We attended the Open19 Foundation Summit 2019 in San Jose, CA.  The key message of the leadership team of the Foundation was that it expects 2019 to be the year where Open19 systems begin shipping.  Yuval Bachar, President of the Foundation explained that there are 8-10 companies that are deploying or seriously considering, including two mega data center operators in process of evaluation and at least 6 adopters in advanced evaluation/deployment.  Open19 does not specify what technology will be inside the systems; it only defines the form factor.  Interestingly, GPU and ARM designs are included and we heard about AMD CPU more often than we did Intel.  
 
VaporIO made a presentation about its edge data center systems.  Matt Trifiro, CMO of VaporIO explained that its systems nominally consume up to 165 kw in a 9 foot round datacenter.  It claims that Vapor IO is deploying in 6 cities, 3 to 4 data centers in each city.

ASUS and a new company, German Edge Cloud, both made interesting presentations.  Salim Fedel, Associate VP Enterprise Solutions Business Group, ASUS, presented a few of the company's Open19 oriented products, Alps19, Brick and its Network Switch.  Jason Rylands, VP of Data Center Strategy & International Sales, German Edge Cloud, made a very interesting presentation about its company's activities in Germany on how it is participating in the manufacturing industry in Germany.  There is reticence on putting manufacturing data and control on the cloud, but there is a desire to build a German-only computing system, driven in part by GDPR and part by the nation's focus on manufacturing - that's the opportunity.  German Edge Cloud has decided to use Open19 systems - accessing only the front of the racks is a big deal, it believes.

German Edge Cloud shared many examples of how it is engaging with manufacturers for real-time error tracking during the manufacturing process, using analytics, and sharing information between various companies in the German supply chain.

According to news reports and press and social media announcements by high-ranking members of US government, the US government has put Huawei on its so-called "Entity List" of the Bureau of Industry and Security (BIS).  Our read on this is it similar to what happened with ZTE during C2Q18 last year, a move that severely curtailed ZTE's shipments and revenue until ZTE made concessions and was removed from the list.  Many, but not all, Huawei products use technology only available from US suppliers. US-made semiconductors are the most significant Entity List target that Huawei needs to ship its products.  Significant US semiconductor suppliers to Huawei include Intel, Xilinx, and Broadcom.  

Huawei is such a significant vendor in many of our coverage areas, including Mobile Radio Access Networks (RAN), Ethernet Switching, and Servers, for instance, that we feel it is a good time to point out that 2019 market-level estimates may be at risk.  Additionally, since Chinese cloud services players, like Baidu, Alibaba and Tencent cannot delay their capital infrastructure build-outs, alternate suppliers may benefit.

We think it comes as no surprise to Huawei that the US is putting it under pressure.  Just over a year ago, we attended the Huawei analyst summit (April 16, 2018) and its then-chairman said in response to the question "Will Huawei find alternate suppliers for data center products, "Today, Intel is the dominant player.  Our point of view, we look forward to a more diversified landscape; but we work with Intel mainly now."  Additionally, at Huawei's most recent analyst summit (mid-April 2019), the three main keynote speakers, all high-ranking executives of the company spoke about how much progress Huawei has made in developing in-house semiconductors and what its plans are to continue developing more.  We do, however, think that despite Huawei's diversification efforts that it still has significant reliance upon key US chip companies.

Today Intel had a major Data Center event in San Francisco. It was a multi-hour announcement showcasing all the different products Intel is/will be launching.

Some interesting background that Intel talked about was that only 2% of worlds data has been analyzed and a 5G will be a major driver move compute to the edge.   They also touted that over 50% of AI workloads are inference and runs best on Intel (X86).  Noticeably absent at the beginning of the presentation was Intel’s work on training.

We found the most interesting parts of the announcement being that AWS talked about custom versions of Intel’s CPU and a Up to 14X inference improvement from just July 2017 in its XEON processors.  Overall there is a 30% gen/gen improvement in XEON, the biggest jump in 5 years.  While staying at 10NM, Intel is able to continue to squeeze performance gains out of the server.

It is important as we hit the limits of process geometry that everything be accelerated, especially with Intel having a similar view of AI workloads and that’s what we saw with Intel.  New Optane memory, new persistent memory, faster Adapter cards which will lead to more Smart NIC announcements, and a 10nm FPGA.  It was clear at the event that large cloud provers like AWS, Azure, and Tencent are looking at all avenues to increase performance and reduce power consumption via software and hardware advancements.

Some interesting highlights included AWS touting over 100 unique instances that leverage Intel processers with more SAP instances running on AWS than anywhere else and Formula 1 using of 65 years of historic race data to train its models in order to make real-time race predictions. 

​The main theme of the the Huawei HAS 2018 meeting keynotes was Artificial Intelligence and, secondarily, nearly ubiquitous networks connections across the world.  Huawei expects 86% of enterprises to have experimented with AI by 2025 (<5% in 2018).  It is leveraging AI across nearly all its products and will offer a full stack AI solution to all Huawei partners at its @Huawei Connect 2018 conference (Oct 10, 2018).

More specifcially, Huawei is using AI to elevate products & solutions to new levels: cloud, networks, devices, EI, SoftCOM AI, and Intelligent phones.  The company's strategy has changed over time and is now AI-focused:

2006-2011: Single strategy: All IP
2012-2017: SoftCOM: All Cloud
2017+:     All Intelligence: SoftCom AI (autonomous networks / services 2.0) - this reduces operating and maintence costs

The company expects that networks will be 10x more efficient in the operation of equipment as a result of AI.  

By 2025, Huawei expects 440M AR/VR users, 40% of cars to be 'connected," 80% of users with access to mobile broadband, usage of 1 Gbps / user / day (versus .03 in 2018) and 20B connected devices worldwide.


Connected Devices Forecast (Huawei) by 2025: 40B sensors and 100B connections.  This thinking is based on data including that there are: 

• 4B livestock in the world
• 300m streetlights
• 1.8B utility meters
• numerous bike programs in major cities
• numerous greenhouses

The company's product lines are very diverse; to wit, the company introduced a helmet for the blind, which will be available soon.  

Huawei expects NB-IoT (LTE-based IoT capability) to reach almost full coverage in China in 2018.  Additionally, the company expects NB-IoT to reach 100 networks by the end of 2018 (versus 39 in 2017) and to be available on 1.2M base stations (from 0.5M in 2017) and to be connected to 150M connections (versus 10M in 2017).  

The company boasted about several developments:

1. Chipsets for cloud data center systems.  The company highlighted its internally developed Atlas (intelligent cloud hardware).
2. The company expects its cloud services will become one of major 5 clouds.  Uses smart NICs for CPU optimization and is 'open.'
3. The cloud service from Huawei will be low cost because Huawei makes all the equipment necessary to build this cloud
4. Internet of Vehicles system was was built for Group PSA (French auto company known for the Peugot brand)
5. 5-An example of the company's "Intent-Driven Network" was its AI-based premium home broadband for a better user experience on Chinese based PON systems in use today.  Real time data collections allows 40% reduction on door-to-door service and fault prediction of 85% of Wi-Fi faults and 30% of all network faults.
6. AI-enabled, software-defined cameras are now available that perform low-light feature extraction (e.g. facial detection/comparison) over 85% of the time.  And, using the Huawei AI chip, it can outperform CPUs by 25X and GPUs by over 6x.
7. VR/AR will create a $2.7 trillion ecosystem in the future.  The company reminds the audience that it demonstrated teh first CloudVR Proof of Concept at the March 2018 MWC conference.

Q&A after keynote:
Mr. Eric Xu, Rotating Deputy Chairman of Huawei dodged several important questions relating to trade tariffs, cloud business unit revenue targets, growth rates of each major business units, specifics about AI full-stack claims made during the keynote, and instead focused generally on the AI theme.  Xu did, however, however, answer a handful of questions that were quite interesting:  Huawei won't acquire DRAM, Flash companies; and that 5G is not so revolutionary - it is just an evolution following LTE. Additionally, Xu mentioned that in 2H18, Huawei will launch end to end 5G solutions  and by 3Q19, it will launch 5G capable phones.  Xu said Huawei will continue to work with Intel on x86 for the foreseeable future.

More Q&A specifics:
Trade Tariffs and ZTE.  (In a moment of levity, however, Eric Xu smiled when the words ZTE were mentioned - recall that a day earlier, ZTE was penalized by the US).  We will focus on our customers and will ultimately survive. 

Cloud 1.5B by 2020, will you hit the target?  Will offer cloud services to telco service providers.  Huawei smartphones will leverage the Huawei cloud.  Enterprise customers will consume cloud services such as video, computing.  In future, trend will be enterprises will move to hybrid cloud and public cloud will take a major share.  Huawei cloud provides compute/storage/networking to enterprises and government.  200K x86 servers in Huawei cloud.  Revenue with external customers - won't share it with you - maybe .  

AI chipset question:  We don't position chipset as a standalone business - won't sell to external customers.  Will be used to differentiate Huawei products.  Smartphone - we use multi-vendor strategy always; in other worlds; have multiple Qualcomm, NTK and others.  Remain committed to multi-vendor strategy.  Don't want vendor lock-in, however.  If we only have one vendor, what might happen to our smartphone business, Xu asked.  

Enteprise business growth? Declined to comment on specifics, but said he encourages each to grow rapidly.  

How do customers get to 86% AI usage (the question was asked by an audience member by incorrectly referring to the statistic that was made during the keynote - specifically, Huawei said AI experimentation will be 86%, not AI usage)?  Will give clearer answer at Huawei Connect 2018.  For now, can share that we will use AI on ourselves first, then help customers on various functions such as finance, human resources, networks, etc.  

Supply chain - will you acqire your suppliers?  We do joint innovation with suppliers to meet Huawei's needs; push multi-source strategy, however.  Will not invest in DRAM, display, flash.

5G wasn't mentioned much in the presentation, why?  We don't have as high expectations as some others; 5G is just one of many products we offer and is just a natural evolution from 4G.  You don't have a fundamental difference between 4G and 5G - consumers just see faster speed and lower latency.  LTE already support autonomous driving.  Past couple years, governments have regarded 5G as too important.  June 2018, will only address eMBB - faster speeds.  2019 - will have fully 5G compliant system that does low latency.  4G is pretty robust; we don't see 5G as a national coverage network - it'll just focus on city centers.  However, once one carrier announces 5G, then all others must.  50% of Chinese have wireless connection capable of 4K but there are still no 4K stations.

2H18, end to end 5G solutions available.  3Q19, will launch 5G capable phones.

Share trends for Huawei at operators.  Revenue growth of telecom services is a challenging topic.  This revenue growth topic is why titan operators express concern about moving to 5G; instead, Huawei thinks moving to improved intelligence will assist operators.  Video will become more and more important as telcos become media companies too.  

Will AI become a privacy concern?  Any technology has double-sided effects.  With AI, some believe it can be dangerous.  Xu believes in the wisdom of man.  Look back to history of mankind, and our humanity can do same for mankind.

Will Huawei find alternate suppliers for data center products?  (Xu also smiled about this question before answering).  Today, Intel is dominant player.  Our point of view, we look forward to more diversified landscape; but we work with Intel mainly now.

The GENBAND Perspectives 2017 conference in Los Angeles did a good job of highlighting the relatively smaller division at GENBAND - Kandy.  Additionally, the company highlighted its advances towards an NFV World, its participation in so-called "Network Evolution" (upgrading old PSTN and VoIP systems to new VoIP and IMS systems).
​
Kandy.  I asked CEO David Walsh to compare its business to publicly traded Twilio.  He highlighted some differences between the two:

• GENBAND/Kandy owns its own intellectual property
• GENBAND/Kandy has a different target customer - it is going after large service providers and enterprises; his viewpoint is that Twilio is going after the 'long tail' of the market like small websites and such.   (He did concede that Twilio's relationship with Uber is a significant one).
• GENBAND/Kandy's go to market approach is different; it is focusing on SPs

NFV.  The company highlighted its VNF Manager, and we understand that it can perform some aspects of orchestration when operating specifically on GENBAND VNFs.  Additionally, the company and its partner Wind River (Intel) explained that using WIND ABS (its software virtual switch) and the DPDK capability, for many VNFs, can see as much as a 40x improvement in performance compared to running in a virtualized environment not using these two technologies.
  
Network Modernization.  About half of GENBAND revenues last year were related to services; and a meaningful percentage of total revenues are associated with network modernization.  Several customers made presentations discussing their experience in moving to new VoIP systems, replacing PSTN and older VoIP systems.  We learned a few interesting things relating to this modernization:

• British Telecom explained that voice minutes of use have been down 10% Y/Y ever since iPhone introduced (it wasn't clear if BT meant BT's results or those of the industry; we view this 10% figure to be too great on an industrywide basis, but directionally, it is correct).  By 2026, the company expects 100% cutover to VoIP.  By then, voice will get embedded into apps and / or is on mobile.
• During the main presentations, we learned that there were 25M lines of Nortel gear in the installed base (PBX and Switches)