Chinese hardware company #Huawei laid waste to a once fertile computing sector in Europe and then took over the smartphone industry in China. And now it aims to break into another corner of the tech business. Attention #Dell, #Cisco, #Lenovo and others: Be afraid. Be very afraid.Huawei is training its sights on selling computing gear for the world's biggest data centers, which are the invisible locomotives of the digital world. These giant buildings packed with racks of computing equipment and miles of data-carrying cables enable every moment in the digital world, from the Facebook photo you shared this morning to the databases managing Walmart's supply chain. Here Comes Huawei Huawei's revenue more than doubled since 2010 to 395 billion yuan ($60 billion) as the Chinese hardware maker shook up the markets for telecom equipment and smartphones.
You'd think the digital explosion would be great for companies such as Hewlett Packard Enterprise, Dell, #EMC, Lenovo and Cisco that sell the computing equipment for data centers. Nope.
The number of buyers for their wares has grown more concentrated, shifting power to demanding customers including #Amazon, #Facebook, #Google and #Microsoft. Those companies gobble servers by the truckload, but they tend to shun most equipment from traditional hardware makers and buy made-to-order gear from no-name Taiwanese factories. Companies from #GE to #Uber are following the lead of #Amazon and its ilk, demanding the opportunity to buy different types of data-center equipment at lower costs -- or else. The changes have caused revenue for data-center equipment makers to shrink or grow slowly, and their once enviable profit margins have become far less enviable.
And now here comes another existential threat. Huawei said at an event that it was aiming to sell about $10 billion worth of gear and software to the global data-center powerhouses by 2020. For context, that figure is about one-third of the estimated 2015 worldwide spending on hardware for cloud computing, according to research firm IDC.
That is an ambitious goal for a relative newcomer to data-center gear. But Huawei should not be underestimated, because it has already wreaked havoc in two computer hardware industries.
In telecom equipment, once powerful European hardware makers like #Alcatel and #Ericsson lost sales to Huawei, which grabbed about one-quarter of the market for wireless network gear, according to IDC. Huawei's gains have badly damaged its rivals. Alcatel was forced to sell to Nokia. Industry leader Ericsson's operating profit margins were in the 20 percent range before Huawei entered the market. Last year, its operating margin was 9 percent.
Huawei's success in breaking the backs of European telecom equipment makers helped the company's revenue double from 2010 to 2015, to 395 billion yuan, or about $60 billion at current exchange rates. Huawei's revenue in the first in the first six months of this year puts in on track to generate roughly $74 billion in annual sales, or 50 percent more than Cisco's expected revenue. (Cisco is far more profitable.) Huawei has also became thebiggest seller of smartphones in China and the world's third-biggest smartphone maker.
In data centers, it's hard to imagine Huawei will have much luck selling equipment to big data-center owners in the U.S. Fairly or unfairly, Huawei's telecom equipment is persona non grata in America because of fears China would use it to spy on U.S. companies and computer networks. But China and the rest of the world are a different story.
Now, Western companies including Cisco, Dell and Hewlett Packard Enterprise account for a majority of data-center equipment sold in China, which is the world's second-largest buyer behind the U.S. of computer hardware, software and other digital products. China's spending on information technology, including data-center equipment, rose 14 percent in 2015. That's far faster than the overall market for global IT, which is growing by a few percentage points a year.
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