Huawei calls shots despite US ban

Nassos DrakosGlobal Markets

Huawei’s revenues for the first half of 2019 were up and, despite US blacklisting it in May, the Chinese telco is confident of more growth this year. It is now even wooing US allies, like Poland, with investment pledges.

Huawei said Tuesday it has seen a bump in sales, without providing details. The Chinese telco giant is set to announce its results for the first six months of this year on July 30.

The company made the announcement after Washington decided to loosen a US campaign to limit the company’s overseas activities and to sooth potential shareholder worries over lower sales growth.

Just before the US blacklisted Huawei on May 5, the company reported a revenue of  $27 billion (€21 billion) in the first quarter, up 40% from last year. The privately held company also saw a staggering growth in revenue and profit last year.

The company’s founder, Ren Zhengfei, said in January he expected sales to rise 30% this year.

But then Huawei was blacklisted by the Trump administration over allegations its equipment could be used to spy on the US.

Zhengfei said the company could lose $30 billion in revenue in 2019 and 2020 due to the restrictions. In June, the Chinese giant downgraded its forecast for total smartphone shipments in the second half by 20% to 30%.

Chinese consumers rally behind Huawei

Huawei’s ongoing strength is widely attributed to increased smartphone sales in China, helped by a combination of intense marketing and consumers rallying around a beleaguered national company. China accounted for over 50% of the company’s revenue in the first quarter.

Criminal charges

In January, the Justice Department and FBI filed criminal charges against Huawei for fraud, intellectual property theft and obstruction of justice. Huawei was, among other things, accused of copycatting a device-testing robot called “Tappy” made by US telecom company T-Mobile.

China and the US remain engaged in a trade spat with both sides slapping tit-for-tat tariffs on goods worth $360 billion. US president Donald Trump has hinted at using Huawei as a bargaining chip to extract a trade deal from China.

Samsung in their sights

Before the blacklisting, all eyes had been on whether Huawei could challenge Samsung’s position as world’s biggest smartphone seller. Samsung sold 292 million smartphones in 2018, followed by Apple (209 million) and Huawei (206 million). The Chinese company has since overtaken Apple to claim the No.2 position.

Huawei execs had previously set 2020 as their target for overtaking Samsung to reach the number one spot.

Samsung saw the steepest fall in profit in 4 years in the first quarter and broadly flat smartphone sales.

Huawei said recently it could ship 260 million units, above the pre-blacklist forecast of 250 million.

But this depends on Huawei restoring access to Google’s Mobile Services (GMS), which means its phones having full-fat Android, Gmail, YouTube and the Play Store. If that doesn’t happen, shipments might be closer to 230 million, one analyst said.

Relaxing restrictions

After meeting China’s President Xi Jinping in Osaka, PresidentTrump announced a lifeline for Huawei last month. Commerce Secretary Wilbur Ross said on Tuesday his department would  issue licenses to Huawei’s US suppliers in cases where “there is no threat to US national security.”

He said the US will allow Huawei to license “commodity chip sets” and widely available software and tools as long as they don’t pose a risk to US national security or foreign policy interests

The top American diplomat for cybersecurity, Robert Strayer, told reporters that Washington wants to avoid hurting US suppliers and some US companies have started expediting Commerce Department licensing requests to supply the Chinese giant once again.

A UK science and technology committee advised the government recently that “there are no technical grounds for excluding Huawei entirely from the UK’s 5G or other telecommunications networks.”

Other countries have also shrugged off US concerns and are going ahead with their 5G rollouts using Huawei technology.

And Huawei is also offering enticing incentives to would-be partners. It said last week, for example, it will invest about €700 million in Poland over the next five years. This, however, on the condition that the central European country, a key US ally, allows the Chinese vendor to participate in Warsaw’s 5G rollout this year.

Countries such as the UK and Germany, meanwhile, have largely accepted Huawei’s role in the construction of their networks.

US domestic pressure

Trump’s apparent pivot may be a reaction to pressure from US companies such as Intel, which provides computer chips to Huawei. Other chip suppliers, such as Qualcomm and Xilinx, have also reportedly lobbied the Commerce Department to ease the restrictions.

Huawei cuts US jobsHuawei is planning to lay off hundreds of US workers, the Wall Street Journal reported. The layoffs are expected at Futurewei Technologies, a Huawei research and development unit with divisions in California, Texas, and Washington state. The unit employs 850 people.

Huawei adjusts to new realities

Huawei is also reportedly deciding how to respond to possible loss of access to Google’s Android operating system for its mobile phones and has developed its own operating system, Hongmeng. It is also developing its own chips and other technology to reduce the amount it spends on US components. Huawei unveiled plans in January for a next-generation smartphone based on its own chips.

Source: dw.com