How Huawei is doubling down on Latin America amid global headwinds

China's Huawei is increasing its bet on Latin America by upping investments in several areas such as cloud, solar equipment and digital transformation.

The Chinese giant faced a difficult 2021 that affected its performance due to the US government blacklisting it from using US-manufactured components both in the consumer and enterprise product segments, while also being impacted by the global components shortage and logistical challenges brought on by the COVID-19 pandemic.

Huawei remains a major force in both the smartphone and network equipment segments, especially in emerging markets where many companies find its lower equipment prices a very attractive factor.

“Ongoing efforts by the US government to curb the rise of Huawei is starting to show in the numbers, especially outside of China. At the same time, Huawei continued to dominate the global market, still nearly as large as Ericsson and Nokia combined,” Dell'Oro consultancy analyst Stefan Pongratz wrote in a recent report.

According to Dell'Oro’s January-September figures, Huawei led the global telecom equipment market in revenue terms, accounting for 30% of the US$100bn market, followed by Nokia, Ericsson, ZTE, Cisco, Samsung and Ciena. 

The figures include broadband access, microwave & optical transport, mobile core & radio access network (RAN), and SP router & switch equipment. 

In Latin America, the company's market share is estimated to be even greater. 

Partly in response to US pressure, the company has doubled down on emerging regions such as Latin America, where it has moved beyond smartphones and radio to invest in areas such as cloud computing, digital transformation, solar equipment and talent training.

In Brazil, Huawei says it is a partner of 90 universities and educational institutes through the Huawei ICT Academy Program, and to have already trained 36,000 students in the last 10 years.

The goal is to train another 40,000 students and teachers in the next five years. The company has invested 40mn reais (US$7mn) in R&D in Brazil year-to-date.

The company has a broader LatAm program called Huawei Competition, where young students who are part of the ICT Academy compete in regional competitions.

In July Huawei opened a center for the testing of 5G solutions in São Paulo, which demanded an investment of 35mn reais.

The company said it seeks to attract customers and partners, as well as universities and startups, to participate in experiments that simulate real conditions of the new generation of mobile networks in several business sectors, including agribusiness, mining and manufacturing.

Huawei estimates that over 50% of the mobile networks (3G and 4G) in Brazil run on its equipment, although that figure is disputed by competitors. And its 5G equipment is also being used in the first roll-outs by Brazilian telcos TIM and Algar, as well as Telefónica Chile, among the few that have already activated 5G networks following spectrum auctions held in Latin America.

In Mexico, “the probability that you make a phone call that goes through a Huawei device is very high, over 80%,” the company’s LatAm marketing and strategy director, Joaquín Saldaña, recently said.

Huawei is now looking to expand its base and gain new contracts with cash-limited operators and new entrants to the regional mobile market.

But unlike Ericsson, Huawei does not manufacture telecom equipment in the region - although that is reportedly now part of its plans. 

Ericsson manufactures 3G, 4G, and now also 5G equipment, in its LatAm factory located in Brazil, which help speeding up delivery of equipment to local and regional operators.

The current capacity of the Ericsson factory is 2,500 5G radio equipment per month. The Swedish company has said that three Brazilian operators with a nationwide footprint – Telefônica, Claro and TIM – have placed orders for 5G equipment. 

CLOUD

Huawei is also stepping up the expansion of its cloud presence in Latin America.

Last month it launched a second cloud region in Mexico, located in the municipality of Tultitlán, in Mexico state.

Since opening its Mexican cloud operation in 2019, Huawei says local sales have increased by more than 80%, and it claims to be the fastest-growing public cloud company in the region.

Huawei have nine datacenters in the region: two each in Brazil, Chile, Peru and Mexico, and one in Argentina. This is more than any other public cloud provider.

In terms of market share, it is still far behind leaders AWS, Microsoft and Google in most Latin American countries.

The company is mulling new cloud datacenters and content-delivery networks (CDNs, structures to take content closer to the client and reduce latency) in other Latin American markets.

Paraguay and Uruguay are markets where Huawei plan to activate CDNs in the short term. The company also plans to open CDNs in Bolivia, Barbados, Suriname, Belize, Bahamas, Guyana, Jamaica and Nicaragua starting in 2022.

"Huawei has pivoted to the cloud market and attempts to bill itself as a trustworthy IT supplier for the public and private sectors and as an alternative to the large IT software companies which supply a combination of services and a cloud", writes consultancy Strand Consult. 

To boost cloud sales, the company recently launched its Spark Program in Brazil, which includes a support feature of US$100,000 for startups to help them buy services from Huawei Cloud.