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SMM811S - STRATEGIC MANAGEMENT - 2ND OPP - NOV 2024 |
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nRmlBIA unlVERSITY
' OF SCIEnCE AnDTECHnOLOGY
FacultyofCommercHe,uman
ScienceasndEducation
Schoolof Commerceand
ManagementSciences
Departmenot f Governance
andManagemenSt ciences
13JacksonKaujeuaStreet
Private Bag133BB
Windhoek
NAMIBIA
T: +264612072398
F: •26461207939B
E: dgms@nust.na
W: www.nust.na
QUALIFICATION: Bachelor of Business Management Honours
QUALIFICATION CODE: 08BBMH
LEVEL: 8
COURSE: Strategic Management
COURSE CODE: SMM8115
DATE: January 2025
SESSION: PAPER 1
DURATION: 3 Hours
MARKS: 100
SECOND OPPORTUNITY EXAMINATION PAPER
EXAMINERS: Ms Esther Olivier
MODERATOR: Dr Chris van Zyl
THIS QUESTION PAPER CONSISTS OF TWO (2) PAGES
(INCLUDING THIS FRONT PAGE) AND A CASE STUDY)
INSTRUCTIONS TO CANDIDATES
1. The required length of the Report is between six (6) and eight pages (8), including the indent
reference list.
2. Please ensure that your answers are written clearly and legibly. Avoid using cursive or illegible
handwriting. Answers that are difficult to read will result in lost marks.
3. You are allowed to refer to your notes, textbooks, and the case study during the examination.
However, all answers must be presented in your own words.
4. Ensure that you allocate sufficient time to each section of the report according to the percentage
weightings provided. It is crucial to manage your time effectively to cover all sections
comprehensively.
5. Where applicable, include references within your answers to support your analysis. Follow APA
referencing style for in-text citations and the reference list at the end of the report.
6. All answers must be written in the examination book provided. Ensure that you number your
answers correctly and follow the report structure as outlined.
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QUESTION 1
Study the case study "Huawei smartphone business competition - fighting, surrendering, winning or
losing?".
By Jarunee Wonglimpiyarat
Required: Present a report and consider the following variables:
1. New European Union Regulations on SG Security: The European Union implements new stringent
security regulations on SG technology, requiring more rigorous certification and testing for
equipment used in its SG infrastructure, targeting companies like Huawei due to concerns about
potential espionage.
2. Emergence of a New Low-Cost Competitor from India: A new competitor from India, specialising
in low-cost smartphones and telecommunications equipment, emerges and quickly gains market
share in regions like Africa and Southeast Asia, where Huawei has been trying to expand.
3. Increased Demand for Green Technology and Sustainable Practices: There is a rising global
demand for technology companies to adhere to sustainable and environmentally friendly
practices, with governments offering subsidies for green initiatives in the ICTsector.
The Report should cover the following:
Criteria
1.1. Executive Summary
1.2. Organisational Goals & Objectives
1.3. Comprehensive SWOT analysis giving due consideration to the
additional variables
1.4. Current strategic position
1.5. Discussion and findings
1.6. Recommendations
1.7. Conclusion
1.8. UK academic English, in-text references and the indent
reference list
Weighting(%)
10%
5%
30%
15%
15%
10%
5%
10%
Total for assessment=100%
END OF THE ASSESSMENT
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Huaweismartphonebusinesscompetition
fighting,surrenderingw, inningor losing?
Jarunee Wonglimpiyarat
Introduction
The case study explored Huawei smartphone business. The case presented a protagonist,
Ren Zhengfei, CEO of Huawei, who built the business from a small company to a leading
global information and communications technology (JCT) company. It discussed how
Huawei built its strategic capabilities and became a leader in the global smartphone
market. Huawei faced difficulties as a result of US ban causing its smartphone shipments
plummeted by 70% in 2021. The growth of Huawei was struck by the US sanction with the
supply chain being disrupted by a shortage of advanced chip technology to run the
smartphone business. The dilemma addressed in this case study was concerned with how
Ren Zhengfei would make a decision to steer the company out of the crisis. Under the storm
of difficulties, the company needed the strategies to help it regain a leading position and
remain competitive in the global smartphone industry. With the pressures still growing on
Huawei, what would be the next step for the company - fighting, surrendering, winning or
losing? The case invited readers to evaluate Huawei positioning in the smartphone market
and recommend the best way forward for the company:
Huawei is dangerous. We're not going to do business with Huawei [1].
The former US President Donald Trump declared in 2019, banning Huawei from US
communications networks. Huawei was added to the entity list under US restrictions [2]. The
Trump administration issued an executive order forbidding US companies from supplying
Huawei with components and restricting domestic networks from using Huawei equipment.
Huawei was banned for its fifth-generation (5G) technology [3] as the Western countries
saw that Huawei was too close to the Chinese Government (Kwan, 2020).
In 2018, the US Department of Justice charged Huawei's Chief Financial Officer (CFO)
Meng Wanzhou with bank fraud, wire fraud, money laundering and accused her of
conspiring to violate American sanctions on Iran. She was detained by Canadian authorities
at the request of the US Government for allegedly violating US trade sanctions. The USA
and China began an escalating trade war. The US indictment charged Meng Wanzhou and
accused Huawei of stealing trade secrets. Without trust in the Chinese Government, the
former President Trump banned Huawei 5 G business (Alfayad, 2019; Kwan, 2020).
Being banned by the US sanction and Western countries, Huawei suffered severely from
chip supply chain disruption. Huawei's revenue fell by 29% with the smartphone shipments
plummeted by 70% in 2021 [4]. Huawei struggled to compete in the 5G business under US
sanctions. Ren Zhengfei, Chief Executive Officer (CEO) and Founder of Huawei, declared a
battle to survive the company. He stated:
There is no way the US can crush us [5].
Jarunee Wonglimpiyarat is
based at the School of
Management, Asian
Institute of Technology,
Bangkok, Thailand.
The author acknowledges the
contributions by Maurizio Zollo
and Livio Scalvini. Since
acceptance of this article. the
following author has updated
their affiliations: Professor
Jarunee Wonglimpiyarat also
undertakes the research
projects for Imperial College
London, London, UK and
Massachusetts Institute of
Technology, Cambridge, USA.
Disclaimer. This case is written
solely for educational purposes
and is not intended to represent
successful or unsuccessful
managerial decision-making.
The authors may have
disguised names; financial and
other recognizable information
to protect confidentiality.
DOI10.1108/EEMCS-12-2022-0485
I I VOL.13 NO.2 2023,pp.1-22©, EmeraldPublishinLgimitedI,SSN2045-0621 EMERALDEMERGINMGARKETSCASESTUDIES PAGE1
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The structure of the case study was as follows. The first section provided a big picture of
China's policy in moving the country from imitation to innovation with a focus on developing
high-tech industries including the ICT sector. The second section laid out the background
of Huawei with regard to its origins and growth. The third section discussed the start of
difficulties took place at Huawei as the company was charged by the USA as a security
threat to the national security. The fourth section presented the storm attacking Huawei
smartphone business. The fifth section highlighted Huawei financial performance and
market share. The last section explored the next stage of Huawei's competition.
China- fromimitationto innovationunder"Made in China2025" policy
China had seen rapid economic growth in the past 30years with an average growth rate of
10% per annum [6]. In 2022, China was placed in 1yth position according to the
International Institute for Management Development (IMO) world competitiveness ranking.
After joining the World Trade Organisation (WTO) in 2001, China had adopted trade the
liberalisation policies and various government policies to drive its innovation system
(Wonglimpiyarat & Khaemasunun, 2017). Table 1 provides an overview of economic and
innovation performance of China.
China attempted to make a transition from imitation to innovation through "Made in China
2025" policy. It was a state-led industrial policy launched by Prime Minister Li Keqiang in
2015 to transform the nation to the next level on the global stage. The policy was focused on
developing 10 high-tech industries including the ICT sector. The policy initiative aimed to
make China stronger and independent in terms of technology. China planned to become a
science and technology innovation superpower by the year 2049 (Fu, 2015; Sutter, 2020;
Babel, 2022).
President Xi Jinping introduced the industrial policy aimed at achieving China's technology
self-sufficiency. The 14th Five-Year Plan 2021-2025 had emphasised self-reliance in R&D as
a path for the nation to become a self-sufficient "technology superpower". The plan was
focused on foundational technologies such as next-generation information technology,
biotechnology, new energy, new materials, high-end equipment, new-energy vehicles,
green and environmental protection technology, aeronautics and astronautics and marine
equipment. The Chinese Government had placed importance on developing advanced
industrial sectors to reduce China's reliance on foreign technology and promote self-
sufficiency. At the conference on cyber security in 2016, Xi Jinping stated:
Indicator
Year
China
Population (million)
Gross domestic product (GDP)
GDP growth(%)
International Institute for Management Development (IMO)
world competitiveness ranking
% of research and development (R&D) expenditure to GDP
No. of patent applications
-Residents
- Non-residents
Total researchers in full time equivalency (FTE) (million)
Number of scientific publications
2022
2021
2021
2022
2021
2020
2021
2021
2021
2020
2020
1,412
US$17.7tn
8.1
17
16
20
2.44
1,426,644
159,019
5.092
744,042
Sources: The author's design, based on the World Competitiveness Scoreboard (various years) by
International Institute for Management Development (IMO), World Bank, United Nations Conference
on Trade and Development (UNCTAD), OECD Main Science and Technology Indicators, World
Intellectual Property Organisation
I PAGE21 EMERALDEMERGINMGARKETSCASESTUDIES VOL.13 NO.2 2023
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Our dependence on core technology is the biggest hidden trouble for us [... ] Heavy
dependence on imported core technology is like building our house on top of someone else's
walls; no matter how big and how beautiful it is, it won't remain standing during a storm[ ... ] [7].
The origins and growth of Huawei
Huawei was founded in 1987 by Ren Zhengfei with a capital investment of CNY 21,000 (or
approximately US$3,019 [8] pooled by himself and five other individual investors) in
Shenzhen (Sun, 2009; Yi, 2021). Ren Zhengfei had set the vision of building a global
company that could rival the best in the world. The mission of Huawei was to bring digital to
every person, home and organisation for a fully connected, intelligent world. The company
was headquartered in Shenzhen, Guangdong, China. Huawei was an employee-owned
company. The founder, Ren Zhengfei, owns only 1.4% of the company shares where the
rest (98.6%) was owned by its employees [9]. Huawei was one of the ICT solutions
providers attempting to restructure the global ICT infrastructure network system. In line with
China's 14th Five-Year Plan 2021-2025, Huawei aimed to compete in the global technology
and innovation sector.
Huawei was initially a small company focused on manufacturing phone switches. Three
decades later, Huawei expanded its business to include the construction of telecommunications
networks,operational and consulting seNices, and equipment for enterprises inside and outside
of China, and manufacturing communications devices for the consumer market. Huawei had
three business segments: Carrier Network Business Group, Enterprise Business Group and
Consumer Business Group. In the consumer business, the smartphone was an important
business of Huawei. Huawei sold smartphones under its own brand since 2009 where its
smartphone business had been the fastest growing segment. Huawei was a global provider of
ICT infrastructureand smart devices. It was the world leader in the telecommunication industry
with more than 197,000employees in over 170 countries and regions. The company was ranked
44th on the FortuneGlobal 500 in 2021 [10].
Huawei had placed importance on R&D investments. The company had invested in R&D for
approximately 20% of revenue each year, leading Huawei to one of the top five companies
for such investments in the world (Cui & Liu, 2019). In 2021, Huawei spent CNY 142.7bn (or
approximately US$20.52bn) [11] on R&D or 22.4% of its total revenue according to Huawei
2021 Annual Report. Figure 1 shows Huawei R&D spending during the years 2012-2021.
According to the 2021 EU Industrial R&D Investment Scoreboard, Huawei was ranked the
World second-highest investor in R&D (No. 1 ranking was Alphabet - Google's parent
company). The company was also recognised as a leading brand in the international
market. According to Brand Finance Global 500 2022 report, Huawei was ranked among
top 10 most valuable brands.
Figure 2 charts out companies with the highest shares of global 5G technology patents in
2021. Huawei had the highest share of global 5G technology patents (15.4%), overtaking
Samsung (13.3%), Nokia (13.2%) and Qualcomm (12.9%).
Huawei competed in the world market by using the benefits of low wages and getting low
interest loans from state banks. Huawei pursued the low price strategy in market
competition. Its equipment was 20%-30% cheaper than other competitors [12]. The
competitive pricing strategy and its focus on R&D investments enabled Huawei to get a
greater share in a global smartphone market.
The start of difficulties - Huawei as a security threat?
Huawei began to face difficulties in 2018 as former US President Donald Trump started the
US-China trade war. In 2018, the USA ran a trade deficit with China amounting US
$412.9bn, resulting in a surge of unemployment rate and debt in the USA. Thus, the US
VOL.13 NO.2 2023.1EMERALDEMERGINGMARKETCSASESTUDIESI PAGE3
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1,60,000
1,40,000
1,20,000
1,00,000
so,oo·o
60,000
40,000
20,000
R&D spending (Million CNY)
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Statista
Who Is Leading the SG
Patent Race?
Companies with the highest shares
of global SG technology patents·
As of February 2021
+ Granted and active patent families (SG SEP patent families
with at least one granted patent counted)
Source: IPlytics
Government imposed tariffs and quotas to decrease US imports from China (Alfayad, 2019;
Kwan, 2020). In the same year, Huawei rose as the second-largest global seller of
smartphones, surpassing Apple - an American company - for the first time.
Back in 2012, the USA claimed that Huawei posed a national security threat and that
American companies should not conduct business with the company. Former US President
Trump issued an executive order barring all US companies from using ICT from any party
considered a national security threat. In the escalating trade dispute between the USA and
China, Trump signed an executive order banning communication devices of Huawei [13].
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Attorney General William P. Barr delivered his speech at the Department of Justice's China
Initiative Conference in 2020:
China has established a leadership position in 5G, capturing 40% of the global infrastructure market.
For the first time in history, the United States is not leading the next technological era[ ... ].
From a national security perspective, if the industrial Internet relies on Chinese tec,hnology,
China will have the ability to cut off the link between countries and the technologies and devices
their consumers and industries depend on. The power of economic sanctions used by the
United States today will pale in comparison to the unprecedented leveraging influence we will
succumb to with Chinese dominance[ ... ] [14].
The USA accused Huawei of lying about its ties to the Chinese Government. The former
President Trump banned Huawei charging that the company was the Chinese Government
tool to spy on its competitors and enemies (Yan & Huang, 2020). According to the USA,
Huawei's close ties with the Chinese Government would pose a threat to the national
security of countries that use its technology in their next-generation mobile networks.
In China, loyalty to the state was enshrined in China's National Intelligence Law. Article 7
stipulated that "Any organisation or citizen shall support, assist, and cooperate with state
intelligencework according to law". In 2017, the ChineseGovernmentintroduced the regulations
on security, requiring the Chinese companies to send all information to the government. The
laws compelled companies and individuals to assist in intelligence efforts and they had to
comply, they had no choice [15].
Concerning the background of Huawei CEO, Ren Zhengfei began his career in the Chinese
military and he was a member of Chinese Communist Party (Sun, 2009). This caused
worries for many countries that Huawei would be forced to help the Chinese Government
conduct espionage. There was a fear that Huawei would build a backdoor into its SG
technology allowing the Chinese state access to private data. Many countries expressed
concerns that using Huawei equipment would risk leaking information to the Chinese
Government. However, Ren Zhengfei, CEO of Huawei stated:
We never participate in espionage, and we do not allow any of our employees to do any act like
that. And we absolutely never install backdoors. Even if we were required by Chinese law, we
would firmly reject that[ ... ] [16].
Huawei was charged of engaging in corporate espionage to steal the competitors'
intellectual property [17]. The US Department of Justice charged Huawei with intellectual
property theft alleging that it stole trade secrets from American firm T-mobile deliberately.
Cisco, Nortel, Motorola accused Huawei as stealing their ideas and technology. The US
Department of Commerce listed Huawei and its subsidiaries in the entity list. Ren Zhengfei
stated:
In actual fact, many of our technologies are already far ahead of those - the Western
companies - not just in 5G or optical switching or chipsets. The number of technologies in
which we're leading is huge and these are complex technologies. The charges that the US has
made against Huawei are fairly marginal. They are not enough to say that Huawei has become
what it is today by stealing from the US. Today we have many things that the US doesn't. How
can we steal what they don't have? (18]
BanningHuawei- the stormattackingHuaweismartphonebusiness
Huawei consumer business suffered severely from the US chip ban. As the smartphone
business relies on the supply chain operations and 40% of Huawei total manufacturing
parts are imported, the ban from the USA had disrupted Huawei supply chain causing
difficulties in the product development. The US Government blocked chip makers from
supplying HiSilicon Kirin chipsets to Huawei [19]. As a result, the company lost its ability to
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work with industry-leading chipmakers like Taiwan Semiconductor Manufacturing Company
(TSMC) and Samsung Electronics.
The US ban had restricted Huawei from accessing any chip built on US technology. As a
result, the company was cut off from critical components for building 5G smartphones
(Table 2). Moreover, Google stopped providing Huawei with access, technical support and
collaboration. Thus, Huawei could no longer license Google's Android operating system.
Huawei suffered from semiconductor supply shortage, as Ren Zhengfei stated:
We cannot get components supply, cannot participate in many international organisations,
cannot work closely with many universities, cannot use anything with US components, and
cannot even establish connection with networks that use such components (20].
Following the Trump's administration banning Huawei, many European countries decided
against Huawei 5G products. The UK removed all Huawei components from their national
systems. Figure 3 depicts the countries banning Huawei.
Figure 4 portrays the global smartphone shipments reflecting the effects of US ban on
Huawei smartphone business. While other competitors could sell more smartphones in the
... ..- . ••
Company
Google ARM
TSMC
Microsoft Intel
AMO
Nvidia
Product
Country
Licensing
Maintain service
Software
USA
No
No
Core architecture
Japan, UK
Not needed
(Non-US)
No
Own decision
Source: TechAltar34
Micro-processors
Taiwan
Not needed
(Non-US)
No
Own decision
Software
USA
Yes
Yes
Processors
USA
Yes
No
Semi-conductors
USA
Yes
Yes
Figure processing
USA
Yes
Yes
i@iiiiii
IWhich Countries Have
Banned Huawei?
Countries which have banned or are
considering of ban of Huawei products
(Partial) ban
in effect
On the fence
Unlikely to ban
Using Huawei
Source: Bloomberg
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295.1
295
Samsung Etoctronics
235.7
Apple
166.8
Xiilomi
2019
2020
Source: Canalys smartphone analysis
59
Huawr.1
2021
global market, Huawei smartphone shipments plunged from 192.7 million units in 2020 to 59
million units in 2021, a fall by 70%.
Huawei financial performance and market share
Figure 5 shows the financial performance of Huawei in the past 10years. Huawei sales revenue
increased steadily and surged to CNY 891,368m (or approximately US$128,151m) [21]
in 2020. The decreasing sales revenue in 2021 (29% decrease) was a result of US
sanctions, semiconductor shortage and lowering demand of smartphones in the global
market.
CNY million
10,00,000
8,00,000
6,00,000
4,00,000
2,00,000
2012 2013 2014
2015
2016
2017
2018
2019
2020
2021
Revenue "Operating pront ., Nel profit
Notes: (1) The exchange rate of US$ to CNY in 2022: US$!.00:::: CNY6.96;
(2) In 2021, the operating profit and net profit increased by 67% and 76%,
respectively. The high increase in net profits despite the falling revenue was a
result of one-off gains from selling the budget smartphone unit, Honor, and the
server business
Source: The author's design (compiled from Huawei Annual Reports)
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Figure 6 shows Huawei's revenue in 2021. The revenue from the consumer business
(smartphones and other products) decreased by 49.6% as a result of US clampdown
pressuring the company's smartphone and personal computer (PC) businesses (22).
In the smartphone market competition, Huawei faced fierce competition both from domestic
and international players like Samsung, Apple, Xiaomi, Oppo and Vivo (23). Figure 7 shows
the global smartphone market share of Huawei in the first quarter of 2021. Huawei market
share was seized away by its competitors. Huawei's global smartphone market share
decreased from 14.6% in 2018 to only 4% in 2021.
Meng Wanzhou, the company's CFO of Huawei, said:
The multiple rounds of sanctions imposed by the US have significantly affected our business,
especially smartphones [... ) [24).
Without the supply of 5G chipsets, the launch of Huawei's smartphones in 2021 was based
only on 4G technology. Being pressurised by the US sanctions which cut off supplies to key
Revenue by business segment (Unit: CNY Billion)
Revenue by region (Unit: CNY Billion)
(011\\lltn:"r Bw.11'<.'~S 0
243.4
• ,19.6'1..
• Carrrr !;115111t"S)
281.5
• 7.0%
,;~,a P.icd,c 0
53.7
• IG.7~<1
Ent~qlli,\\: gu~int",, 0
102.4
:21%
[ME/, 0
131.5
: 27.3'\\.
Note: The exchange rate of US$ to CNY in 2022: US$1.00 CNY6.96
Source: Huawei Annual Report, 2021
• ,\\menus
29.2
l 26 J'"O
e (h,nJ
413.3
. 30.9:>.
22%
17%
14%
11%
10%
Samsung Apple Xiaomi
Source: Counterpoint
Oppo
4%
1
Vivo Huawei
PAGEa j EMERALDEMERGINMGARKETSCASESTUDIESj VOL 13 NO.2 2023
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components of Huawei smartphone business, Huawei sold the Honor smartphone brand in
2021 to a consortium of companies to ensure that Honor could survive. Huawei hoped the
sale of Honor would help the company get access to vital components and supplies like
semiconductors again (25].
Huawei's next stage of competition
Despite huge difficulties, Huawei CEO, Ren Zhengfei was fighting for his business. He
denied the US claim that Huawei spied for the Chinese government and was optimistic
about the future of Huawei business. Ren Zhengfei stated:
Our company will never undertake any spying activities. If we have any such actions, then I will
shut the company down( ... ]. If the lights go out in the West, the East will still shine. And if the
North goes dark, there is still the South. America doesn't represent the world. America only
represents a portion of the world (26].
To achieve Huawei's vision of the future and stay ahead in the JCTsector, the company kept
investing heavily in R&D (Figure 1). Figure 8 shows the attempt of Huawei in solving the
problem of supply chain disruption. Huawei made heavy investments in chip technology
(CNY 142.?bn (or approximately US$20.52bn} (27] or 22.4% of its total revenue in 2021).
The company further expanded into the semiconductor industry chain mainly through
Hubble Technology Investment, a subsidiary of Huawei, to solve the problems of chip
shortage. Huawei also established Precision Manufacturing Company focused on the
design and development of modules and components for its wireless and digital energy
products (28]. Huawei also developed its own operating system called HarmonybS (HMOS
. or Hongmeng OS) in 2021.
Figure 9 depicts the use of Huawei 5G technology worldwide. Despite the ban (shown in
red color}, there were 5G market opportunities in Asia, Latin America, Middle East and
Africa [29] (shown in green and white color) that Huawei could secure.
GMi¥1
China's Huawci Technologies
effects of the US crackdown.
is a~::rcssivel)· boosting its chip R&D capabilities
Huawei's chip-related
investments
/8)·11v1r,hiri
to mitigate the
so
40
Chip-related
Others
'•,:·.,,;.~.t."'•1:0~ ,·.•.,~r~
•)' :,•r~• J." ._ ;::•,·,·.•;.\\ I
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:v <;;,,-:,• ,1 .\\.,,,, ,'l,!",•.
·' .:.t ••... ,, tJ·" .,''·J
2019 ·20 ·21
Huawei accelerates chip investment in 2021
··"!.•1·!,·r ~l.•••:f' /!• ••":s·
Semiconductor related"" Others
20
30
·22·
50
Huawci in 2021 cslablislu:d .i new subsidiary. /!u:rnd PnTirnm
.\\fr11111Ji1u11n1w1gi.lh n paid-in capital of Rmb 600111(S9-I.Sm)
202 I chip investment doubled comparing to 2020.
s~m1conJuc1or-h:l,1t1.:J:-urrli.:r:-, ranging from chip developers and
design tools to production equipment and materials.
Sou-ct.hl~'-.n.coni1ccnienl/k9~llo0.l~r,a,i0d.J.2Sclobcr.l.x9
Source: www.ft.com
·,,. ·,.-•·::t •,::-.-.., , 1,,_.~:: · ( •1:1 o , : ·,_ .1, t'~
: • ::·,.v ,.~ ,,••~,:,· -!• .• ,, __1; · r: o~ I,;., ;JC~ ,•1:
:I''..: . ;.J,,, • ,.,1 ,.•·~: ;, _;! r, J (' ·;. f•"•(:r •
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I I VOL.13NO.2 2023 EMERALDEMERGINMGARKETSCASESTUDIES PAGE9
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Gfoiii¥i..
Ir- -· -···----··- ·,
Already us;nu or '
planningto use
Unlikelyto use
Restrictions
Banineffect
V
Not yet
considering 5G or 1
no data
Source: CFR Research
Keywords:
Strategy,
Innovation management,
Competitiveadvantage,
Strategic capability,
Competition,
Collaboration,
Competitive strategy,
Innovation,
Managementtheory
After Trump administration, President Joe Biden continued to ban approvals of new
telecommunications equipment from Huawei [30]. Zhao Lijian, a spokesperson at China's
Foreign Ministry, stated:
The United States, without any evidence, still abuses national security and state power to
suppress Chinese companies[ ... ] [31].
Given the continuing ban under Trump and Biden administrations, Huawei could not wait to
push itself ahead in the world 5G technology [32]. According to a Financial Times report,
Huawei was planning to redesign its smartphone without using restricted chipset
technologies to bypass US sanctions. The company attempted to use phone cases with
built-in eSIM module and chips that support 5G connection [33]. Given the technology
advancements in artificial intelligence (Al) and Internet of Things (loT), these were
opportunities for future innovations for Huawei to build synergy-based ecosystems in
driving the ICT industry further.
The dilemma addressed in this case study was concerned with how a protagonist, Ren
Zhengfei, CEO of Huawei, could steer the company out of the crisis. It was interesting to see
if Huawei could regain a leading position and remain competitive in the global smartphone
market under a storm of difficulties. What would be the next step of Huawei - fighting,
surrendering, winning or losing?
Notes
1. www.cnbc.com
2. The Bureauof Industryand Security(BIS),the UnitedStatesDepartmentof Commerce,added Huawei
to the entityliston the basisof informationthatprovideda reasonablebasisto concludethatHuaweiwas
engaged in activitiesthat were contraryto US nationalsecurityor foreign policy interests.Huaweiwas
chargedwith posingrisksof nationalsecuritythreatsto the USA(www.federalregister.gov).
3. 5G was the fifth-generationtechnology standard for cellular communication networks. It was up to
100 times faster than 4G in terms of speed and could reduce latency as well as improve flexibility of
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wireless services. 5G technology could improve the performance of business applications as well
as other digital experiences such as online gaming, videoconferencing and self-driving car
performance (www.cisco.com).
4. Huawei Annual Report
5. www.bbc.com
6. www.worldbank.org
7. www.thediplomat.com
8. The exchange rate of US$ to CNY in 2022: US$1.00:::::CNY6.96
9. Huawei Annual Report, 2021
10. www.huaweicentral.com
11. The exchange rate of US$ to CNY in 2022: US$1.00:::::CNY6.96
12. It was claimed that Huawei could undercut its price by 70% when competing with its competitors
because the company received annual subsidies from the Chinese Government (washingtonpost.
com, www.businessinsider.com). According to the Washington Post, Huawei got US$222m as the
grants from the Chinese Government in 2018 (www.washingtonpost.com).
13. www.theguardian.com
14. The United States Department of Justice
15. www.cnbc.com
16. www.cnbc.com
17. www.justice.gov
18. Ren Zhengfei's interview with BBC (www.huawei.com)
19. Prior to US ban, Huawei used US-based technology to produce HiSilicon Kirin chips - application
processor - for its smartphone (www.hisilicon.com).
20. www.reuters.com
21. The exchange rate of US$ to CNY in 2022: US$1.00:::::CNY6.96
22. Huawei Annual Report, 2021
23. Huawei's competitors in the high-end smartphone market were Apple and Samsung. Its
competitors in the low-end smartphone market were Xiaomi, Oppo, Vivo, Samsung and Realme.
24. www.theguardian.com
25. www.cnbc.com
26. www.bbc.co.uk
27. The exchange rate of US$ to CNY in 2022: US$1.00:::::CNY6.96
28. www.huaweicentral.com
29. It was forecasted that the growth of smartphones market in the Middle East and Africa will be 9%
during 2021-2026 (www.mordorintelligence.com).
30. www.nytimes.com
31. www.reuters.com
32. Apart from Huawei, the other major players operating in the global 5G network industry were
Samsung (South Korea), Intel (USA), Nokia (Finland), Ericsson (Sweden), Cisco (USA), LG (South
Korea), Qualcomm (USA), AT&T (USA) and NEC (Japan).
33. www.ft.com
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Correspondingauthor
Jarunee Wonglimpiyarat can be contacted at jaruneew@ait.asia
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