The Huawei logo will be shown at the IFA consumer technology trade fair as part of the coronavirus disease (COVID-19) outbreak on September 3, 2020 in Berlin.

Michele Tantussi | AFP

GUANGZHOU, China – Huawei steps up efforts in software areas such as cloud computing and smart cars as US sanctions affect hardware business.

Last week, Arcfox, a brand of automaker BAIC Group, launched a car powered by Huawei’s vehicle technology. It contained a cockpit with HarmonyOS, the Huawei operating system introduced in 2019, and autonomous driving capabilities. Huawei won’t build cars and instead focus on the technology that powers them.

And on Sunday, Huawei launched some new cloud computing products to challenge China’s leader Alibaba.

Huawei said in a press release on Sunday that it hopes the focus on the cloud “will ultimately increase the share of our software and services business in our total revenue mix.”

The linchpin for software comes after U.S. sanctions against Huawei caused smartphone sales to decline. The Chinese giant was blacklisted in 2019, known as the Entity List, which restricted access to American technology. And last year Washington cut Huawei off from major semiconductor shipments.

“Huawei doubles as it moves to a software / cloud and services company,” said Neil Shah, research director at Counterpoint Research.

As a result of Washington’s sanctions, Shah said the Chinese company was “unable to source critical semiconductor components and related technologies from the US”

“Huawei is becoming like Google in this effort,” he said.

Google makes the Android mobile operating system used by most of the world’s smartphones. The tech giant also works on in-car software and has a rapidly growing cloud computing business.

Huawei has also touted its HarmonyOS as capable of working on a variety of devices, from smartphones to TVs to cars.

“The smartphone business is facing challenges. They have one more mobile platform to use HarmonyOS on. The car could be a great mobile platform to use and use HarmonyOS,” said Will Wong, research manager at IDC.

In pursuit of areas like vehicles and cloud, Huawei will seek to challenge some of China’s largest tech companies. Alibaba is the market leader in China for cloud computing. And in the automotive sector, a number of companies are vying for a piece of cake from established players like Baidu to newcomers like Xiaomi.

Isolation from geopolitics

Behind Huawei’s foray into the software is also an attempt to isolate itself from potential geopolitics and other US measures. While Washington successfully blocked Huawei’s access to chips, impacting the software business could be more of a challenge.

“It will be better protected if geopolitics are discussed from the US,” said IDC’s Wong.

He found that the chipsets required for vehicles also require a less advanced manufacturing process than smartphones.