Huawei sees 2020 as most difficult and challenging year due to blacklisting by US

Huawei Technologies rotating Chairman Eric Xu said that 2020 will be the most difficult and challenging year for the company despite reporting a 19.1% increase in revenues and a 5.6% in net profit in 2019.

In a virtual press conference held in Shenzhen, he said that 2019 was a challenger year due to political headwinds.

“As we are a subject to US Entity List throughout this year, our supply inventory is running out and can it work in an effective way this year. On top of that, the outbreak of coronavirus is something unexpected and we don’t know how the demand is going to be due to economic downturn,” he said.

On May 16, Huawei was added to the Entity List by the US.

 “In 2020, we will do all we can to continue to survive so that we can release our annual report next year,” he said.

Huawei reported a 19.1% year-over-year increase in revenue to 858.8b yuan ($121 billion) in 2019 compared to 721.2b yuan ($101.69) a year ago.

The company’s net profit grew 5.6% in yuan terms to 62.7b yuan ($8.8b) compared to 59.3b yuan ($8.36b) in 2018, compared to 25% increase a year ago.

“Consumer business grew rapidly and carrier business maintained steady growth while enterprise business growth slowed,” Xu said.

The Chinese firm’s consumer business, which includes smartphones, grew 34% in yuan terms to 467.3b yuan ($65.82b) in 2019 compared to 348.9b yuan ($49.15b) a year ago.

Huawei shipped more than 240m smartphones in 2019 compared to 206m devices a year ago.

Its carrier business, which sells core networking equipment for 5G cellular technologies, grew only 3.8% to 296.7b yuan ($41.8b) compared to 285.8b yuan ($40.26b) as it was not unable to acquire US parts and software or sell its products in the US.

The US, Australia, Japan and New Zealand have all blocked Huawei’s equipment to provide the 5G networks.

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US chip ban can have a catastrophic impact 

The telecom giant’s revenue from 5G last year stood at more than $3b, Xu said, as many countries did not deploy the cellular technology on a wide scale.

There are reports that the Trump administration is considering changing its regulations on Foreign Direct Product Rule to allow it to block shipments of chips to Huawei Technologies and seek US license before supplying Huawei from companies such as Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker and a major producer of chips for Huawei’s HiSilicon unit, Apple and Qualcomm.

Regarding this, Xu said that Chinese government is not going to stand by and see Huawei get slaughtered on the chopping board.

“I believe that China will also take some countermeasures. If the US chip ban happens, we and other Chinese companies can buy chipsets from Samsung, South Korea, MTK from Taiwan and other companies in China. Even in the long term, Huawei was denied access to chip manufacturing but I believe that many Chinese companies will be working on manufacturing its own chipsets,” he said.

If the US changes its Foreign Direct Product Rule, he said that it will be destruction to the global technology ecosystem but does not believe it is true.

“If the Chinese government also takes countermeasures, you can imagine what kind of impact it would have on the industry. We hope that the global industry can work together, focus on the challenges and come up with trustworthy products,” he said.

He does not see a production impact in the short term as its production facilities have generally been restored after they were shut down in China due to coronavirus.

However, he said if the pandemic outside China could not be contained, then the company may face a long-term impact on its supply chain.

 “It will cause long-term challenges and uncertainty over whether Huawei can continue to supply the market if supply shortages of components happen,” Xu said.

Huawei has invested 131.7b yuan, 15.3% of its sales revenues, on R&D in 2019 compared to 101.5b yuan, registering a 29.7% year-on-year increase in 2019.

“Patents held by Huawei grew by 16,243 in 2019 to more than 85,000 globally. 54% of its 2019 patents were granted in Europe and the US. In 2019, 11, 096 patents were granted outside of China,” Xu said.

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