Huawei’s Winning Strategy to Overcome Challenges

For Huawei, simply discussing optimism and pessimism in the face of sanctions is meaningless; the key is to have effective response strategies..

This article aims to clarify three questions:

• First, why does it say that Huawei has long been prepared?

• Second, two fatal problems and challenges that Huawei may not yet fully realize.

• Third, Huawei’s winning strategy that can decisively defeat opponents—The Menglianggu Plan. Of course, this strategy cannot be confidential; it needs to be publicized and promoted vigorously.

Using Trump’s words, we cannot blame him; he has to speak and act from the perspective of the United States (of course, whether he is right or wrong is another matter), but we must stand on China’s side to help Huawei and respond seriously and correctly.

Let us briefly review the historical process of Huawei’s own development and the continuous leaps in core capabilities:

• First Leap. From representing user switches for Hong Kong users at the company’s inception to self-developed user switches. This laid the foundation for independent technology research and development, distinguishing itself from other companies that have long indulged in trade and production.

• Second Leap. From R&D and production of user switches to entering the core field of the communications industry with the revolutionary C&C08 exchange. This established confidence and a leap from developing simple technical products to developing core system products. This allowed it to transcend other companies that are stuck in low-tech fields.

• Not considered a significant leap forward. Communication system products expanded from switches to transmission, access, power supply, video, and other products. This shows that once core capabilities are enhanced to a certain level, horizontal expansion of these capabilities can achieve significant scale expansion.

• Third Leap. From fixed networks to mobile GSM. Although mobile and switches are both communication system products, there are significant technical differences.

• Not considered a significant leap forward. From GSM, CDMA, 3G, 4G to the current 5G.

• Fourth Leap. From device products to self-developed chips. The earliest practical chips included transmission 2M branch chips, and later expanded to more system device chips.

• Fifth Leap. From system devices to mobile phones. Initially, Huawei did not intend to enter the mobile phone field, but suddenly entered when the PHS technology was coming to an end, quickly capturing the market with extremely low pricing strategies.

• Not considered a significant leap forward. From PHS mobile phones to GSM, CDMA, 3G, 4G, and 5G.

• Not considered a significant leap forward. From system chips to terminal chips.

From the above simple review, it can be seen that Huawei has, at various stages where core capabilities need to leap, either early or late, achieved corresponding capability accumulation with very firm determination and action, thus gradually realizing continuous breakthroughs and improvements in core capability levels.

Now let’s look at its terminal chip strategy. The following image is a screenshot of the product section copied from the HiSilicon website, along with my translation. After checking the technical descriptions of its various products, we can find that, except for AI chips, others are mainly based on the ARM architecture.

The above is an introduction to the ARM V8 architecture authorized to Huawei. There are two important characteristics of the ARM V8 architecture authorization method obtained by Huawei:

• First, it has obtained permanent authorization for ARM V8.

• Second, it is not the IP Core method used by most ARM companies (equivalent to ARM providing source code or design drawings for the authorized party to modify), but rather an instruction set authorization, which means that all chip designs must be completed by itself.

Why obtain permanent authorization for ARM V8? The first important reason is that this version has been upgraded to 64-bit. In the history of CPU development, the bit length has been continuously upgraded from 4 bits to 8, 16, and 32 bits, and the time for each process is not too long. When the bit length changes, there will be significant generational changes in the instruction set. However, after upgrading to 64 bits, its directly managed memory space can be regarded as infinite, approximately 16E, compared to 4G for a 32-bit CPU, which is a difference of 10 orders of magnitude. Now, even the size of a movie is at the 4G level, but the total mobile data traffic globally in a month in 2016 was only 7E, less than half of the 64-bit space capacity. Therefore, for the foreseeable future decades, there is no need to consider upgrading CPUs to 128 bits. Therefore,obtaining permanent instruction set authorization for a 64-bit CPU means there is no need to worry about generational technical changes.

On the other hand, the above authorization method reflects Huawei’s determination to master ARM architecture technology to the greatest extent, which can indeed be seen as a strategic consideration to avoid interruptions in technical support from ARM. Huawei’s mastery of ARM architecture has taken a long process, from the establishment of HiSilicon in 2004 to the release of the first mobile phone chip K3 in 2009, and the K3V2 released in 2012 was not successful. From the successful release of Kirin910 in early 2014 to the 980 released in August 2018, it has progressed smoothly, indicating that HiSilicon has finally successfully mastered the ability to design mobile phone chips based on ARM architecture after a long 10 years of tempering, and then successfully reached a world-leading level in just four years. But don’t think that Huawei’s ARM chip R&D only gained market application in 2014. As early as the successful tape-out of HiSilicon’s set-top box chip at the end of 2007, it had already successfully gained market application in 2008. I witnessed the process of its chip entering the market to surpass the leading ST chip in that field due to my involvement in the development of digital television market CAS (Conditional Access System) software products in cooperation with HiSilicon’s set-top box chip.

Some people have raised a concern about what will happen when ARM upgrades to V9 in the future. First, we need to clarify a question: ARM’s CPU version number does indeed have characteristics similar to other software and hardware product version numbers, that is, higher versions are generally better and more advanced than lower versions. However, we also need to realize that ARM’s CPU technology is not entirely so, and it needs to be viewed in terms of different product series. It began to be divided into three major series from V7: Cortex-A (for high-performance chips, supporting virtual memory), Cortex-R (for real-time control applications), and Cortex-M (for low-cost application microcontrollers). The R and M series are closer to traditional embedded chips in the sense of ARM. The A series has approached Intel’s X86 architecture for transactional processing CPU chips, which can be developed into chips for smartphones, PCs, and even servers. HiSilicon’s Kirin and Kunpeng are all developed based on the Cortex-A series. Unlike CPU products that can change monthly, the speed of changes in the instruction set is much slower.

Therefore, on one hand, since V8 is already a 64-bit CPU, there will be no significant generational changes in the instruction set; on the other hand, since the speed of technical changes in the instruction set is very slow, the risk of HiSilicon chips falling behind due to changes in ARM’s instruction set technology is extremely small for a considerable time.

HiSilicon’s server chip Kunpeng series

People often talk about HiSilicon, but that is not all of Huawei’s chip capabilities. From its product list, it can be seen that HiSilicon mainly focuses on consumer product chips, while the chips for system products are not reflected in the HiSilicon product list. From the summary of Huawei’s technological capability development history mentioned earlier, it can be seen that once Huawei’s chip capabilities break through to this level, even if there are some chips that have not been developed yet, as long as they are within the scope of the ARM architecture or other architectures already mastered, new developments will not be too difficult.

Huawei transmission chip

This does not mean that Huawei can solve all chip problems on its own. There are many chips with strong versatility: DRAM, FPGA, flash memory, etc. These are not only technical capability issues but also require enormous production capacity support, which needs external solutions. Fortunately, China has intervened in these chips, and the main sources of DRAM and flash memory are not in the United States.

In summary, the chips that people are particularly concerned about are not actually the real difficulties for Huawei. As long as Huawei is fully aware and truly determined to do something, there is rarely a situation where it cannot be done. The real problem is the issues that Huawei itself may not yet fully realize but are crucial to Huawei today.

In people’s impression, Huawei is already a very powerful company. In 2013, Huawei’s total sales (239 billion RMB) surpassed Ericsson, becoming the first in the communications industry. By 2018, it reached 721.2 billion RMB, more than three times that of the second-ranked Ericsson. However, if you ask a question: Is Huawei confident? Especially in terms of innovation confidence? The answer may be ambiguous. In this regard, Huawei has been extremely outstanding among Chinese companies, but even so, it is still difficult to transcend the deep-seated insecurity in the hearts of the entire nation. This is reflected in the constant search for endorsement from others or external factors to support its confidence, rather than building confidence on its own original core technology, capabilities, culture, and brand.

Let me first mention something that seems irrelevant. A few days ago, I enjoyed the night view at the Bund in Shanghai, and the beauty and grandeur of the Bund’s night scene can be called world-class.

Below is the Bund Bull of the Financial Plaza

Bund Bull

But under the Bund Bull, the introduction of this sculpture is as follows: “Bund Bull,” designed and made by renowned Italian-American sculptor Arturo Di Modica, creator of the “Wall Street Bull.”

Of course, there is no problem in introducing the designer’s name, but why emphasize his other work that can be considered competitive with the Bund Bull? The Bund Bull is almost better than Wall Street Bull; why publicly use the latter for endorsement? On the one hand, there is a strong desire to gain a higher image advantage (the Bund Bull’s tail is raised higher, and it deliberately makes a circle), on the other hand, such a public declaration does not indicate that the Bund Bull will always follow behind the Wall Street Bull?

Wall Street Bull

In China, whether it is entertainment stars or so-called artists, they are either trying hard to win awards abroad, spending money to hold concerts in Vienna’s Golden Hall, or flocking to walk the red carpet at the Cannes Film Festival, and once they get on the red carpet, they are reluctant to leave. High-end residential communities want to enhance their grade, so they name themselves after foreign places…

In short, if one does not use others or external factors for endorsement, one cannot build confidence.

When I first went to Huawei’s Bantian base in Shenzhen, what struck and moved me strongly were the names of the roads: Chongzhi Avenue, Jiexian Road, Longping Road, Curie Avenue, Zhang Heng Road, Bell Road, Picasso Avenue, etc. The respect for Chinese and foreign scientists and artistic masters fills people with positive energy.

Later, Huawei used the extremely simple-dressed Academician Li Xiaowen as a spokesperson, and while I was shocked and moved, I began to feel a bit confused, and immediately checked Academician Li Xiaowen’s specialty; he studies geometric optics remote sensing of vegetation.

At this point, I began to notice that among the scientists in the road names at Huawei’s Bantian base, except for Bell, the others do not seem to be related to Huawei’s specialties. Of course, respect for scientists and masters can be unrelated to specialties.

The media has hyped the “Voting Gate” incident involving 5G, which relates to POLAR codes. The inventor of this code principle is not Huawei, but Turkish professor Eldar Ali Kan. Huawei specifically awarded Professor Ali Kan, which is very reasonable, but the high specifications of this award ceremony are indeed shocking, and the grandeur of the ceremony is even somewhat “usurping” the treatment that European monarchs or popes would have.

Huawei’s respect for Chinese and foreign scientists is touching, and Huawei’s efforts to learn advanced global technology have reached an extreme, even publicly stating that it aims to learn seriously with the spirit of “cutting feet to fit shoes.” Ren Zhengfei also expressed gratitude to advanced American companies in recent public speeches, acknowledging that they taught Huawei many things, such as IBM and Accenture, which taught Huawei through consulting services; Ren Zhengfei objectively referred to them as teachers. Huawei has also put in great effort in learning technology under the “mattress culture” and “pressure principle,” eventually achieving outstanding performance indicators that lead the world, such as the camera function of Huawei smartphones.

However, how many people in this world can distinguish between learning, following, imitating, and copying? Everyone in this world needs to learn and must stand on the shoulders of others to go further. However, when faced with accusations of copying from the United States, we suddenly realize that if Huawei could have even one technical field where it is a world pioneer and creator, there would be no space for accusations of copying. If Huawei could base its confidence on its own brand, it would no longer need more unrelated scientific masters to endorse it.

This should not be seen as a criticism of Huawei because Huawei, as a technology company that has emerged from contemporary China, has done very well; it cannot do everything perfectly. In the United States, large companies often do not actively engage in original R&D. Even if Huawei learns and follows the original technologies of other Chinese companies, it would not leave space for accusations of copying. But it is regrettable that there is not a single one. This is also why Ren Zhengfei expressed some helplessness, saying that Huawei’s technology is already 2-3 years ahead of the world, but China as a whole is still very backward. But even with such an outstanding Huawei, we still feel that it lacks something compared to global technology leaders.

A recent video circulating online is about Huawei’s new base in Xiliu Village, Songshan Lake, covering an area of 1900 acres and an investment of 10 billion. The beautiful environment is indeed shocking, and the community names adopt the names of 12 European countries. Of course, these communities are built in the architectural style of these 12 European countries, so it is natural to name them after their names. However, Huawei is already the world’s largest communications company; what is its own culture and style? Is it just a mix of the best styles in the world?

Apple’s headquarters building

Ren Zhengfei also said that Apple is a great company, more precisely, it is the greatness of Steve Jobs. The greatness of Jobs lies not only in creating great technologies and products but also in his unique culture, including his uniquely designed headquarters building.

The gap does not lie in specific technical and management capabilities but in the culture and consciousness of innovation. In the past, we needed to learn advanced technologies and management experiences from abroad quickly, but today, the things we can learn in this regard have almost been exhausted. If there is still something to learn, it is their innovative ability, especially the ability to conduct original work based on a deep understanding of scientific principles and philosophy, and self-experience in art. Achieving this requires a complete self-transcendence and breaking away from the stubborn mindset formed in the past due to being deeply trapped in learning, which is “whatever technology is led by foreign countries, we must follow; whatever technology is of Chinese origin, we must not do.” This requires the joint efforts of the entire Chinese technology community, business community, and even the entire Chinese nation. But Huawei is already a company with strong and even critical influence on the direction of industrial development; has it seriously considered what it can do in this regard? That is truly a matter that can impact the fate of the entire China and will profoundly affect Huawei’s own fate.

Ren Zhengfei once said that people only remember the first place; it is very difficult for the second place to survive. This is actually a quote from marketing master Trout’s book “Positioning,” and Trout’s other famous book “Marketing Warfare” is based on another of Ren Zhengfei’s favorite books—Clausewitz’s “On War.” Huawei’s sales in 2018 were already three times that of the second place, but does Huawei feel secure? No, it has still set an ambitious goal of achieving 2.5 to 3 times more sales in five years, reaching a scale of 250 to 300 billion dollars.

The recognition of the importance of scale is certainly very correct, but the question is, does being number one in scale necessarily mean safety? Especially in the mobile phone field that Huawei relies heavily on, being number one in scale does not necessarily mean safety. We have long been accustomed to the process of “the flag on the city wall changes.” The authentic mobile communication leader Motorola was first in the simulation mobile phone era, Nokia was first in the 2G era, and Apple, which originally made PCs, became first in the smartphone era, but after fierce competition with Samsung, it lost the crown to Samsung, and Huawei has now surpassed Apple to become second and is competing with Samsung for the first place. Perhaps Huawei can achieve the first position in the mobile phone market and maintain it for a long time. However, while simply recognizing the importance of scale, we also need to deeply consider some other issues: Microsoft, Intel, Google, and other giants are not the first, but they can maintain a high monopoly in the market for a long time and obtain extremely rich profits; why is that?

The difference is not difficult to find. The companies mentioned above are not only relying on their own scale but also on the industry ecosystem scale they have established to gain an unparalleled competitive advantage. Huawei has publicly announced that it will launch its own operating system “Harmony.”

For Huawei today, we fully believe that there are no technical obstacles to developing an operating system, but the success of an operating system has never been a technical issue but whether it can successfully establish an industry ecosystem. The difference between establishing an industry ecosystem and simply making products is where? One simple difference is that as the core manufacturer of the industry ecosystem, one does many things without profit, providing a lot of resources for others to make money for free.They actively assume the “government” function of providing public goods for an industrial ecosystem. We should not only see how profitable Microsoft’s operating system and Office are, but we should also see the large number of development platforms and free resources like IE that they provide for the operating system platform. We know that Android belongs to Google, but at the same time, we must know that Android is provided for free by Google, which also offers a large number of free resources such as search, GMAIL, navigation, etc. The core manufacturers of the ecosystem can earn extremely rich and stable profits because they provide a large number of free resources that help others make money as a market protection belt. The partners on the periphery of the ecosystem are equivalent to “the masses,” and the reason why the core manufacturers of the ecosystem can earn rich profits for a long time without collapsing is that they are willingly protected by the vast “masses.”

The industrial ecosystem chain supported by the core manufacturer of the ecosystem

It cannot be said that Huawei is not good at establishing an industrial ecosystem. There are many types of industrial ecosystems, and in the past, Huawei has been very successful in building ecosystems in the upstream and downstream of the industrial chain. It has maintained very good relationships with downstream customers, has a well-known reputation for paying suppliers, and the high praise for employee compensation (also an important part of the ecosystem) comes not from current employees and brand departments but widely from former employees.

However, if it wants to develop an operating system, it needs to consider a lot about establishing an ecosystem relationship with horizontal partners, and on this point, people’s evaluation of Huawei is basically “wolf-like.” The general story is that when Huawei does not have a product, it seeks cooperation with partners, but once Huawei’s own product is developed, the partners basically have to consider how to exit. For example, when Huawei did not have 10G transmission products, it initially entered the market in an OEM manner. However, once its self-developed 10G products were released, the previously OEM partners gradually disappeared. Since many of these temporary partners encountered in the past were in competition with Huawei’s core products, we cannot blame them. However, to establish an ecosystem for the operating system, it is crucial to clearly understand the market boundaries that must not be easily crossed with partners and to be particularly clear about what public goods it must continuously provide for free as the “government” of the ecosystem; otherwise, no one will dare to easily cooperate with it. In this regard, many Chinese internet companies have already understood, such as the free resources and platforms provided by Tencent through WeChat, but Huawei has yet to prove that it is aware of this issue.

We do not wish for Huawei’s employees to still rely on a desperate way and mattress culture to complete future upgrades; we do not wish for Huawei to survive while many excellent and outstanding talents do not survive. It needs to rely on innovative wisdom and a brand-new way of survival by establishing an ecosystem. It should enable employees of other companies to willingly sleep on the mattress of Huawei’s tree and ecosystem while allowing Huawei’s employees to have more time to enjoy coffee and life with their families. It should not be that people buy Huawei products out of patriotism and love for Huawei, but because of the profitable opportunities provided by Huawei and the free use of Huawei’s resources, they unite into the broadest united front.

In the face of US sanctions, Huawei needs many response strategies. However, if it is a strategy that Huawei is already fully aware of and has a detailed plan for, we do not need to say much; if it is a strategy that Huawei may not realize but is confidential, we cannot say much publicly. We can only express here a strategy that Huawei may not have fully realized but should be made public. Here, I will propose a strategy for Huawei: if Huawei can comprehend this strategy, it could easily take the head of a general among millions of troops.

One of the optimal strategies in warfare is “capture the king to catch the thief.” Now, in the face of the US chip blockade, seeking substitutes for chips with similar functions is a major task that people naturally think of. However, this is not the best strategy. The best way is innovation; if you do not provide me with a certain chip, I will completely eliminate that chip—dimensionality reduction attack, cross-border kill, eliminate you without relation to me.

One of the largest chip companies in the US is none other than Intel; can Huawei first eliminate Intel? If we mention this, everyone may be shocked and think it is impossible. However, today’s IT technology has actually entered another great revolutionary eve; it is just a matter of seizing the opportunity. The performance of mobile phone chips has already rapidly surpassed that of PC CPUs, and the demand for chip performance in PCs has long been saturated and stagnant. Therefore, the speed of PC updates has become slower and slower. Huawei also began to enter the PC field a few years ago and experienced rapid growth. Now, after the US blockade, not only is it difficult to obtain X86 chips, but finding substitutes is far more challenging than other chips. However, taking the opportunity to quickly close the gap and surpass the performance of computer CPUs with mobile phone chip capabilities is a chance that has long been proposed by both domestic and foreign companies, and many small companies have launched such products.

This mobile phone computer simply adds a display device and keyboard and mouse, connecting the phone via USB or other means, fully utilizing the computing power of the phone without a computer motherboard. It is clear that such a mobile phone computer will be very cheap because it eliminates the entire motherboard. For example, a mobile laptop only needs to add a few hundred RMB beyond the phone, and the laptop part can also provide a larger battery and USB storage space for the phone. In fact, Huawei’s Kirin chip has long supported this function. In the past, when I was investing, I encountered a startup company in Silicon Valley called Andromium that made this type of product.

But the question is, why has such an attractively priced and technologically disruptive product not been widely popularized for so many years?

The key reasons are two:

• First, the advantage of this technology is its disruptive low price, and its reason for making the original industry players panic, fear, and unwilling to support it is precisely this. It eliminates the entire motherboard, which effectively eliminates all major manufacturers in the PC industry, including CPU, hard disk, motherboard, etc., leaving only the case, display, keyboard, mouse, and battery.

• Second, when it eliminates the original motherboard and operating systems, it also needs to rebuild the entire application ecosystem. For example, to print a document with such a mobile computer, it needs a printer driver. How to drive peripherals such as projectors and scanners is also a problem. These issues are far from being solved by a startup company.

Therefore, in the past, startup companies solved the first problem but could not solve the second one. However, the companies that can solve the second problem obviously cannot face the first problem. Even though Huawei clearly knows this technology, it is still unwilling to do something that only brings benefits to users while it does not earn money; it still wants to make some money by utilizing the tail of the PC industry’s market.

Now, the X86 chips are not sold to Huawei, and it is difficult for Huawei to find alternative chips. Even if it develops PC chips with comparable performance using ARM chips, how to bypass the huge PC ecosystem established by Microsoft is also a daunting task. Since this is the case, why not vigorously promote this mobile phone computer technology? It can achieve a threefold effect.

• First, although this technology is not originally from Huawei, if Huawei promotes it, it will become the true pioneer in large-scale commercialization of this technology. True innovation is easiest to succeed when it starts from a simple thing.

• Second, eliminating Intel’s CPU used in PCs essentially eliminates Intel.

• Third, eliminating PCs will also eliminate the ecosystem established by Microsoft in the PC industry.

Moreover, without thinking too much, since Trump is serious, then let him see some colors. Such a dimensionality reduction attack would leave the opponent utterly defenseless.

If Huawei wants to establish an entire ecosystem for smartphones and mobile computers based on the Harmony operating system, the mobile computer is an ideal and irresistible entry point. Huawei can clarify the boundaries with its partners on this issue, profit directly by developing interface chips, establish competitive barriers for its smartphones, thereby obtaining a stable market and rich profits, and use this opportunity to learn how to establish a horizontal ecosystem.

Mobilizing partners worldwide would create an overwhelming sea that traps the enemy in disaster.

Only by deeply rooting itself among the masses can it gain true security.

Pure Science

Understanding everything through pure scientific methods

Long press the QR code to follow us