology enterprise. Samsung not only made mobile phones, but also set foot in automobile manufacturing in 1994.
Samsung’s original intention is to integrate its existing businesses through its auto business to form a joint force. But because Samsung chairman Li Jianxi at that time seriously underestimated the difficulty of automobile manufacturing and the amount of investment, Samsung automobile, which was not mature at the beginning, lost money year after year.
Samsung
If the market had developed normally, Samsung would have been able to support the early losses of its auto business. However, in 1998, Samsung had encountered the Asian financial crisis, and even its many high-quality asset businesses were short of funds.
In order to save the industry that can quickly recover its blood, Samsung decided to abandon the car and start to sell off a large number of non core assets. In this context, Samsung, which just launched its first product in December 1998, was also listed for sale, and sold it to Renault for $512 million in 2000.
In this regard, a fund manager said: “today’s economic environment is more uncertain than that in 1994 and 2008. After the global water release in the first half of the year, the economy has not improved, and countries around the world have successively started negative interest rates, which makes the future global economy face huge deflationary pressure.”
Based on the economic uncertainty, in 2020, many listed companies sold their stocks for cash out, and Huawei also sold glory in November 2020 in exchange for more liquidity to ensure the continuous promotion of key business.
According to a technology practitioner who knows Huawei, “what Huawei needs to break through most is chip manufacturing.”
According to the practitioner, “after TSMC can’t OEM chips for Kirin’s advanced processes, Huawei will have a hard time in 2020. Therefore, for the current Huawei, how to reduce the financial pressure and at the same time win more profits for future development has become the key to whether and how Huawei builds cars. ”
In April 2019, Huawei once said at the Shanghai international auto show that 70% of the future automobile value will not be made up of the traditional body and chassis, but the software of automatic driving, as well as the technology of calculation and connection.
Considering the fact that the profit of Auto hardware is not high and the risk of economic environment is great, the positioning of “Huawei does not build cars, but helps auto companies build good cars” is more in line with Huawei’s long-term interests.

A data related to this fact is that Bosch, as the benchmarking company of Huawei’s car manufacturing, has an auto business revenue of 77.72 billion euros in 2019. This figure has completely surpassed the international famous luxury car brand Audi’s revenue of 55.68 billion euro in fiscal year 2019.
This may be the reason why Huawei did not choose to build a complete vehicle.
4. Changes brought by Huawei to the market
In 2013, Huawei set up the “Internet of vehicles business department” and formally set foot in the automobile market. In 2014 and 2015, Xiaopeng, Weilai and ideal were established. With many competitors coming on the stage, intelligent cars have become the favorite of capital in 2019.
Ideal car co founder Shen Yanan (left 1)
Shen Yanan, the co-founder of ideal automobile, defines this new era as: “the automobile industry chain is experiencing changes similar to those that occurred when traditional mobile phones were transiting to smart phones.”
The rapid development of smart phones stems from the high division of labor in the mobile phone industry.
On November 5, 2007, led by Google, many manufacturers, such as Qualcomm, Texas Instruments, Samsung, Motorola and LG, established an open mobile phone alliance. This alliance only does one thing, that is to use the global division of labor to standardize the components of mobile phones.
Google is responsible for the Android system and ecological construction, Texas Instruments, MediaTek and Qualcomm are responsible for the processor of smart phones, while Samsung and Sony, which occupy South Korea and Japan, undertake some hardware dividends brought by the development of mobile phones.
It is understood that there are similar organizations in the intelligent automobile industry. In 2016, with the joint efforts of Huawei, Audi, BMW, Daimler, Ericsson, Intel, Nokia and Qualcomm, the “5g automobile alliance” was jointly announced.
Huawei automobile ecosystem
In the two years since the establishment of 5g automobile alliance, Huawei has initially opened up the standardization of its own system through the hardware of “cloud management end”.
Based on the division of labor in the mobile phone industry, in the next few years, the intelligent automobile industry will probably completely rewrite the existing automobile manufacturing mode. The upstream and downstream manufacturers of the industrial chain will be rapidly stratified, and will usher in a small prosperity due to the reduction of the threshold of car manufacturing.
Nowadays, automobile manufacturers still need to purchase different equipment from different upstream enterprises, which requires automobile enterprises to do a lot of adaptation work, so the cycle of designing a car is often relatively long. However, in the future, auto companies may only need to do a good job in the appearance and chassis of the car, while the electronic system, power system and networking system of the whole car may be directly supplied by Tier1 companies.
Huawei’s booth at Beijing auto show 2020
At the moment when Tier1 is monopolized by foreign companies, many auto practitioners have high expectations for Huawei.
With the acceleration of industrial division of labor, the regional pattern of “one country is responsible for one thing” similar to smart phones is accelerating.
As for the monopoly of automobile upstream, one practitioner shared his own experience:
Because of the lack of Tier1 enterprises in China, many upstream companies need to find Bosch and other companies for certification before they make any special chips for automobiles. If they do not complete the certification, no one will dare to use them.
It’s not that the chip is not good. It’s that when the car is manufactured, the electronic system on the car is provided by Bosch and other companies. The enterprise doesn’t know if there will be any problems after replacing the chip. Based on the fear of accidents, not using is the best choice for the enterprise.
In his view, making Huawei a domestic Tier1 will help to form China’s own smart car standards under the national internal circulation strategy, so as to cultivate a number of truly competitive upstream companies around the standards.
But it’s different from ordinary people’s expectation of Huawei’s “car”.
An auto practitioner said: “the current auto companies have a certain attitude of rejection towards suoha Huawei’s car building plan. For example, Chang’an not only cooperates with Huawei, but also has contacts with Bosch, Ali and Tencent.”
As for the reasons why auto companies chose this way, he added: “in the face of the new pattern of rapid division of labor in intelligent vehicles, auto companies actually know this trend better than anyone else, so although we want to embrace it, we are also worried that after the rapid integration of the industrial chain, our profits will be less and less.”
Regarding the doubts of auto companies, Xu Zhijun once expressed a view in an interview with the 21st century economic report in September 2020: “in the future, different auto companies will have different choices based on their own capabilities and strategies, some will choose the operating system, some may only choose our hardware, some will do it by themselves, but we provide them with different choices.”
Combined with the saying that “Huawei has repeatedly said that it does not build complete vehicles”, Huawei is now improving its ability to assist in car building while at the same time using an open attitude to reassure auto companies that they will not rush for business.
Bosch, as Huawei’s direct target, is far more nervous than auto companies.
At the 12th auto blue book forum, Wang Jun, the person in charge of Huawei smart car, once said that Huawei is developing lidar technology, and the goal is to quickly develop 100 line lidar in a short time. In the future, we plan to reduce the cost of lidar to $200 or even $100.
Huawei lidar
This means that Huawei, as a new entrant, is likely to affect Bosch’s revenue in China and even the world.
However, as a participant in the global change of the smart car industry, both Huawei and Bosch are actually doing business in accordance with the trend. However, with the change of industrial structure, there will inevitably be a bloody battle between the old and new forces. This war is an opportunity for new forces such as Huawei, Qualcomm and NVIDIA, and a challenge for old rivals such as Bosch.
But no matter who sits on the new throne, the storm has come, and the intelligent war is inevitable.