After weeks of bold talk, Huawei has finally admitted that the U.S. blacklisting of the firm will have a material impact on its revenues.
Speaking at a company event on Monday, Huawei founder and CEO Ren Zhengfei finally put some numbers behind his firm’s fall this year in the face of a unilateral attack by the U.S. government: The firm now expects 2019 and 2020 revenues to hit $100 billion in each year, far short of the $125 billion that he promised for 2019 in January before the ban. That figure is also below the $105 billion in revenues that Huawei posted last year.
Ren had previously claimed that Huawei had been stockpiling computer and mobile chipsets as well as other electronic components and that doing so would insulate from the ban, which had long been predicted. But he was shocked by the United States’ ability to undermine his company’s business so quickly.
“We did make some preparations,” he said at the event. “It’s like we’re on a damaged airplane. We only protected the heart. We only protected the fuel tank. We did not protect other, smaller parts.”
“We did not expect [that the United States] would attack us on so many aspects,” he added. “We cannot get components supply, cannot participate in many international organizations, cannot work closely with many universities, cannot use anything with U.S. components, and cannot even establish a connection with networks that use such components.”
While the U.S. government is focused almost exclusively on Huawei’s networking equipment, which it fears could be used for spying purposes by the Chinese government, Huawei’s smartphone business is likewise being torpedoed at an awkward time. After flowing past Apple in 2018 by unit sales, Huawei expected to surpass Samsung in late 2018 to become the world’s biggest maker of smartphones.
That’s not going to happen now, at least not yet, and Huawei now says that its rise to the top “may take longer.” But a new Bloomberg report puts some hard numbers to this issue, too, claiming that Huawei’s smartphone business will experience a massive sales plunge of 40 million to 60 million units in 2019, almost exclusively outside of China. Huawei, for reference, shipped 206 million smartphones in 2018.
Mr. Ren has essentially confirmed this report by noting that Huawei has already seen a 40 percent drop in non-China smartphone sales because of the U.S. blacklisting.
While Huawei’s U.S. problems could suddenly be resolved if there’s an agreement in the U.S./China trade war that is the real reason for the blacklisting, Huawei is also planning for the long-term by developing its own chipsets and software. The latter includes alternatives to both Android and Windows, and while it’s hard to believe either will be ready, let alone viable, anytime soon, this U.S. action has clearly accelerated those efforts. And that may ironically cause bigger problems for companies like Google, Microsoft, and Qualcomm, as well as for the U.S. government, over time.
Mr. Ren says he now expects Huawei to fully recover from a revenues perspective by 2021.
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