HUAWEI: OCEANCONNECT IOT PLATFORM AND SOLUTIONS

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1 COMPANY PROFILE HUAWEI: OCEANCONNECT IOT PLATFORM AND SOLUTIONS AHMED ALI Analysys Mason Limited 2018 analysysmason.com

2 Company summary Huawei is a global information and communications technology (ICT) solution provider offering hardware and software solutions and services more than 170 countries. Significant customers include BT, China Mobile, Singtel and Vodafone. Huawei had about employees involved in research and development activities in 2016, which is about 44% of its workforce. Its spend on R&D was equivalent to 15% of revenue in Huawei offers its solutions and services to both telecoms operators and enterprises. For telecoms operators, Huawei has been prominent for its support of the 3GPP Narrowband IoT (NB- IoT) technology. The company has invested in internal development as well as collaboration with standards bodies, customers, technology partners and developers to expand the ecosystem. Huawei has released OceanConnect, a cloud-based IoT platform, which is offered to telecoms operators and enterprises to enable IoT deployments and to share network and device APIs with enterprises and developers. Huawei released its Edge Computing solution (EC-IoT) for enterprises in 2015 to accelerate enterprises digital transformation projects. The solution includes IoT gateways and a cloud controller for terminal management. Figure 1: Huawei company facts Founded 1987 Offices Employees (2016) Regional focus Headquarters in Shenzhen, China. Offices worldwide Global Revenue USD75.1 billion (CNY521.6 billion) (2016) Selected IoT customers Selected IoT partnerships Axiata, China Telecom, FAW Group, Groupe PSA, MTN, Telefónica, Weifang Government, Zain Accenture, AEOTEC, ARM, BOSCH, Chainway, DHL, GE, Gemalto, Giesecke & Devrient, GoldCard, Hikvision, Honeywell, iflytek, Intel, isoftstone, Johnson Controls, Leedarson, MetaSystem, Nuance, NXP, ofo, Philips Lighting, SAP, Sercom, Software AG, Tatung, Tech Mahindra, Veolia Analysys Mason Limited

3 (USD billion) Huawei: OceanConnect IoT platform and solutions Company summary: financials Huawei s business divisions are: the Carrier business which includes mobile, fixed, cloud and IT solutions for operators, the Enterprise business which includes ICT infrastructure and services for enterprise verticals, and; the Consumer business which focuses on smartphones and other consumer products. The Carrier business, which accounts for more than half of the revenue, grew by 24% YoY, thanks to the company s digital transformation solutions including IoT, cloud and video. Huawei s Chinese market is the largest contributor to the company s revenue in terms of regions (Figure 3) and it grew by 41% YoY. The rest of the Asia-Pacific revenue grew by 37% YoY due to the ongoing 4G rollout in emerging markets like India and Thailand and the increase in Huawei s consumer market share in developed markets such as Japan. Smartphone market growth also contributed to the EMEA revenue which grew by 22.5% YoY while infrastructure development in countries like Mexico increased the revenue in the Americas region by 13%. Huawei did not report its IoT revenue in However, the company generated USD1.3 billion from IoT in 2015 divided between five sectors; smart transportation (28%), smart cities (24%), smart grid (24%), oil and gas (21%) and smart home (3%). Figure 2: Huawei s revenue and net profit, worldwide, Figure 3: Huawei s revenue by region, worldwide, Other revenue Consumer revenue Enterprise revenue Carrier revenue Net profit Source: Huawei 13% 30% 9% 3% China Total revenue: USD75.1 billion 45% EMEA Asia Pacific Americas Others Source: Huawei Analysys Mason Limited

4 Edge Security & billing Cloud Professional services Huawei: OceanConnect IoT platform and solutions IoT business overview Huawei is trying to leverage its position as both a carrier and an enterprise ICT provider to offer a wide range of IoT products (Figure 4) and build an ecosystem around them to enhance collaboration between different types of stakeholders. The company is a key supporter of the NB-IoT technology and promotes the adoption of the technology across the value chain. Figure 4: Huawei s IoT stack Analysys Mason s IoT platform stack Huawei s IoT platform stack At the device level, Huawei provides device manufacturers and solution providers with its IoT chipset, Boudica, integrated with its operating system, Huawei LiteOS. At the aggregation level, the EC-IoT Solution includes a range of gateways that handle data routing, switching, and security in the industrial and residential environments. The gateways are managed using Huawei Agile Controller which provides open APIs and esdks to connect to different partners' industry application systems. Through its OceanConnect IoT platform, Huawei offers connectivity management, device management and application enablement capabilities including analytics and service orchestration. Huawei also partners with other platform providers (e.g. Software AG) to extend its platform features. The company also complements its IoT offering with its other solutions and service such security and billing. Applications Application enablement Device & Data management Connectivity management Fog and edge computing Devices Home e.g., Software AG, GE Predix OceanConnect Device Management (including Agile Controller) Key Manufacturin g OceanConnect Connection Management Platform Huawei Energy Utilities EC-IoT Gateway, Home Gateway LiteOS, IoT Agent Partners City Automotiv e OceanConnect Application Enablement Source: Analysys Mason Analysys Mason Limited

5 Strategic direction: Huawei is supporting its platform by strengthening its NB-IoT market and expanding its IoT partner ecosystem Huawei aims to build its presence across the IoT value chain layers with a diverse range of products. The company is targeting different types of IoT stakeholders including telecom operators, enterprises, device manufacturers and application developers. Huawei has several approaches to IoT. First, the company has its dedicated IoT unit and invests in developing it. Second, Huawei is expanding its ICT technologies such as cloud computing and big data which support its IoT efforts. Third, the company is growing its IoT ecosystem to compete in different IoT verticals. To develop its IoT solution, Huawei relies largely on its internal capabilities and resources. Since the acquisition of Neul in 2014, Huawei has not made any significant IoT-related acquisitions. Instead, it has formed an IoT R&D team of 3300 members working on different aspects of the Huawei s IoT technologies including connectivity, edge computing and IoT platform. The company is aggressively supporting the use of Narrowband IoT (NB-IoT) standard for low power wide area (LPWA) IoT applications, anticipating a wide-scale adoption of the technology and consequently, securing Huawei s share of this market. By the end of 2017, Huawei s NB-IoT footprint reached more than 30 networks across 20 countries. Huawei has been relatively late to market with IoT platforms and faces strong competition. However, It is trying to build a stronger position for its IoT platforms based on its NB-IoT networks. To build the ecosystem, Huawei is operating globally distributed OpenLabs as joint development and collaboration hubs. The company has established 14 self-run OpenLabs and 8 jointly-run OpenLabs with operators including China Mobile and Vodafone. Regionally, Huawei s IoT strategy has a particular focus on the Asia-Pacific, the Middle East and Africa, where the company has a significant market presence. For example, its most recent IoT OpenLabs have been in Malaysia, the UAE, Egypt and South Africa. Huawei s ecosystem also plays a role in facilitating the company s expansion into different IoT verticals. Huawei does not develop its own industry-specific IoT applications but it aims to become an enabler across all verticals using its connectivity technologies and its horizontal platform. Areas where the company and its partners have demonstrated IoT use cases include manufacturing, smart homes, smart cities and connected cars markets. Smart city market, in particular, is a market where the company is seeing a traction. The Huawei s Smart City solution includes the OceanConnect IoT platform and infrastructure in addition to other Huawei s technologies in cloud computing, big data and video. It has been deployed in 120 cities across 40 countries including 9 projects in China. Source: Analysys Mason Analysys Mason Limited

6 Key acquisitions and mergers Figure 5: Huawei s key acquisitions and mergers, Date Company Description Sep 2014 Neul Founded in 2010 in the UK, Neul offers NB-IoT network technologies and was involved in several trials in the UK including a city network project in Milton Keynes in partnership with BT. Huawei acquired Neul for USD25 million. Jan 2012 Nov 2011 The Centre for Integrated Photonics (CIP) Huawei Symantec CIP is a research centre that is based in the UK. It focuses on the development and manufacturing of photonic devices and optoelectronic chips for telecommunications applications. Huawei Symantec was a joint venture between Huawei and Symantec the was founded in 2008 to offer IT solutions including networking, security, storage and computing technologies. In 2011, Huawei acquired Symantec s share for USD530 million Analysys Mason Limited

7 Product summary Figure 6: Huawei s IoT products Product Function Description EC-IoT Gateways Huawei LiteOS OceanConne ct IoT Platform Protocol conversion, local processing and device management Device operating system Connectivity Management, Device Management, Application Enablement The gateways link the IoT sensors and terminals to the Agile controller through more than 17 types of IoT interfaces and protocols including industrial protocols. The gateways are remotely managed using the Agile Controller which can manages up to a million devices in the cloud. A lightweight, 10-kilobyte, device software stack that includes a kernel, middleware components and open APIs. It runs on IoT modules and devices and activates connectivity and management features such as auto discovery and auto connect. The LiteOS is also based on open source software and available for free for device developers, Cloud-based platform that is offered to telecom operators and enterprise customers to support Huawei s NB- IoT, cellular network and elte network infrastructure. The platform is based on onem2m IoT service platform standard. It offers connectivity and device management service including SIM and esim management, subscription and notifications, device access management, device onboarding and data collection. The platform also supports application enablement services like rule engine, analytics, machine learning enabler suite, application management and integration services. NB-IoT Solution elte Solution Wireless Network Wireless Network Huawei s NB-IoT solution is based on its SingleRAN solution. Through the NB-IoT solution, The solution complies with the 3GPP standards and provides narrow bandwidth, air interface retransmission, and power saving mode (PSM). Huawei elte Solution is an integrated IoT wireless network solution for enterprise applications. It uses broadband elte-u and narrowband elte-iot access technologies to employ licensed and unlicensed spectrums and ensure industry-grade stable connections. NB-IoT Chip Chipset The Boudica 120 complies with 3GPP Release 13, and supports 700 MHz, 800 MHz, and 900 MHz frequencies. The Boudica 150 additionally supports 1800 MHz and 2100 MHz frequencies, and complies with 3GPP Release 14. Analysys Mason Limited

8 Significant customers Figure 7: Huawei s selected IoT use cases Customer Country Scope ofo China ofo is a bike sharing service provider, founded in China in 2014, that also operates in 20 countries including Australia, Japan, Singapore, the UK, and the USA. The company has 10 million connected bicycles that support 100 million subscribers in 180 cities. ofo was looking for a way to revitalise its business model by using IoT technologies to improve the customer experience such as offering rapid and accurate bike locating services and faster unlocking and payment methods. The company also wanted to a tighter management of its assets to maintain higher quality and longer lifespan for its bikes. Huawei offered its IoT solutions including chips, networking and the platform to enable ofo to develop its smart locks. The solution allowed ofo to have access to equipment, operating and user data and as a result improve its maintenance and value added services. Groupe PSA France Groupe PSA is one of the largest car manufacturers in Europe selling under multiple brands including Peugeot, Citroën, DS, Opel and Vauxhall. The company partnered with Huawei to offer mobility service to its customers. Using Huawei s OceanConnect IoT platform, Groupe PSA developed its Connected Vehicle Modular Platform (CVMP) which is deployed globally on Huawei's Cloud Family public cloud. With the connected car platform, Groupe PSA is looking to enhance the driving experience and address the mobility needs of its customers while utilising the revenue potential of connecting operations cross-regions and cross-industries. The CVMP is targeted to reach 89 countries and connected 8 million vehicles by The applications supported by the platform include online car bookings, car sharing, in-car entrainment, driving habit analysis, emergency and rescue support, fleet management and car resale. Weifang City China With an area of square kilometres and a population of 9 million, Weifang is the second largest city in the province of Shandong, China. The city collaborated with Huawei to build its smart city system including infrastructure, platform and applications. The city platform was developed using Huawei s OceanConnect IoT platform to allow collecting and managing data in realtime from different sensory equipment across the city. It also acts as a public service platform providing unified access to the city data and applications. The city plans to launch 12 apps on the platform including smart parking, smart egovernment, the Internet of Vehicles, smart building and smart lighting. Analysys Mason Limited

9 Analysis: strengths, weaknesses, opportunities and threats STR ENGTHS Huawei s IoT solution covers a wide range of products across the value chain and supports different stakeholders including telecoms operators, enterprises, device manufacturers and software developers. Huawei is investing in building a diverse ecosystem of partners and continues to expand it to improve interoperability and reduce the risks of new technology adoption for enterprise and operators customers. The continuous development of its NB-IoT have established Huawei as one of the main providers of the technology and related solutions. Huawei has the resources and the ability to scale required to support its operator and enterprise customers IoT investments. OPPOR TUNITIES Huawei is a trusted provider in emerging markets such as Asia, the Middle East, Africa and China. The company is in a good position to capture a large share of the market as IoT adoption grows in these regions. Although the company s Enterprise business generates the smallest share of the revenue at the moment, it has significantly grown by 47% YoY in Huawei is better poised in the enterprise market compared to other rival telecoms vendors and should leverage the opportunity to expand its platform and application offerings to the enterprise customers. WEAKNESSES Through its use cases and customers, Huawei focuses on promoting its role in developing NB-IoT network infrastructure while lags, in comparison, in showcasing the platform s role and capabilities such as data analytics and visualisation. Huawei is relatively late to the platform market and did not yet establish itself in the connectivity management with many significant public deals as its rivals; Ericsson and Cisco (Jasper), did. THR EATS Huawei s limited access to the USA market may affect its overall technology development and adoption. IoT connectivity market remains fragmented and both operators and vendors are extending their support to multiple technologies. Focusing on a single LPWA technology may result in a lower share of the connectivity market. Differentiating in the IoT platform market is difficult for telecoms vendors as they do not have strong backgrounds in IoT devices and data management. Operators might be reluctant to rely on Huawei for more than network connectivity. Analysys Mason Limited

10 About the author Ahmed Ali (Senior analyst) is the lead analyst for Analysys Mason's IoT Platforms and Technology research programme. His research covers IoT software, applications and solutions used by service providers to enable their IoT offerings. Prior to joining Analysys Mason, Ahmed worked as a senior analyst at ABI Research for more than 3 years, where he was part of the next-generation mobile network research programme, covering wireless and core mobile markets like small cells, in-building solutions, network virtualisation, unlicensed spectrum, and other 4G and 5G technologies. Ahmed holds a master's degree in Electronics Communications and Computer Engineering from the University of Nottingham and a bachelor's degree in Electrical Engineering from the University of Khartoum, Sudan. Analysys Mason Limited

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