One of the most obvious effects of the US blacklisting of Huawei has been the redoubling of the vendor’s efforts – and those of its government – to end its reliance on western technology and patents, especially in foundational areas like 5G and semiconductors. There has been a wave of new funding for Chinese chip suppliers as the country looks to become self-sufficient in this regard (though that remains a distant goal so far). And Huawei has been moving contracts to new, homegrown partners where it can, and developing more and more technology inhouse.
This is especially true in highly strategic areas like base station chips, where any disruption to its supplies could hurt one of its biggest businesses. And it has also been stepping up investment in promising start-ups in these crucial segments.
It established a new venture arm called Hubble Technologies in April 2019. One of its first investments was to buy an 8% stake in 3Peak, which makes analog signal chips for 5G base stations, for RMB72m ($10.2m). Now 3Peak is already planning an IPO, aiming to raise RMB850m ($120m) on the Shanghai science and technology board, according to local reports. If successful, it will have gained almost 350% in value since April 2019, from $127.4m to $566.4m.
The Suzhou-based firm was founded by former employess of Motorola Semiconductor and IBM. It sells to ZTE and Haier, but also lists an unnamed firm which has been its biggest customer for the past three years and enabled it to become profitable. That customer is widely presumed to be Huawei.
Hubble is a secretive unit which was set up as a wholly-owned Huawei subsidiary with registered capital of RMB700m ($99.1m), increased to RMB 1.4bn ($198.2m) in January. Unlike arm’s-length venture arms at many companies, Hubble has an explicit mission to support technologies that are likely to be valuable to Huawei and help in its bid for self-sufficiency.
It does not have an independent investment team, but acts a funding channel for Huawei business units. Its chairman, Bai Yi, is president of Huawei’s global financial risks control group.
It has nine investments so far, all related to chips or hardware. They include the China unit of Taiwanese company Starconn, a major connector maker; Shandong Tianyue, a supplier of silicon carbide for semiconductor manufacture; and NewCoSemi, a fabless chip firm specializing in display and enterprise networking.
One fund manager told LightReading: “Huawei didn’t pay much attention to domestic companies in the past, but after the ZTE incident [when the USA temporarily barried its vendors from supplying components to ZTE, in 2018], its attitude changed significantly.”