Huawei Finally Admits to Impact of U.S. Blacklisting

Posted on June 17, 2019 by Paul Thurrott in Android, Cloud, Hardware, Mobile, Windows 10 with 47 Comments

Huawei founder and CEO Ren Zhengfei (Source: Getty Images)

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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Comments (47)

47 responses to “Huawei Finally Admits to Impact of U.S. Blacklisting”

  1. Rcandelori

    Paul, I do find it peculiar that you think this is merely about xenophobia and trade war tactics. China is a totalitarian state - look what it is trying to do in Hong Kong, look at it's "honour" credit system it has introduced which is literally out of Orwell's 1984, meanwhile the President just made himself president for life. This isn't a joke. It's time to stop pretending that China is some benign power with whom the West loves to trade and that it isn't seeking to exercise its own power through all of its various tentacles. Say what you will about Trump but his instincts are right on China.

    • wright_is

      In reply to Rcandelori:

      The USA isn't much different, just at the other end of the scale. The Orwellian tracking and scoring in America is done by private companies in the name of capitalism. The government might not spy as openly as China does on its citizens, but don't kid yourself that you aren't ranked and rated every day in the West, it just isn't reported as "in-your-face" as the Chinese spying on its citizens.

      As a non-American, who do I want spying on me? No-one, thank you very much. But if I have to pay for "the pleasure", then the lowest bidder, which is China.

    • Pungkuss

      I am happy that something is being done about China. Not a fan of Trump or how he is doing it, but happy non the less.
      Huawei isn't China and shouldn't be punished is easy to say, but they have benefited for years from IP theft by the government. I can't think of a time when the American government spied on international companies for the sole purpose of giving that Intel to home grown ones. There is no recourse if Huawei steals from you, because if you take them to court you can't do business in China. Trade cannot be this one-sided. Trump is using the only leverage he has, the same companies that benefited from China's bad behavior. Right now China is years away from making their own unencombered chips. They either need ARM liscense or Qualcomm parts. It is my guess that China will come back to the negotiations and offer more favourable terms. It was always thought that a trade war would hurt the US more than China. I believe over the next 6 months we will see that that was incorrect.
      In reply to Rcandelori:

    • Paul Thurrott

      In reply to Rcandelori:

      Two things.

      This is literally not about security. Which you can tell because the president has explicitly said that Huawei could be returned to normal business as part of a favorable trade agreement with China. If there was really a security concern, that wouldn't be the case at all.

      Huawei is a company. China is a country. It's really easy---too easy---to fall into the trap of commingling the two. Huawei is from China, yes, and there is a different system there. And China is whatever it is, yes. Bu to jump from that "they must be evil/whatever" is rather bizarre to me. We're talking about a company here, not a country. Also, Amazon paid $0 in U.S. taxes last year. Which company has closer ties to, and benefits more from its relationship with, its home country, Huawei or Amazon? Think about it.

      Also, as others have pointed out here and elsewhere, the U.S. has done things just as bad as anything we know about China. And I don't mean historically. Recently, we have been caught spying on our own allies, after all.

      Xenophobia is basically ignorance. What is unfamiliar is inherently wrong. I'm not saying China isn't terrible. I'm also not saying that Huawei hasn't done some questionable things, business-wise. But that's not the charge. (Samsung and Microsoft have done terrible things, too. Microsoft has been repeatedly called out for NSA backdoors in Windows, etc. Both have stolen IP.) The actual charge is that Huawei is a national security threat. And our country, this transparent, democratic wonder we're all so proud of, has provided ZERO evidence of that to our allies or to the people who live here.

      That's the issue. Not one's instinct, biased from our upbringing and limited experience, about China or Huawei.

      Put simply, I am not defending China or Huawei. I know as little about them as you do. What I am complaining about is ignorance and the lack of evidence.

      • lvthunder

        In reply to paul-thurrott:

        You defend Huawei all the time. Maybe not in this particular article, but in most of the others.

      • christian.hvid

        In reply to paul-thurrott:

        While there's little doubt that your current administration is xenophobic (and worse), the real driver behind its actions against China's crown jewel is likely to be about economic and geopolitical interests, not about culture or race. If Huawei were a Saudi company, or a Russian company, or even a North Korean company (if such a thing existed), I'm sure the U.S. government would give them a pass.

      • StevenLayton

        In reply to paul-thurrott: Jeez, there you go again Paul. Bringing a fair, balanced logic and common sense into the conversation. ;)

      • melinau

        In reply to paul-thurrott:

        Your distinction between Huawei the company and China the nation is sound, and I'd add a third level to the debate - the Chinese people.
        Unfortunately as I and others have pointed-out there is frequently a connection between 'Business' in China, and the Chinese State which exceeds the kind of 'Pork-Barrel' low-level corruption common in USA by several orders of magnitude. The people who suffer most are of course the 'poor bloody infantry' - the Chinese people.

        AS a non-USA citizen I find the arrogance of your nation in foisting its prejudices and ignorance upon all nations through your economic power ALMOST as distasteful as I find the corrupt & murderous Chinese regime.
        For a nation supposedly wedded to the rule of law the USA is a disgrace. It simply ignores Law and civilised conduct whenever it suits its economic interest.

    • jchampeau

      In reply to Rcandelori:

      I don't dispute anything you say here. I, too, think Trump's instincts are right on China, as much as it pains me to say anything positive about our president. However, as with most things, I think there's more to it than that. The US sticking it to Huawei may produce some short-term results and provide a nice bargaining chip but, if we persist, Huawei will undoubtedly shift to selling phones running its own OS variant/app store/ecosystem. And they will double down on marketing their cellular network equipment to non-US customers. Long-term, I worry our pressure will lead to Huawei becoming a powerhouse despite not selling to US customers. And that'll harm the Googles and Qualcomms who presumably stand to profit from Huawei's rise. It seems to me that with the world's economies all inextricably linked, the most important and difficult calculation in a modern trade war scenario is that of unintended consequences. And our 73-year-old president, who envisions a return to a booming coal industry in the US, doesn't seem to understand how these particular pieces fit together.

  2. bluvg

    If they make their own ecosystem and it takes off, this could easily have the unintended consequence of the US attacking its own interests in irreversible fashion.

  3. lvthunder

    Sounds like Huawei needs to pressure China into making a deal.

  4. Bats

    Huawei should just pickup their stuff and move to Japan ?.

  5. skane2600

    In reply to Mav_Pen:

    The idea that most tech people in all of Asia are incapable of good software development is denial on an almost a global scale.

    Yes, chasing Google modifications would be difficult for any entity which is one of the reasons I think the idea of Microsoft making a Windows/Android hybrid mobile device is such a bad idea.

    • Mav Pen

      In reply to skane2600:

      No it’s not. Parts of Asia have produced beautiful hardware for years (Japanese cellphones before the iPhone) but they have always struggled with software. A lot of the asian apps just tend to suck. Royally.

      I would imagine that many of their best software engineers studying in the US and other western countries then making lives here for themselves has something to do with it.

      • skane2600

        In reply to Mav_Pen:

        So how many programs from Asian companies have you used and what is the diversity of counties they are from?

        • Mav Pen

          In reply to skane2600:

          Many. I worked in Asia before I retired, working out of Hong Kong and spending time all of east and south east Asia. I would spend half my time in HK and half my time overseas every year.

          Most of the apps that you download there feel like they are using simple app templates and were quickly compiled. Most of what I used lacked flow, were buggy, full of ads and on Android were normally quite slow. In the case of Mainland China, would often install other apps on my Chinese phone without even asking.

          Outside of China (because Google is still banned there) everyone uses Google Services. There is no competitor to Google Maps, Gmail (with the exception of Japan because Yahoo still reigns king there), YouTube or any of the others. Google and Facebook alone cover the majority of apps that people want to use on their phones, and it’s because they offer excellent apps that just work with little to no hassle. Any local alternatives tend to be done on the cheap, underfunded, slow and not worth the hassle. Excluding gaming, as China and Japan seem to have that wrapped up for themselves.

          That’s not to say that there are no apps that are good, but the vast majority are just absolute rubbish.

          In software development in much of Asia there is a lot of love and care that is missing for want of a better term. Doing it just good enough seems to be the benchmark and it really shows. You can go online to a developer who will then promise you an app in a week and whip it up from a pirated CodeCanyon template and the vast majority of businesses seem to be happy with this as it is cheap and efficient.

          And if your go to is I’m getting downvoted because of Windows/Android fans perhaps you might consider not being so sensitive about a number just because people disagree with you, it’s just a conversation.

    • skane2600

      In reply to skane2600:

      It's hard for me to believe I've been voted down multiple times for criticizing such a vast generalization made with zero evidence. Or maybe it's just from Windows/Android hybrid fans.

  6. hellcatm

    In reply to Mav_Pen: Maybe, maybe not but the Chinese government could make their people use only Chinese products and that would mean other companies switching to the new Wuawei OS and hardware. They do it with search out there, why not go a step further. This could hurt the US. China is like a pit bull caught in a corner, it has nothing to lose. If Wuawei does recoup without the US it could cause issues.

    • wright_is

      In reply to HellcatM:

      Additionally, the USA has shown its allies that it is foolish to rely on technology with ties to the USA, because the US government can simply pull out the rug from under them at a whim.

      • terry jones

        In reply to wright_is:
        Just a suggestion, but you might want to dial back your rabid anti-Americanism.
        You sound like you're on a jihad.
        Or you used to write for Der Spiegel. (Is that you Claas?)

        • hellcatm

          In reply to terry jones: He doesn't sound anti-American. He sounds anti-trump and his bullshit and I can stand behind that.

        • wright_is

          In reply to terry jones:

          It isn't rabid anti-Americanism, it is a reaction to the USA government trying to de-globalize the world.

          Their actions are having a huge knock-on effect around the world. The America World Police attitude to legal jurisdiction, ignoring international treaties (Privacy Shield calls for a permanent ombudsman in the USA, but after 3 years, they have still to appoint said ombudsman), sudden tariff changes (E.g. with the EU and China), dropping out of climate change initiatives etc.

          You have big American companies trying to sell products and services globally and the US government seemingly doing their best to sabotage their reputation and their ability to function globally.

          The big internet companies are also not doing themselves any favours, by acting illegally internationally.

          It is a complete mess at the moment.

    • Mav Pen

      In reply to HellcatM:

      They almost already do. No phone in China is sold with Google services, Facebook is banned, Twitter is banned, Youtube is banned, Google redirects to Google HK and that is banned, half of the western sites don’t load because they can’t load fonts from Google Servers.

      Twitch is banned, Discord is banned, most western news sites are banned, WhatsApp is banned, LINE is banned, KakaoTalk is banned, Messenger is banned, Telegram is banned, Dropbox is banned, Google Drive is banned, Box works but is extremely slow, almost as if its rate limited, OneDrive is banned, Snapchat is banned, Pinterest is banned, Reddit is banned, Tumblr is banned, Quora seems to get banned and then unbanned quite often, Dailymotion is banned, Vimeo is banned, Spotify is banned, Soundcloud is banned, Periscope is banned, this is just the start of it but all of these sites and apps are banned and it’s the real reason that local products have been able to take off.

      Android is allowed and used but only because the Core OS is open source. And even then they’re only deployed with government backdoors in them (In the Mainland, International versions tend to be fine even if their bloatware sucks). China has been doing this for years already, so it’s really not much of a risk. I still don’t believe that their software development is up to snuff- if it were they would have already jumped on the opportunity to use their own OS.

  7. wright_is

    In reply to Mav_Pen:

    Except, I give you the Patriot Act, the FISA courts and National Security Letters (which can't even be shared with the company's lawyer, AFAIK, they have to be acted upon in secret).

    USA based companies, or even foreign companies with a presence in the USA, are beholden to these orders and must follow the orders without question. That doesn't sound much different to the what the USA is alleging Chinese companies have to do, in times of national emergency.

    Edit: Not sure what happened there, this was posted as a reply to Mav_Pen in the thread from Rcandelori at the bottom of this page, but it appeared as a stand-alone thread. I deleted and made a new reply, same result... Go figure! So, please see Mav_Pen's post for my reply to make sense.

    • Mav Pen

      In reply to wright_is:

      That is weird, I can’t even see my original comment lol.

      Is there any evidence of the US using those to intimidate companies into not suing US companies for IP theft? For a lot of businesses, especially in the tech sector, that is the big issue here.

      Just after Motorola filed suit, China began a probe into Google’s acquisition of Motorola mobility. It was soon dropped after Huawei dropped the lawsuit. Even speaking out against Huawei in China can lead to difficulties dealing with the government, and they have all sorts of ways to bureaucratically delay and inconvenience businesses due to the crazy amount of paper work you need to present to get anything done there.

      I don’t see the US doing the same thing up until this point.

      • wright_is

        In reply to Mav_Pen:

        Over IP? No, for other political reasons? Regularly over the decades.

        Also, it isn't just IP, what about National Security Letters, that is much more insidious, or the USA trying to push through that they have jurisdiction in foreign countries (just look at the Microsoft Hotmail case, where the State Attorney argued that they had jurisdiction over Ireland and Irish companies?

        • Mav Pen

          In reply to wright_is:

          It’s not to say that the US doesn’t do bad things or to defend those bad things, but it’s getting a bit off topic. I’m not sure how the Hotmail case relates to IP theft, and even if that isn’t the direct reason why the government is taking on Huawei, national security is really the only umbrella that they have left to fight back with.

          It’s not much to ask that they don’t steal US IP and transport it to a region where they enjoy the benefits of free trade on our land while sheltering their own companies in theirs and giving them advantages on the local field by punishing those who come from overseas to do business there. Our companies thrive because of the intellectual property that they create; their value is entrenched in it and turning a blind eye to companies stealing it is going to eventually spell an end game for them.

          • wright_is

            In reply to Mav_Pen:
            but it’s getting a bit off topic. I’m not sure how the Hotmail case relates to IP theft,

            The whole issue is allegedly national securtiy and companies cowtowing to the Chinese government (and backdoors), yet the US helpfully neglects to mention that they have the same mechanisms and use them on a regular basis. (And backdoors, I'll just say Cisco.)

            And the US has a long and rich history of industrial espionage.

            • Mav Pen

              In reply to wright_is:

              That's fine, but I guess we’re talking about two different things here. I’m more focused on Huawei’s rise to the top, how they got there with the support of the Chinese government and what we can do to stop it in the future.

              • melinau

                In reply to Mav_Pen:

                Few doubt that Huawei is, like Foxconn, and most other large Chinese companies largely controlled (often owned) by members of The CP China and the Red Army - the ruling elite of China. Individuals have become hugely wealthy, and corruption is the norm. These same individuals can also be brought-down if they don't follow the party line.

                This situation is largely a consequence of Western (mainly US) Corporations out-sourcing manufacturing to China in order to "increase shareholder value" . In addition to turning a blind eye to horrific working conditions & exploitation, their greed led them also to 'share' technology with those Chinese companies providing the cheap labour.

                Its a bit late for USA Trump suddenly to cry "foul" now that China Plc. is overtaking USA as an economic powerhouse, and starting to develop its own, often superior products. No amount of economic bullying of the rest of the World will change this, nor will it, in the long run, change anything in China. Had USA Corporation INVESTED the huge profits they made by using China to do their dirty work the situation might be different - they didn't and here we all are....

  8. wright_is

    Interestingly, after Google last week approaching the US government to get them to relax restrictions, Intel and Qualcomm both approached the government asking for exemptions for smartphones and server products.

  9. beckerrt

    Huawei is doing / saying all the right things in my opinion. Instead of lashing out at the US, Trump, the West, etc., they are keeping their heads down, keeping on keeping on, admitting this is a hindrance but staying strong. Not the biggest fan of that government or some of the companies based there, but I have to say Huawei is handling this about as good as to be expected. Respect.

  10. Pbike908

    I do concur that this will push Huawei to develop more tech in house which will take a little time.

    Unsaid by many apologists and tech bloggers, is that Huawei's rapid rise to prominence is probably due to stealing tech via espionage by leveraging chinese state supported hacking. Of course I can't prove it. And if course I could be wrong.

    • skane2600

      In reply to Pbike908:

      Huawei's thieving skills are apparently so good they've stolen advanced 5G technologies from US companies that haven't even invented them yet.

    • wright_is

      In reply to Pbike908:

      You mean like Apple, Microsoft, Google and others have done in the past?

      • Pbike908

        In reply to wright_is:

        All companies "copy" technological ideas from competitors. Yes, occasionally a company gets caught with another companies proprietary tech -- i.e. gets caught red handed with actual documentation from a competitor. However, in the western world this "misappropriated tech" generally comes from hiring a disgruntled former employee. To my knowledge NO U.S. TECH COMPANY -- at least major one -- has EVER been caught "hacking" a competitor. I am not saying it isn't possible it's happened, but I haven't heard of it.

        China, on the other hand, as been caught NUMEROUS times with their hand in the cookie jar of western tech companies -- usually the governments military hackers. And if I'm not mistaken, Huawei got caught with a T-Mobile Robot Arm!

        I am no Trump lover, however, other companies (China and Mexico) enjoying relatively barrier free U.S. markets while turning a blind eye to U.S. concerns has got to stop. Enough is enough! I am not sure Trump's approach will work, however, I have to give him credit in that he has for the moment actually appeared to seriously gotten the attention of China and Mexico.

        • skane2600

          In reply to Pbike908:

          So what's most important to you isn't the theft, but the method used to perform it?

          And why are you lumping in Mexico with China?

        • wright_is

          In reply to Pbike908:

          Oracle vs. TomorrowNow/SAP?

          Apple vs. Microsoft (Apple alleged that MS stole the GUI idea from them)

          Xerox vs. Apple (Xerox told Apple to leave MS alone, because it was Xerox PARC's technology in the first place).

          Lotus Software vs. nearly everybody else over the "/" menus.

          There have also been a few other stories over the years of company A hacking into company B,

          • skane2600

            In reply to wright_is:

            Well, I agree in spirit. Apple lost in court in Apple vs. Microsoft. Xerox tried to sue Apple but the statute of limitations had expired. We don't know how the latter case would have ended, but the fact that Xerox sued them and Apple didn't refer to the so-called license agreement is good evidence that it never existed. There was an agreement involving Apple stock, but not for intellectual property of Xerox.

        • hellcatm

          In reply to Pbike908: Its because trump is racist and hates everything Mexico and China hasn't kissed his ass. Think of Wuawei was a Korean, Russian or even a Middle Eastern company, things would be different, they'd probably get away with it because he looks up to their leaders.

    • codymesh

      In reply to Pbike908:

      Android's rise to prominence --> copying

      samsung's rise to prominence --> copying

      xiaomi's rise to prominence --> copying

      and now

      huawei's rise to prominence --> copying

      at some point you people will realize just how dumb and drawn out this is, and that copying is basically business as usual in the tech industry (see Facebook's copying of Snapchat in Instagram Stories, etc)

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