Huawei Selling x86 Server Business Due To U.S. Sanctions: Report

Chinese technology conglomerate Huawei reportedly is looking to sell its x86 server business due to U.S. sanctions that are hindering its server market capabilities.

China-based technology conglomerate Huawei Technologies is looking to sell its x86 server business to a consortium of buyers due to the company not being able to secure server processors because of U.S. sanctions, according to a Bloomberg report.

Due to the sanctions the U.S. government implemented against Huawei in recent years, the Chinese IT giant is in advanced talks to sell its server business to a group of buyers for likely hundreds of millions of dollars, according to the report by Bloomberg.

The issue mainly stems from U.S. sanctions that made Huawei unable to buy x86 chips from Intel, Bloomberg said, citing people familiar with the matter.

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Huawei is looking to sell to a consortium that includes at least one government-backed buyer, with several possible buyers from the Chinese government and the private sector engaging with the company over the past few months, said Bloomberg. Huawei did not respond to a request for comment by press time.

Huawei has dropped off IDC’s worldwide server market-share leader list in recent quarters.

The company failed to crack the top five global market-share revenue leaders list in IDC’s second-quarter 2021 Worldwide Quarterly Server Tracker, meaning Huawei’s sever business generated less than $1 billion in server sales on a global basis, while also shipping less than 150,000 server units worldwide during the quarter, according to data from IDC.

Huawei has hit tough financial times since the U.S. banned American companies from supplying certain components to the company.

Huawei recently reported third fiscal quarter revenue of $21.2 billion, representing a 38 percent drop in sales year over year. This represents the company’s fourth straight quarter of declining sales.

In addition, Huawei needed to sell its Honor smartphone business to the Shenzhen government last year after the U.S. banned American companies from supplying certain components, such as 5G chips, to Huawei.

It is key to note that Huawei’s x86 server line was not a core group for the company, as Huawei has developed its own servers for cloud computing powered by ARM-based processors.

Two potential buyers of Huawei’s x86 server business are China-based Henan Information Industry Investment Co., which is state-owned and has partnered with Huawei’s server group, as well as Chinese asset management company Huaqin Technology, according to Bloomberg.

Looking at the worldwide server market landscape, Dell Technologies and Hewlett Packard Enterprise alongside China-based H3C have been two dominant leaders on a global basis for the past several years.

Worldwide server market revenue declined 2.5 percent year over year to $23.6 billion during the second quarter of 2021, while 3.2 million servers were shipped, representing flat growth.