Huawei's "Willingness" in Twenty Years: How Are Those Leading Businesses That Were "Let Go"?

Recently, according to PV information reports, there are rumors that CATL will acquire Huawei Digital Power.

According to Taiwa Energy reports, in response to this information, it verified with an executive of a product line of Huawei Digital Power and received a reply of "I'm not sure. It's probably a rumor." An industry insider said that the two parties have been in negotiations for some time. However, as of press time, neither Huawei nor CATL has officially responded to this news.

Although there are discrepancies in the information from all parties at present, whether this transaction that has shaken the industry will ultimately be realized is still in the "let the bullets fly" stage, and it is difficult for the outside world to draw a conclusion for now. We can only wait patiently for the official announcement.

However, although it is difficult to tell whether the acquisition rumor is true or false, looking at Huawei's development history, there are indeed precedents of "selling" or "spinning off" non-core business segments according to the adjustment of strategic focus.

In fact, looking at Huawei's more than 30 - year growth history, it has always had the determination to "cut off an arm to survive" and the wisdom to "make room for new development". From selling Huawei Marine and H3C many years ago to spinning off Honor Mobile in recent years and injecting the intelligent vehicle solution business into Yinwang, Huawei has always been good at optimizing resource allocation through "streamlining".

All these precedents prove that in Huawei's business dictionary, there is no absolute "non - sale item". Whether it is to relieve financial pressure, break through external blockades, or reshape the industrial ecosystem, Huawei has always been good at achieving a balance between "giving up" and "gaining" through resource optimization during the strategic transformation period.

01

Huawei Electric - The Financial Balancing Act of Exchanging for a "Warm Coat"

In Huawei's more than 30 - year history of asset operation, the sale of Anshang Electric (formerly Huawei Electric) in 2001 was undoubtedly the first strategic game of watershed significance.

At that time, the Chinese business community was in a period of rapid expansion and was enthusiastic about diversifying across industries to spread risks. However, Huawei made an extremely cold - headed and counter - intuitive decision that year: it sold its communication power supply business, which had excellent annual profits and a market share of nearly 30%, to Emerson Electric of the United States for $750 million in its entirety.

This transaction not only set a new record for mergers and acquisitions of high - tech enterprises in China at that time, but also laid the first solid foundation for Huawei's future survival philosophy of "focusing on the main business" at the underlying logic level.

To understand the professional depth of this transaction, we must first review the hidden concerns behind Huawei's balance sheet at that time.

Around 2000, although Huawei was in a period of high - speed revenue growth, this growth was based on extremely fragile financial leverage and high - intensity capital expenditure. At that time, global communication technology was in a critical iterative period from analog to digital and from 2G to 3G. The R & D expenditure on standards such as WCDMA was like an endless black hole, devouring cash flow at an astonishing speed.

At the same time, Huawei was making all - out efforts to enter the overseas market. The expansion strategy of "encircling the cities from the countryside" meant a large amount of advance payment and a long - cycle project payment collection. In such a "high - growth, high - consumption, high - risk" state, Huawei's cash - flow management had actually reached the edge of the tolerance limit.

As the profit engine at that time, Anshang Electric's communication power supplies and industrial control products had extremely strong competitiveness in the market.

However, from the perspective of industrial economics, the power electronics business is essentially a capital - intensive and manufacturing - driven industry. Its core competitiveness depends on the scale effect of the supply chain and the improvement of manufacturing processes, which is misaligned with the underlying genes of Huawei's communication main business, which was being built around algorithms, protocols, and software - defined networks at that time.

If Huawei had insisted on holding Anshang, it would have meant that while facing the life - and - death battle of 3G technology, it would also have to continuously allocate a large amount of capital expenditure to maintain the manufacturing advantage of the energy business. This would not only cause the dispersion of R & D energy but also create an embarrassing situation of "fighting against oneself" in resource allocation.

Through this transaction, Huawei also achieved a textbook - level replacement of asset liquidity.

The entry of $750 million in cash provided Huawei with an extremely thick financial firewall at a time when the global IT bubble burst in 2001 and the financing environment deteriorated extremely. This cash reserve not only gave Huawei a longer survival half - life than its competitors during the "Internet winter" but, more importantly, it gave Huawei the strategic confidence to bid irrationally in the overseas market to gain market share.

While international giants such as Ericsson and Nokia had to cut expenses and cancel marginal projects due to performance pressure, Huawei was able to increase its intensive investment in core technologies such as distributed base stations against the trend with this "warm - coat money". This capital skill of realizing secondary contradictions at the peak and fully hedging primary contradictions is actually the most extreme management of "opportunity cost".

The deeper logic lies in that the spin - off of Anshang Electric was a forced unification of organizational will.

Ren Zhengfei knew well that if an organization got used to "supporting" its core business with the profits from non - core businesses, the competitiveness of the core business would degenerate and develop a sense of dependence. Through this "selling a subsidiary to survive" - like arm - cutting, Huawei sent a cruel and clear signal to all internal management: Huawei had no way out. If it could not achieve absolute technological suppression in the communication main business, the money exchanged for Anshang Electric would not last long.

This all - or - nothing resource concentration forced tens of thousands of R & D personnel to focus on the narrow communication spectrum. The explosive power brought by this focus was proven to be the key for Huawei to surpass its competitors in the following decades.

The transaction of Anshang Electric was essentially Huawei exchanging a certain short - term gain for an uncertain but infinitely possible long - term entry ticket. This rational and almost cruel choice was not only an optimization of the financial statements but also a re - anchoring of the enterprise's strategic sovereignty.

02

H3C - The "Return of Sovereignty" under Strategic Borrowing

If the spin - off of Anshang Electric was a "de - diversification" based on financial security considerations, then the several - year - long equity separation and reunion between Huawei and H3C was a high - dimensional game involving international politics, intellectual property rights, and market access.

In the view of business researchers, the birth and final spin - off of H3C were by no means simple investment cashing - out but an extremely complex strategic replacement: Huawei used a joint - venture platform as a buffer to complete technology internalization, brand isolation, and learning of global supply - chain rules under extreme external litigation pressure, and finally regained full sovereignty over the enterprise business segment through a complete spin - off at the peak of its value.

To understand the deep - seated logic of this transaction, we must go back to the moment in 2003 that shocked the global technology community.

At that time, Cisco sued Huawei for infringement in the United States. This was not only a legal lawsuit but also a "life - and - death blockade" on Huawei's path to internationalization. For Huawei at that time, a direct confrontation would not only face huge legal risks but also might lead to being completely excluded from the mainstream data - communication market.

Therefore, Huawei showed extremely flexible pragmatism and formed a joint - venture company, H3C, with 3Com of the United States. In the initial structure, Huawei injected its mid - and low - end data - communication business into the joint - venture company, successfully building a "firewall" for itself at the legal level. At the same time, it also used 3Com to open the door to the North American and European enterprise - network markets, which were extremely difficult to enter before.

However, for an organization like Huawei, which has a strong sense of control and long - term strategic goals, a joint - venture is never the end but a phased "borrowing path".

As the litigation pressure eased and H3C showed amazing growth in the global market, Huawei faced a new choice. By 2006, H3C's share in the enterprise - level market had begun to erode its competitors, and its value had reached a phased high point.

At this time, Huawei once again showed its precise sense in asset operation. Instead of choosing to increase its stake to completely acquire the company, it did the opposite, gradually liquidated its shares, and finally exited completely with a premium of nearly $1 billion.

The professional considerations behind this spin - off transaction are extremely profound. First is the logic of "de - confliction".

Although H3C was powerful, it was essentially a commercial product with a mix of Chinese and American genes. Its governance structure and strategic direction were long - term restricted by 3Com and the will of the capital behind it. Huawei realized that in the data - communication field, future competition would be about the "right to define the industry". If it was trapped in the structure of the joint - venture company for a long time, Huawei's own enterprise - network business would never be able to achieve a real strategic closed - loop.

By spinning off and cashing out, Huawei not only avoided the increasingly sharp strategic differences with its partners but, more importantly, it quickly reinvested this precious capital into its self - developed IP (Internet Protocol) product line. This is a typical case of "exchanging space for time", using the equity of a mature entity to gain the financial freedom to support the R & D of next - generation core technologies.

Secondly, the spin - off of H3C was a re - assertion of Huawei's sovereignty over the global supply chain.

During the joint - venture period, Huawei had systematically internalized the sales system, compliance processes, and customer - service standards of the Western enterprise - level market through the operation of H3C. This "ability internalization" was the most invisible but huge asset that Huawei obtained in this spin - off. When Huawei completely liquidated its shares after 2006, it took away not only nearly $1 billion in cash but also an elite data - communication team that had been tempered in the international market and was well - versed in global rules.

This operation mode of "first cooperation, then separation, borrowing a boat to go out to sea, and then returning with the net" allowed Huawei to complete a magnificent transformation from an "imitator" to a "challenger" and then to an "independent player" without sacrificing the rhythm of technological evolution.

From a higher - dimensional industrial game perspective, the spin - off of H3C was also a successful "risk hedging".

At that time, 3Com itself was in an operating dilemma, and the value of its assets was highly uncertain. Huawei chose to withdraw completely at that node, precisely avoiding the subsequent political intervention risks of the US regulatory authorities in the acquisition cases related to 3Com. This keen sense of the macro - political and economic environment allowed Huawei to always maintain an "elegant" state of "being able to advance and retreat freely" in asset transactions.

The departure of H3C not only did not weaken Huawei's competitiveness in the data - communication field but also allowed Huawei to build a full - stack self - developed system from underlying chips to operating systems and then to upper - layer applications without distraction.

This several - year - long capital marathon finally ended with Huawei's full autonomy. It showed the outside world Huawei's basic principle in dealing with complex cross - border assets: all joint - ventures and cooperation are to enhance core capabilities, and when this form begins to limit strategic flexibility, Huawei will not hesitate to choose "de - leveraging".

This extreme paranoia about strategic sovereignty is the underlying logic for Huawei to finally establish an absolute dominant position not only in the operator field but also in the enterprise - level market in the subsequent cruel competition in the enterprise business.

03

Huawei Marine - "Resilient Unloading" in Geopolitical Games

If the spin - off of Anshang Electric was to obtain cash flow for survival and the exit from H3C was to regain strategic sovereignty, then the transfer of Huawei Marine was an active cut - off based on asset resilience protection and supply - chain compliance reorganization in an extremely complex geopolitical environment.

In 2019, Huawei announced that it would transfer 51% of the equity of Huawei Marine Networks Co., Ltd. to Jiangsu Hengtong Optic - Electric Co., Ltd. This transaction triggered in - depth interpretations in the global communication industry at that time. It was a typical case of how to preserve core technology seeds through the transfer of ownership in the "great - power game" of global information infrastructure.

The submarine cable business plays an extremely special role in the communication map. As the "digital artery" carrying more than 95% of the global international data traffic, submarine optical cables are not only a technological high - ground but also a sensitive nerve in geopolitics.

Since its establishment in 2008, Huawei Marine has grown into the fourth - largest submarine cable service provider in the world in just ten years, breaking the long - term monopoly of Asian, American, and European manufacturers in this field. However, due to this extremely sensitive infrastructure attribute, Huawei Marine became the hardest - hit area first affected by external political resistance after 2018.

At that time, the situation Huawei faced was very clear: if Huawei continued to be the major shareholder, this business's overseas access, financing, and approval would be trapped in an endless political quagmire, which would be almost devastating for an infrastructure business that highly depends on cross - border collaboration and long - term delivery cycles.

From a professional risk - management perspective, the spin - off of Huawei Marine was a far - sighted "prospective unloading".

The characteristics of submarine cable projects are huge investment, long cycle, and involvement of the maritime laws and security reviews of multiple sovereign countries. At that stage, Huawei had foreseen that the global supply chain would enter an unprecedented "opaque period". By transferring the control rights to Hengtong Optic - Electric, a private leading enterprise in domestic optical - fiber communication, Huawei was actually "de - labeling" this high - quality asset.

The involvement of Hengtong not only provided the submarine cable business with a corporate identity that better met the aesthetic requirements of international financial institutions and some sovereign countries but, more importantly, through this structural adjustment, it allowed this submarine communication technology representing China's highest level to bypass specific administrative barriers and continue to extend in the global waters.

In terms of business logic, this spin - off reflected Huawei's defensive wisdom of "dividing the whole into parts".

Although the submarine cable business has a very high technical content, its contribution to Huawei's overall revenue is relatively limited, belonging to a "small and beautiful" vertical field. However, the regulatory attention and political pressure it attracted were completely out of proportion to its scale.

By choosing to let go at this time, Huawei was essentially optimizing resource allocation: withdrawing limited legal, public - relations, and strategic resources from these marginal positions that were easily attacked, shrinking the defense circle, and concentrating firepower on protecting the "main battlefields" such as the 5G wireless access network and core network.

This approach of actively giving up non - core and sensitive assets to gain overall strategic resilience when facing extreme pressure is a vivid interpretation of the principle of "preserving the people and losing the land, and both the people and the land will be preserved" in high - dimensional business logic.

In addition, this transaction also reflected Huawei's far - reaching plan for the domestic industrial - chain ecosystem.

Instead of selling this technological asset to foreign capital, Huawei chose Hengtong, which has deep accumulation in the optoelectronic field. This "ecological relay" ensured that China's R & D patents, engineering experience, and supply - chain system in the submarine cable field were completely retained and continued to evolve under the new ownership structure.

For Huawei, the spin - off was not simply "leaving the field" but building a more hidden and resilient technological community externally through the transfer of equity.

Ultimately, the financial significance of this asset realization involving about 1 billion yuan was far less than its strategic defensive significance.

Through this spin - off, Huawei sent a signal to the global market: Huawei is willing to solve the problem of security and mutual trust through changes in ownership. Even in an extremely pressured environment, Huawei is still trying to find a survival mode to maintain business sustainability under the background of the "new Cold War" through asset reorganization.

The transfer of Huawei Marine was another major evolution of Huawei from a closed technological island to a mature enterprise that is more extensible and better at using social capital and industrial - chain power for strategic games.

04

Honor - "Coming Back from the Brink" under Extreme Survival

If the spin - off of Huawei Marine was a forward - looking risk - avoidance based on compliance, then the overall transfer of Honor in 2020 was the most tragic and organizationally innovative "coming back from the brink" in Huawei's development history.

This was not only the largest - scale asset reorganization in the history of