The supply chains of Chinese telecoms giant Huawei have been crippled by U.S. sanctions over the past couple of years. Now it’s fighting back at home, thanks in part to an investment spree carried out by its wholly-owned fund, Hubble Technology Venture Capital. 

At The Wire, we periodically look at prominent firms investing in China, examining their management teams and investments. So far, we’ve featured Yunfeng Capital, Hillhouse Capital, IDG Capital, and 5Y Capital. This week, we take a look at Hubble Technology and how it’s helping Huawei invest its way out of its financial woes. 

HUBBLE: A BRIEF HISTORY

Hubble Technology was founded in April 2019, a month before the Trump administration put Huawei on the Commerce Department’s entity list, barring U.S. firms from doing business with the company. The fund’s size hasn’t been disclosed, but it has registered capital of $3 billion RMB ($470 million), according to Asset Management Association of China records. Available data indicate its median investment size is $11.1 million. Hubble’s investment activity has sped up over the last year: 32 out of the 62 investments made since the firm’s founding were completed after February 2021, according to data compiled by Pitchbook. 

Hubble is headed by longtime Huawei executive Bai Yi, who was involved in Huawei’s foray into the U.S. market in the early 2000s, when the company sought deals to supply American phone companies with discounted telecom equipment. His more recent role as head of Huawei’s global financial risk control put him in charge of a network of divisions in London, Tokyo, and New York. At Hubble, he oversees a relatively small staff estimated to be a few dozen people, some of whom are affiliated with Huawei’s strategic planning department, according to a report by financial magazine Caijing. 

Representatives for Huawei did not respond to multiple requests for comment. 

While many Chinese tech companies, including Xiaomi and Oppo, have dedicated funds, Huawei’s flurry of investments into homegrown companies via Hubble stands out because it marks a departure from the company’s long standing principle of avoiding investing in its suppliers. Indeed, for a company of its size, Huawei has been a relatively infrequent investor: The company disclosed just 14 investments between 2006 and 2016, according to a 2019 analysis of its registration data by Chinese media outlet PEdaily. The stress on Huawei’s supply chain caused by U.S. sanctions may have forced it to revise its approach. 

Investment from Hubble has several benefits for suppliers beyond just a capital injection, providing them with all-but guaranteed sales to Huawei and a stable market. Such investments also represent a vote of confidence in the long-term prospects of the supplier, helping it to attract follow-up investment from other firms. 

MAJOR INVESTMENTS

Hubble’s investments thus far have exclusively targeted Chinese companies, with the vast majority involved in the semiconductor supply chain. At least nine of those companies are publicly listed or have applied to list on Chinese stock exchanges. Below are some of Hubble’s recent investments:

INVESTMENT FOCUS: OPEN SOURCE CHINA/GITEE

Open Source China is a leading Chinese open source tech community organization. It’s also the owner of Gitee, a Chinese alternative to Github, the popular, Microsoft-owned code hosting site. China’s relationship with Microsoft has soured, and the authorities have been looking to champion a home-grown open source platform that could reduce Chinese developers’ reliance on Github. 

Gitee is leading the charge to develop a Chinese alternative. In 2020, the Ministry of Industry and Information Technology, China’s top industrial policy making body, championed Gitee as an “independent open source hosting platform for China.” 

Through a parent company that wholly owns Open Source China, Hubble Technology owns a 4.17 percent stake in Gitee. Huawei isn’t just financially invested in Gitee. It also chose the platform to host the open source files for HarmonyOS, Huawei’s flagship mobile operating system. HarmonyOS is designed to compete with iOS and Google’s Android, after Huawei was banned from licensing Google’s software.

Below are Open Source China’s major investors:

---