Chinese tech giant Huawei closes Huawei Cloud & AI division just 1 year in – despite significant investments being made recently

A visitor interacting with a Huawei Cloud X simulated reality stand at the Mobile World Congress (MWC) in 2019. (Photo by LLUIS GENE / AFP)

Huawei shutters cloud, AI business just a year into operations

It has happened. After just a year of full operations, Chinese technology juggernaut Huawei has decided to break up its cloud and artificial intelligence (AI) business arm – despite having sunk in sizable investments over the past two years.

With US and other allied territories imposing sanctions on its previously thriving consumer-oriented product ranges, including 5G telecommunications networks and popular Android smartphones, the Shenzen-based Huawei is now moving up its timetable to dismantle its cloud interests. This comes after Huawei had merged its cloud services and AI units into a single, unified new division in January 2020.

Despite entering the cloud computing market much later than local Chinese rivals Alibaba and Tencent – and way behind Western market leaders Amazon Web Services, Google Cloud, and Microsoft’s Azure platform – Huawei Cloud quickly rose through the ranks to emerge as China’s second-largest cloud services provider in Q4 2020 with a market share of 17.4%, according to research analyst firm Canalys.

This was occurring at a time when the cloud infrastructure and services market was exploding in use across the Asia Pacific, buoyed by strong demand in the wake of a global shift towards embracing cloud services as a means to accelerate enterprise digital transformation initiatives. In Huawei’s home market of China, cloud spending shot up by 62% in Q4 2020, says Canalys, to US$5.8 billion.

Off the back of this strong domestic performance, and with the challenges crippling its lucrative telecommunications and consumer electronics businesses, reports appeared to indicate that Huawei had committed to investing $1.5 billion into the new hybrid cloud and AI division.

The decision to break up the promising division highlights the struggles and shifting fortunes of the hardware manufacturer to transition to a competitive field, featuring well-established players both at home (like Alibaba, Tencent) and internationally (the aforementioned triumvirate of market leader AWS, Microsoft, and the Alphabet company’s Google Cloud).

According to an internal Huawei memo seen by Caixin, the server and storage products unit will become part of Huawei’s Internet Products and Solutions Department, which will be renamed ICT Product Solution and handle product research and development.

Back in 2019, the fledgling Huawei Cloud had a bumper year, with the Chinese telecommunications and mobility giant dipping their toes into managed cloud services and saw success in a number of global markets. A Gartner report details how Huawei Cloud grew at the fastest rate of any cloud services provider in 2019.

It continued to expand its range of services and partnerships, launching in excess of 200 cloud services and at least 190 cloud-based solutions including 43 Ascend-powered artificial intelligence (AI) cloud services which will enable corporations to leverage AI computing power in the cloud ecosystem.

Huawei Cloud had also roped in over 2,000 technology partners around the world, who had collectively developed and released around 3,500 cloud-based applications, and was studying the implementation of a number of needs including containerized hybrid cloud, high-performance batch computing, ultra-high-speed input/output cloud discs, and an All-Connect cloud network solution for cloud-native transformation.

Still, it remains to be seen if the dissolution of these two units means that Huawei is exiting the cloud space altogether, or whether the closure of the division is just part of an internal restructuring at the company.