Cisco is ‘very optimistic’ about its expanding business with China EVs
Cisco established operations in China in 1994.
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DALIAN, China — Cisco is “very optimistic” about its growing business with Chinese electric car companies as they expand overseas, the company’s Greater China head told CNBC on Tuesday.
The EV segment is the U.S. tech giant’s second-largest for the region — Cisco generates most of its revenue in Greater China from manufacturing companies, and within that, electric cars form the largest category, said Ming Wong, vice president and CEO of Cisco Greater China.
Chinese EV-makers have ramped up their global expansion in the last year as domestic competition intensified.
However, trade tensions have escalated, with the U.S. and likely the European Union, increasing tariffs on imports of Chinese electric cars.
That doesn’t necessarily restrict their growth. Chinese automakers, such as BYD, are investing in local factories.
Cisco, which provides networking equipment and software for businesses, is working with at least 10 electric car customers as they build factories, offices and research and development centers overseas, according to Wong.
“At least as of now, we don’t hear anything from the [EV] customers saying that, ‘Oh, because of this, we need to stop investing, or we need to slow down,'” he added.
“It’s actually the other way around. A lot of things happening. They will keep pushing, going forward, and we’ll see how this will evolve.”
It’s unclear how much spending such business expansion will generate, said Shiv Shivaraman, Asia region leader, and partner and managing director at consulting firm AlixPartners.
“But you should expect that there is going to be manufacturing-related capex as well as office-related capex,” he said. “And I think tariffs will definitely accelerate, if not increase it.”
Getting China businesses back to growth
The U.S.-based tech company has run into challenges in the China market as the two countries increasingly rely on domestic players in the name of national security.
Cisco CEO Chuck Robbins told analysts in 2019 that the U.S.-China trade war resulted in a “significant impact” on its business in China.
The company’s revenue in the country fell by 25% on an annualized basis in the quarter ended late July 2019, Cisco said at the time.
“What we’ve seen is in the state on enterprises … we’re just being — we’re being uninvited to bid,” Robbins said. “We’re not being allowed to even participate anymore.”
Sales to carriers declined more forcefully as well, he said.
Looking ahead, Wong is hopeful that the China business can return to growth this year. He did not specifically reference the 2019 period in his remarks.
He pointed out that state-owned and non-state-owned businesses are turning to Cisco as they expand globally. “So we are shifting our focus and portfolio to that side,” Wong said.
Also supporting Cisco’s business are Chinese internet companies such as Alibaba that are expanding globally, Wong said. He added that Cisco also benefits from its ability to connect different graphics processing unit providers together in a market where AI giant Nvidia is restricted.
GPUs are the chip systems powering the training and implementation of the latest artificial intelligence models.
In Cisco’s latest quarterly reporting period, which ended in late April, total revenue fell by 13% from a year ago, with revenue in Asia-Pacific, Japan and China falling 12% during that time.
Wong pointed out the latest slump in the Asia-Pacific, Japan and China revenue is off a high base, and he expects it to grow more quickly in the next one or two years.
“Asia Pacific is still the highest growth area for Cisco,” he said.
— CNBC’s Jordan Novet contributed to this report.
The Huawei flagship store and the Apple flagship store at Nanjing Road Pedestrian Street in Shanghai, China, Sept. 2, 2024.
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Huawei reclaimed the top spot in China’s smartphone market in the second quarter of the year, while Apple returned to growth in the country — one of its most critical markets — data released by technology market analyst firm Canalys showed on Monday.
Huawei shipped 12.2 million smartphones in China in the three months ended June, a rise of 15% year on year — equating to 18% market share. It’s the first time Huawei has been the biggest player by market share in China since the first quarter of 2024, according to Canalys.
Apple, meanwhile, shipped 10.1 million smartphones in the quarter in China, up 4% year on year and ranking fifth. It is the first time Apple has recorded growth in China since the fourth quarter of 2023, Canalys said.
Shipments represent the number of devices sent to retailers. They do no equate directly to sales but are a gauge of demand.
The numbers come ahead of Apple’s quarterly earnings release this week, with investors watching the company’s performance in China, a market where the Cupertino giant has faced significant challenges, including intense competition from Huawei and other local players such as Xiaomi.
Huawei, which made a comeback at the end of 2023 after its smartphone business was crippled by U.S. sanctions, has eaten away at Apple’s share.
Apple’s return to growth in China will be a welcome sign for investors. The U.S. tech giant “strategically adjusted its pricing” for the iPhone 16 series in China, which helped it grow, Canalys said. Chinese e-commerce firms discounted Apple’s iPhone 16 models during the quarter. And Apple itself also increased trade-in prices for some iPhone models.
Canalys’ numbers back up figures released by Counterpoint Research earlier this month showing Apple’s return to growth in China.
Shares of Apple have fallen around 14.5% this year, partly on concerns over China and geopolitical headwinds.
U.S. President Donald Trump has threatened Apple with tariffs and urged CEO Tim Cook to manufacture iPhones in America, a move experts have said would be near impossible.
Meanwhile, competition in China has intensified. Huawei has aggressively launched various smartphones in the past year and has started to roll out HarmonyOS 5, its self-developed operating system, across various devices. It is a rival to Google’s Android and Apple’s iOS.
“This move is expected to accelerate the expansion of its independent ecosystem’s user base, while also placing greater demands on system compatibility and user experience,” Lucas Zhong, analyst at Canalys, said in a press release.
Alibaba announced plans to release a pair of smart glasses powered by its AI models. The Quark AI Glasses are Alibaba’s first foray into the smart glasses product category.
Alibaba
Alibaba on Monday unveiled a pair of smart glasses powered by its artificial intelligence models, marking the Chinese firm’s first foray into the product category.
The e-commerce giant said the Quark AI Glasses will be launched in China by the end of 2025 with hardware powered by the firm’s Qwen large language model and its advanced AI assistant called Quark.
The Hangzhou, headquartered company is one of the leaders in China’s AI space, aggressively launching new models with capabilities that compete with Western counterparts like OpenAI.
Many tech companies see wearables, specifically glasses, as the next frontier in computing alongside the smartphone. Quark, which was updated this year, is currently available as an app in China. Alibaba is stepping into the hardware game as a way to distribute the app more widely.
The Quark AI Glasses are Alibaba’s answer to Meta’s smart glasses that were designed in collaboration with Ray-Ban. The Chinese tech giant will also now compete with Chinese consumer electronics player Xiaomi who this year released its own AI glasses.
Alibaba said its glasses will support hands-free calling, music streaming, real-time language translation, and meeting transcription. The glasses also feature a built-in camera.
Alibaba owns a range of different services in China from mapping to an online travel agent. Its affiliate company Ant Group also runs the widely-used Alipay mobile service. Alibaba said users will be able to use a navigation service via the glasses, pay with Alipay and compare prices on Taobao, its China e-commerce platform.
The firm has yet to release other details such as the price and technical specifications.
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