Huawei, the Chinese manufacturer of telecommunications and networking gear, plans an aggressive push into the server market where it hopes to compete with Dell and Hewlett Packard Enterprise, according to a Wall Street Journal report.
Guo Ping, deputy chairman of the Shenzhen-based company, told the paper that Huawei would “undoubtedly” will be a leader in this sector, adding that it would spend $1 billion out of its total $9 billion annual research and development budget on data center equipment including servers.
“Huawei is now in the mix selling servers to the cloud giants in China alongside Lenovo and Dell,” said Patrick Moorhead, founder and chief executive of Moor Insights & Strategy, an Austin, Texas-based research firm. “Huawei amped up their capabilities in this space in the past year.”
To be fair, Huawei is not “new” to servers: it’s been building them for years and is ranked as the fourth largest server provider as measured by units sold by Gartner (it). What’s different now is that, on August 31, the company said it will build servers targeting the public and private clouds, as well as telecom-focused data centers.
This is a recognition that more computing jobs that once ran in companies’ internal data centers, have moved to some cloud, either a shared public cloud, or a private cloud dedicated to a single customer. That latter option differs from a dedicated data center in that a private cloud lets various departments in a company add and subtract resources as needed and, in theory, be billed (internally) just for what they use.
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While Dell and HPE definitely compete here, giant cloud providers like Amazon (amzn) Web Services, Microsoft (msft) and Google (goog) tend to buy unbranded “white box” servers from contract manufacturers like Wistron, Compal, and Quanta, all out of Taiwan. For cloud providers that run hundreds of thousands of servers in their data centers, price and strict adherence to their server designs is key.
Dell has its own white box business, and two years ago, a pre-split Hewlett-Packard signed Foxconn, the Chinese manufacturer most famous for building Apple’s (aapl) to make cloud servers for it to re-sell.
It is these commodity servers rather than pricier name-brand Dell and HPE boxes that Huawei will likely face in the market.
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As the Journal pointed out, it would be tough for Huawei to sell into the U.S. because of fears that it has built or will put back doors into its gear for stealing trade and government secrets. But Huawei has a strong presence in Europe and could make inroads there.
Note: This story was updated with a additional information on Huawei’s plans and a link to its statement about them.