Huawei’s new venture capital firm highlights aim to create an ecosystem

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A Huawei store advertises the new Mate20 phone in Shanghai on March 22, 2019. (Image credit: TechNode/Cassidy McDonald)

Huawei is moving into the Chinese high-tech venture capital field by establishing a new investment firm in bid to build out its ecosystem, reported PEdaily citing an investor familiar with the company.

According to Chinese business research website Qichacha, Hubble Technologies (our translation) was formed on April 23 in Shenzhen. It is a wholly owned subsidiary of Huawei with registered capital of RMB 700 million ($104 million), and Bai Yi, president of Huawei’s global financial risks control center, was named legal representative and chairman of the company.

Huawei did not respond to requests for comment when contacted by TechNode on Friday.

Many of China’s tech giants have investment arms which invest in a broad range of companies in the country’s internet world. In addition to Alibaba and Tencent, Xiaomi founder Lei Jun established a venture capital firm, Shunwei, in 2012. With a focus on intelligent devices and internet services, Shunwei co-invested with Xiaomi nearly 100 out of the 300 total startups it holds shares in, folding them into the Xiaomi internet of things (IoT) ecosystem.

“The foundation of Hubble Technologies sends a vital message,” Wang Ruchen, founder of Chinese tech media outlet Quark Point, told TechNode on Friday. “As its revenue growth increasingly relies on consumer and IoT businesses, Huawei is now involved in a more complex game. It is true that Huawei has some really big clients in business service sectors including cloud computing, but the company was more focused on research and development (R&D) at ground level, not reaching the top level of devices and applications.”

Huawei has shifted its focus from offering enterprise-facing solutions to consumer businesses amid global concerns about the security of its network equipment. According to its financial results, the company’s sales revenue from its consumer business grew 45.1% year on year to RMB 348.9 billion in 2018, surpassing its carrier business revenue of RMB 294 billion for the first time.

Wang expects that Hubble Technologies will spend a considerable amount to shore up Huawei’s ecosystem. “Innovation in this fragmented market stems from more participants, and Huawei needs to catch up in the construction of its ecosystem,” he explained.

Before the establishment of Hubble Technologies, Huawei’s in-house investment team made just 14 deals over a period of 10 years beginning in 2006, reported PEdaily based on figures from company database website Tianyancha.

The company’s largest investment to date was the acquisition of Huawei Symantec in November 2011, when the Chinese telecommunication giant spent $530 million to take the full ownership of a joint firm formed with the US security giant Symantec. Apart from internet security, Huawei focuses on cloud storage, data centers, and chipmaking.

The Shenzhen-based telecommunications giant invests a massive amount of money into R&D; in 2017 it spent RMB 89.7 billion and in 2018 that number rose to RMB 101.5 billion. R & D spending accounted for around 15% of its total sales revenue.

The significant investment has aroused some disagreement about efficiency in the Chinese tech industry. During an April 2018 press event, Lei said that success in R&D could not be measured by capital. “Almost all significant innovations were achieved by small enterprises,” (our translation) he said, according to a Weibo post by Xu Jieyun, Xiaomi’s head of public relations.