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In May 2020, Huawei Digital Energy was renamed from Huawei Network Energy.
In 2021, Huawei will update its business structure, with digital energy and cloud computing, ICT infrastructure, smart car solutions and other businesses listed as first-level departments. Huawei’s first five “food-producing” legions, among which the data center energy legion and the smart photovoltaic legion have strong business ties with digital energy.
In 2022, Huawei’s digital energy revenue will be 50.8 billion yuan, surpassing cloud computing business and becoming Huawei’s third largest pillar of revenue. Tens of billions of revenue comes from the booming household energy storage market.
In the first half of 2023, Huawei’s digital energy business revenue was 24.2 billion yuan, continuing to exceed the cloud computing business.
Regarding Huawei’s layout in new energy, most of the market’s attention is on the automotive business. However, as wind and solar power storage installed capacity continues to rise, the photovoltaic + energy storage market has become one of the few tracks with strong certainty. As the “elephant in the room”, how did Huawei Digital Energy conquer the city and rise step by step?
01
How to rise?
The rise of Huawei Digital Energy can be summarized into three points:
Accurate market entry timing, differentiated technical routes, and Huawei’s sales army lead the way.
Let’s first talk about Huawei’s situation when it enters the new energy market:
As the dominant player in the communications industry, Huawei is not a new player in the energy industry, but has always had relevant industry genes. The energy business was once an important pillar of Huawei.
The densely populated communication base stations are usually equipped with power supply equipment and have a huge niche market. Huawei’s subsidiary Mobeck (later renamed “Huawei Electric” and “Ansheng Electric”), which specializes in communication power supply, became the first in the market in just 4 years.
But in 2000, due to the bursting of the Internet bubble, Ren Zhengfei chose to sell Ansheng Electric to Emerson of the United States at a discount of 6 billion yuan.
The sale of Ansheng Electric also came with an eight-year non-competition agreement. Huawei could only purchase power equipment from Emerson, and its energy business fell into silence.
From 2008 to 2010, with the end of the non-competition agreement, Huawei returned to the electrical market to look for opportunities.
This period was a period of rapid development for the global photovoltaic industry. In 2009 and 2010, the global photovoltaic installed capacity exceeded the total of the previous ten years, reaching 62.4GW, a growth rate comparable to that of energy storage in the past two years.
For Huawei, this is not an unfamiliar market. Remotely located communication base stations already require stable power supply, so photovoltaic power generation becomes the natural choice most of the time.
In the photovoltaic industry chain, the inverter is an important power electronic device, responsible for converting the direct current generated by photovoltaics into the alternating current used in daily electrical appliances. Although photovoltaic inverters at that time were highly profitable, the top position was still controlled by overseas companies, especially the German company SMA, which invented the centralized inverter, and dominated the market.
Huge profits, rapidly expanding market size, and low industrial concentration have given Huawei the determination to make a bet.
After researching the market, Huawei set up its core R&D team in Europe, establishing an inverter algorithm and topology research center in Stockholm, Sweden, and an inverter architecture and design center in Nuremberg, Germany. This was the source of technology that later enabled Huawei to embark on a differentiated path.
Huawei Nuremberg R&D Center in Germany
Differentiated technical routes:
Inverters are divided into centralized inverters, string inverters and micro-inverters. The inventors of the first two types are the German company SMA.
Before 2010, the mainstream technology route in the industry was dominated by centralized inverters. The advantages of centralized inverters are large installed capacity and low construction costs. As the scale of photovoltaic power plants grows, inverters become larger and larger. The huge inverter is placed in a huge independent computer room, and miles of photovoltaic panels are all connected to this machine.
The string inverter is to shrink the inverter and install it on each photovoltaic array, such as a railway police district in charge of a section of railway. Although SMA was the inventor, it was thrown into the scrap pile because the string assembly cost was higher and the technology was not yet proven.
In 2013, after Huawei had concentrated on research and development for three years, the product it wanted to launch first was a centralized inverter. After all, the market situation at that time was not clear. As of December 2013, only 2% of the world’s photovoltaic power plants above 5MW adopted string solutions.
But at that time, the price war in the photovoltaic industry was about to begin. After experiencing the subprime mortgage and European debt crises in 2010, photovoltaic subsidies declined sharply. From 2008 to 2013, the price of photovoltaic panels plummeted by 80%, which was also due to the formation of economies of scale in China’s photovoltaic industry.
Moments of reshuffle caused by price wars are often opportunities for new technologies to stand out.
String inverters have begun to attract the attention of the industry because of their precise control, which allows photovoltaic panels to generate more power.
In the face of rapid technological changes, fortunately, Huawei, as the “born king of technology”, has an internal horse racing mechanism and has laid out two technical routes. After an on-site investigation in Qinghai, the person in charge of Huawei Photovoltaics immediately gave up on the high maintenance cost and low efficiency of centralized inverters, and instead launched smart string inverters.
Huawei string inverters are installed directly under the photovoltaic array
The reason for Huawei’s maintenance costs is that centralized inverters require professionals to go to the site to handle faults, which takes about a week even in China. The maintenance-free design of Huawei’s inverters means that operation and maintenance personnel basically do not need to go to the site. Even if there is a fault, on-site replacement only takes 2 hours.
The level of operation and maintenance costs has become quite prominent amid the “bloodbath” of price wars. Differentiated technology routes have propelled Huawei to become the leader in industry R&D trends.
Finally, there is the sales force created by Huawei’s “wolf culture”:
There are two examples that illustrate Huawei’s ferocity in developing new energy sectors.
In 2015, after the news came out that China Minsheng Investment Group would build the Ningxia Yanchi Power Station, the world’s largest photovoltaic power station, Huawei’s sales team of dozens of people “stationed” in the office of China Minsheng Investment Group for a long time and started one-on-one ” capture”.
Huawei’s sales staff all have professional backgrounds, so they rely not on pure sales skills, but on impressing customers through technical exchanges. In the end, Huawei won the bid, and Ningxia Yanchi Power Station was equipped with Huawei inverters.
Also this year, customer S of a large state-owned energy enterprise was one of the leaders in the new energy industry, and Huawei had been blocked from entering.
At the end of the year, Huawei Sales learned that their annual meeting was held at a training center in a district in Beijing, and that leaders from various provinces and cities would attend the meeting.
So Huawei quickly targeted a nearby hotel and built a full-scenario smart photovoltaic solution overnight the night before the annual meeting, and dispatched first-level experts to the site to facilitate communication with customers at any time. After the event, Huawei successfully received orders from state-owned enterprise customers.
It was this sales force that allowed Huawei to establish a presence in the new markets it entered in just two or three years.
02
How to stabilize your position?
After taking the market leading position, Huawei relied on two measures to further consolidate its position:
First, comprehensively promote intelligence to help the industry reduce costs and improve efficiency.
There are many technological integrations that can be extended to string inverters. The Huawei team was the first to think of the IV (current-voltage) curve test function and successfully installed it on the string inverter, which can intelligently identify the characteristics of photovoltaic modules. 14 common faults.
Before this, the inspection of photovoltaic modules in the field was mainly done manually. There are 300,000 modules for 100W modules and nearly 20,000 strings, covering an area of more than 2 square kilometers.
If a comprehensive inspection is completed manually, it is equivalent to the operation and maintenance personnel having to measure hundreds of kilometers with their feet, during which they have to test components one by one. Comprehensive inspection of photovoltaic panels is considered “impossible”.
After Huawei launched its smart IV detection technology, the industry followed suit overnight. However, the accuracy of smart IV diagnostic technology is based on the accumulation of massive data. Without big data and a set of advanced algorithms, accuracy is difficult to guarantee.
Also based on big data, Huawei has also launched a “bifacial module + tracking system” matching method, which can obtain the optimal corner of the tracking bracket in real time, fully releasing the suppressed potential of bifacial modules, thereby ensuring the best performance of the power station. of power generation.
The advantages of intelligent technology are progressive and will allow Huawei to bind more top customers.
In 2015, Sungrow, which was once the No. 1 in the inverter market, signed strategic agreements with four leading photovoltaic power station developers. The other parties guaranteed to give priority to Sungrow’s inverter products.
But this still has not stopped Huawei’s development momentum. Since 2015, Huawei’s inverter shipments have surpassed SMA for the first time, ranking first in the world. Since then, Huawei’s inverter shipments have ranked first in the global market share for many years.
The second is to benchmark Tesla from the business level in transforming into optical and storage integration.
Tesla’s typical Powerwall “photovoltaic + energy storage” system consists of three core components: photovoltaic modules, batteries, and inverters, supplemented by other electrical equipment such as distribution boxes and measuring instruments. It connects Solarcity and Tesla cars, Powerwall It connects the entire stages of power generation, storage, and consumption to promote changes in household energy usage.
In addition to not building a car, Huawei Digital Energy’s Fusion-solar solution can be said to have been imitated at the pixel level, and the strategic layout similarity is high enough – directly cutting into the terminal and grasping user needs, rather than horizontally like many inverter companies. Develop energy storage inverters.
Comparison chart of household storage solutions between Huawei and Tesla
In 2020, Huawei released the household intelligent energy storage LUNA2000, which uses lithium iron phosphate cells and a modular battery design, ranging from 5 to 30kWh, with flexible power expansion; each battery pack has a built-in energy optimizer, independent charge and discharge management, and supports new and old batteries. Mixed packages.
LUNA2000 became a phenomenal product that year. In 2021, Huawei, which was originally unknown in the top ten list, directly became fourth in household energy storage shipments, with a global market share of 9%.
Household storage is a link in the entire chain of Huawei’s digital energy, from power generation, transmission to electricity consumption, connecting the upstream and downstream of the energy system. And a large amount of data accumulation can transform Huawei’s digital energy’s intelligent advantages.
For example, Huawei has launched an AI-driven cloud BMS system for energy storage and new energy vehicles, which can provide early warning for thermal runaway of battery cells. The goal is to achieve “day” level warning.
03
Will Huawei “Return” to the domestic market?
In 2020, Huawei Digital Energy was renamed and prepared as a first-level department, merging the original network energy business and smart photovoltaic business. These two businesses are also important sources of revenue for digital energy.
Network Energy’s core business is UPS (uninterruptible power supply) for data centers. When the global cloud computing market expands, UPS is an important protection equipment in the event of an accident in the computer room.
Hou Jinlong, the current president of Huawei Digital Energy, and Fang Liangzhou, vice president, once served as product line president and vice president of Huawei Network Energy respectively. Hou Jinlong is a current member of Huawei’s board of directors.
In 2020, the president and vice presidents of Huawei’s smart photovoltaic business at that time were Xu Yingtong and Zhang Xianmiao. After the business was prepared for reorganization, Xu Yingtong briefly transferred to the president of Huawei’s newly established artificial intelligence business.
However, the last two smart photovoltaic executives resigned together and chose to continue entrepreneurship in the energy storage market. In 2022, they established a household energy storage startup company called “Sige New Energy”.
Currently, Huawei’s smart photovoltaic is a product line of digital energy. Chen Guoguang, former president of global sales and services of Huawei’s inverters, takes over from Xu Yingtong and serves as president of Huawei’s smart photovoltaic business.
Under the smart photovoltaic product line, Huawei has divided into three businesses for three major energy storage scenarios—power station smart photovoltaics, industrial and commercial smart photovoltaics, and household smart photovoltaics. The business presidents are Zheng Yue, Zhong Mingming, and Zhou Tao respectively.
However, after the official announcement of the signing of the Saudi Red Sea large storage project in 2021, Huawei Digital Energy seemed to have “disappeared” in the country.
As Duan Li, general manager of Huawei Digital Energy China’s energy storage business, introduced his business not long ago: “Huawei’s energy storage has a relatively small voice in the domestic market compared to overseas.”
Huawei also seems to have little interest in the fiercely competitive large-scale energy storage bidding in China and has not participated in many projects.
In 2022, Huawei’s energy storage will still be dominated by overseas markets, with shipments totaling 5GWh, of which 4.2GWh is household storage and 0.8GWh is large-scale energy storage. Overseas household savings directly brought tens of billions of yuan in revenue to Huawei Digital Energy.
The profit contrast between household savings and large-scale savings is quite large. The net interest rate of overseas household savings can reach more than 20%, while the net interest rate of large-scale savings is only single digits. Judging from the above-mentioned strategic layout and revenue proportion, Huawei’s choice is obvious, “unprofitable projects will not be considered.”
But after responding to market questions, Duan Li also said that Huawei’s strategy for the domestic energy storage market is also changing. “The policy of compulsory allocation of reserves has brought high certainty of industry demand, triggered iteration of industry production capacity technology, and made prices competitive. Therefore, the industry is maturing ahead of schedule.”
For Huawei, returning to the domestic market is also a necessary choice.
The three major markets for energy storage are North America, Europe and China. In 2022, Huawei’s energy storage revenue sources will mainly come from Europe, of which Germany will account for 15%, Italy will account for 5%, and other regions in Europe will account for 53%. The market share is already high enough. Since it cannot enter the US market, Huawei’s remaining market growth point for energy storage is domestic.
04
Epilogue
The battery industry is experiencing overcapacity, the energy storage market is experiencing price wars, and project bidding prices are falling. Just like the photovoltaic market that relied on technology to increase efficiency many years ago, the current large-scale storage and industrial and commercial energy storage markets are also facing a stage of cost reduction and efficiency improvement. For Huawei Digital Energy, new opportunities are emerging.
