It’s amazing how quickly things can change in the wireless industry. A few short years ago both Qualcomm and Huawei were at the top of their games, battling it out for dominance in the minds of the global wireless marketplace. Today, things are much different. While Qualcomm is still growing and expanding with 5G, AI, IoT, the cloud and more, Huawei is going into “survival mode” due to fears of recession.
Let’s take a look at why Huawei downturn is impacting them so much and if it will impact the rest of the wireless industry.
When faced with massive external pressures like an economic slowdown or downturn or fears of recession, CEOs can take one of two directions depending on the strength of their company.
Either they are confident in their company’s performance and will continue doing business as usual. This is what Tim Cook, CEO of Apple, says he is doing.
Or, if they are concerned about the future, they often take a step back and slow their expansion because of the uncertainty. They want to keep their powder dry. That is what Huawei is doing.
This may be the difference between Qualcomm and Huawei. If so, this may help us shed some light on the difference between these two wireless industry powerhouses.
How over last decade, Huawei and Qualcomm dealt with struggles
Over the last decade, both Qualcomm and Huawei have had many, different regulator struggles. While Qualcomm seems to have settled theirs, Huawei still wrestles with U.S. regulator claims about fears the Chinese government would be able to monitor communications and spy on customers.
Because of this potential threat, Huawei has been forced to exit the U.S. marketplace in recent years.
While U.S. regulators do not have any proof about this claim, Huawei has not been successful countering it either. So, this has been holding them over the last decade. Even so, they have still shown strong, global growth.
Why are recession fears impacting Huawei, not Qualcomm, ZTE, Ericsson
Today, things seem different with the global economic uncertainty exacerbated by the COVID-19 pandemic.
Today, Qualcomm, ZTE, Ericsson, Nokia and others are still in growth mode, while Huawei says they are now in survival mode.
Why is there such a difference? According to Huawei, the reason is the economic downturn and recession fears. If that is true, why is the same thing is not impacting competitors in the same way?
Differences between Qualcomm, ZTE, Ericsson, Nokia and Huawei growth
Founder Ren Zhengfei says Huawei would be shutting down marginal business units. He said they would be in survival mode for the next three years, at a minimum.
However, while Huawei seems to be struggling, their competitors are still showing growth and are expanding into new areas.
In China, 5G wireless also continues to grow. However, competing companies seem to be focused on and moving in different directions.
Huawei recently reported their revenues have been reduced by 14% compared with same period last year. Their business unit including smartphones also dropped, by 25%. This is a pattern.
Huawei new focus on survival and sustainability, not wireless growth
This is what I would have expected years from now when 5G was already installed and the marketplace was getting ready for 6G. To have that slowdown now, during the buildout of 5G, is not typical.
In response, Huawei has adjusted their core goals to be based on survival and sustainability, not growth. They want to make sure they keep customers satisfied. That means keeping quality levels high for gear and service.
This is a good move because if customers become unhappy with the performance of Huawei, they will leave for a competitor.
Will Huawei troubles cause FUD or Fear, uncertainty and doubt?
If customers and other countries begin to worry about the survival and sustainability of Huawei, they will also leave for a competitor.
You see, choosing one competitor to build out the nations mobile ecosystem is very important for the economic development of every country.
That’s why Huawei is focused on sustainability and survival at all costs.
After all, expressing weakness in a marketplace where competitors are not doing the same is like finding a crack in the wall of Hoover Dam. While one crack does not mean the dam will breach, it does create fear, uncertainty and doubt.
And fear, uncertainty and doubt of one competitor is not good news in a marketplace filled with fierce and growing competition.
The next big question: is this an isolated competitor problem, or is it the beginning of a trend?
Is Huawei a sign of slowdown in wireless industry?
So far, I see this as a Huawei issue only. I believe the wireless industry remains a fast growing, strong and expanding marketplace.
However, as we must recognize, things can always change. So, we must stay alert.
Within the wireless industry over the last several decades there have been various times of rapid growth and other times where things calm down. That’s just normal as we shift from one generation to the next.
The important point to remember is, even if there is an economic recession caused slowdown, some wireless companies will continue to grow rapidly while others could begin to slow down.
Remember the Tim Cook/Apple example mentioned above. Some companies can weather the storm better than others.
What to expect going forward in the wireless industry
After all, part of the growth story is around core 5G wireless services, and other parts are around massive changes and innovations, plus other industries embracing 5G opportunities.
Some of that story is necessary and will continue, while other parts are less necessary and could potentially slowdown for a while. It depends on the company and the importance of the product or service.
That means, as the economy slows, it may impact part of the wireless growth story for a while. However, other parts will continue to expand their 5G reach and that will keep growth occurring among most competitors.
Wireless has become an economic juggernaut like food, water and power. It is important and it will continue to advance moving forward, no matter the economic state. The only question is the forward momentum be rapid or measured?
