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Huawei Watches Out of Hengtong

In July 2020, Huawei divested its ownership in Huawei Marine which would be beneficial for Huawei Marine's future market development. By relinquishing a non-core asset, Huawei can focus on its core business and continue selling optical network equipment.

Huawei's exit from Hengtong Optic-Electric's shareholder list was strategic and driven by capital needs to better focus on its core business and key investment areas. After Huawei's investment in Hengtong Optic-Electric, it became the third-largest shareholder, which indirectly supports the growth of the optical communication industry.

Hengtong Optic-Electric has been on a downward trajectory mainly due to overcapacity and intensified competition in the optical and power cable industry. The company has numerous subsidiaries and has been focusing on self-made optical rods, expanding into optical devices like silicon photonics modules, and integrating into communications operation areas.

In August 2023, Huawei stated this was a strategic retreat, emphasizing the need to lead in global strategies or exit when necessary. Huawei aims to recruit top talent worldwide, establish chip factories in the UK, recruit more PhDs from Germany, and enhance salaries to attract exceptional individuals to work for the company.

Huawei no longer holds shares in Hengtong Optic-Electric. Hengtong Optic-Electric, focused on fiber optic communication and power transmission fields, was established in 1993 and is headquartered in Suzhou, Jiangsu Province. It is the only listed company Huawei was invested in.

Hengtong Optic-Electric is one of the leading stocks in the 5G and Huawei concept sectors. Given Huawei's global dominance in 5G technology, Hengtong Optic-Electric benefited from being associated with Huawei's brand and advancements. As Huawei faced challenges, Hengtong Optic-Electric became a prominent concept stock.

In 2018, Huawei faced extensive technological bans from the US, forcing the company to sell its Honor smartphone brand and engage in partnerships like with Hengtong Optic-Electric. In 2019, Hengtong Optic-Electric acquired Huawei's subsidiary through share issuance and cash payment.

In recent years, Hengtong Optic-Electric's net profit margin has been below 5%, showing a reliance on external support due to insufficient internal revenue generation. The company's recent plan to acquire Huawei's subsidiary, Huawei Marine, signifies a significant development in its partnership with Huawei.