Huawei’s Revenue Hits Record $122 Billion in 2019 Despite U.S. Ban
By Dan Strumpf, Wall Street Journal
What ban? Huawei Technologies said its revenue rose to a record $122 billion this year, showing the Chinese tech giant’s continued rise despite the Trump administration’s campaign to curtail its global business.
The pace of growth was slightly slower than expected, said Eric Xu, Huawei’s chairman, predicting more challenges in 2020 and saying the company doesn’t expect to be removed from a U.S. blacklist that has cut it off from certain U.S. technologies.
“We won’t grow as rapidly as we did in the first half of 2019, growth that continued throughout the year owing to sheer momentum in the market,” Mr. Xu said in a New Year’s message to employees titled “Forging Ahead to Survive and Thrive.”
“It’s going to be a difficult year for us,” Mr. Xu continued. ”We will have nothing to rely on but the hard work of our people as well as the ongoing trust and support of our customers and partners.”
Huawei’s finance chief, Meng Wanzhou, remains under house arrest in Vancouver more than a year after her initial detention, as she continues to fight a U.S. extradition request on charges of evading sanctions on Iran. Ms. Meng and Huawei have denied wrongdoing.
Despite those obstacles, Mr. Xu said revenue grew roughly 18% in 2019 to more than 850 billion yuan, or about $122 billion. The unaudited figure was lower than the company initially projected for the year, he said, and was a slowdown from the 19.5% revenue jump recorded in 2018—though exceeded its 2017 growth clip.
Huawei didn’t break out its 2019 revenue by region, but in past years about half of its revenue came from China, while the rest came from Europe and other overseas markets. The U.S. accounts for a tiny share of its revenue.
Huawei shipped 240 million smartphones this year, Mr. Xu said, a 17% increase over 2018 shipments. The company is continuing to invest in other gadgets, including PCs, tablets and wearable devices, he said.
Several U.S. administrations have long suspected that Huawei’s telecom equipment could be used by Beijing to eavesdrop on communications, a charge that Huawei—the world’s largest maker of such gear—repeatedly denies. Huawei gear is effectively off-limits to major American telecom operators, though it is widely used in much of the rest of the world.
A major reason for Huawei’s growth this year has been the company’s ability to withstand being added to the Commerce Department’s “entity list” in May. The listing prevents companies from selling U.S.-sourced technology to Huawei without a license, threatening Huawei’s access to many critical chip and software suppliers.
However, the measure proved less potent than expected. Many American companies assemble chips overseas, allowing them to continue selling to Huawei. At the same time, Huawei turned to alternate sources—including its in-house chip supplier, HiSilicon—for many components. The company now is capable of building 5G equipment entirely free of any U.S. parts.
Its smartphone business continues to grow sharply in its home market of China, and the company has dozens of 5G contracts around the world. So far, Australia and New Zealand have followed the U.S. in blocking Huawei from their 5G networks. In October, German authorities signaled that they won’t exclude Huawei, while a final decision is pending in Canada and the U.K.
Huawei’s CEO and founder, Ren Zhengfei, gave a series of interviews this year boasting of the company’s ability to survive without the U.S. In an interview in November, he told The Wall Street Journal: “We can survive very well without the U.S.”
“Huawei has a fighting culture where aggressive goals are set and with the whole company committed to win,” said Handel Jones, CEO of International Business Strategies Inc., a consulting firm.
One risk to Huawei in the coming year is a slowdown in the adoption of 5G technology, Mr. Jones said. Another is whether its formidable smartphone business can continue to grow in markets outside of China.
Under the entity listing, Huawei remains cut off from selling new smartphones with Google’s suite of Android apps, including the Play app store, Google Maps and other software Western smartphone users take for granted. Mr. Jones said he expects Huawei to ship between 250 million and 260 million smartphones in 2020.
Relief could come in the form of a trade deal between the U.S. and China that makes allowances for Huawei, such as additional Commerce Department licenses. A victory for Ms. Meng in her extradition fight would be met with triumph inside the company. However, Mr. Xu, in his New Year’s note, signaled that the company is keeping expectations in check.
“Survival will be our first priority,” he said.
Write to Dan Strumpf at [email protected]
3 thoughts on “Huawei’s Revenue Hits Record $122 Billion in 2019 Despite U.S. Ban”
Huawei to ship 100 million 5G smartphones in China next year
Huawei’s sales grew in 2019, but it says next year will be ‘difficult’
Huawei Posts Solid Growth but Warns of Difficulties Ahead
In a year-end note, a deputy chairman said the Chinese tech giant’s confrontation with the United States would hurt its prospects for 2020.
For Huawei, it has been a year of lawsuits, blacklists, diplomatic fights, spying accusations and, most recently, viral anger from the Chinese internet.
Through it all, the company posted solid growth, its deputy chairman Eric Xu said on Tuesday. In a year-end note, Mr. Xu said the company’s sales in 2019 increased an estimated 18 percent from a year earlier to $121.8 billion, just below the company’s initial target for revenue.
The results hinted at a slowdown in the final quarter of the year, and Mr. Xu’s note was rich in metaphors describing the difficult days ahead. Alternately likening the company to plums bitten by winter’s frost, a bamboo stalk battered by wind and an embattled aircraft, the executive said that in 2020, the company would not grow as rapidly as it did in the first half of 2019.
“It’s going to be a difficult year for us,” wrote Mr. Xu, adding that “the external environment is becoming more complicated than ever, and downward pressure on the global economy has intensified.”
Huawei is the world’s leading maker of equipment that powers cellphone networks and a champion of Beijing’s ambitions to build new, cutting-edge technology companies. Officials in the United States have long been worried that China’s government could use Huawei’s products to gather intelligence, an accusation the company has repeatedly denied.
Huawei’s year went from bad to worse when the United States added the company to an export blacklist in May. The move effectively restricted its ability to purchase American products crucial to its smartphones and telecom gear, weighing on revenue growth.
The blocks, though, have proven somewhat porous. The Trump administration has permitted sales to Huawei that are used to maintain existing mobile networks. Some of its American suppliers determined they could lawfully continue selling nonsensitive products to the company. In October, the Trump administration said it would issue export licenses to certain United States companies selling to Huawei, further easing pressures on its supply chain.
Even so, Mr. Xu indicated that the confrontation with the United States would continue to dampen growth and said he expected Huawei to remain on the blacklist in 2020.
“Difficulty is the prelude to greater success, and adversity the whetstone of an iron-willed team. The U.S. government’s campaign against Huawei is strategic and long-term,” he wrote.
Huawei, he said, will “need to go all out” to develop software and services that work with its smartphones. Analysts have worried about whether the company’s smartphones would remain competitive since it was blocked from working with Google. Huawei had to release its latest flagship smartphone, the Mate 30 series, without regular access to Google’s apps.
Mr. Xu said the company shipped a total of 240 million smartphones in 2019, an increase of almost 17 percent over the 206 million units it sold in 2018.
The company’s shares are not publicly traded and it has no obligation to announce its results. In a nod to transparency, Huawei has long announced financials, and this year it began reporting unaudited results quarterly. The numbers for 2019 are not audited, and the company will likely provide further details for its performance in the first months of 2020.
With Huawei’s business under pressure, Mr. Xu also warned of tough times for employees, even as he thanked them. Huawei unexpectedly became the center of online anger in China this month after an employee said he had been jailed for 251 days after demanding severance pay from the company. The experience struck a chord for many Chinese white-collar tech employees, who are now facing sagging returns for long hours at the office.
Despite the renewed focus on Huawei’s famous hard-charging corporate spirit, Mr. Xu did not mince his metaphors in describing the company’s outlook on its employees.
“Managers at all levels need to put company interests above personal gain and go where they are needed most, including hardship regions,” he wrote, calling those willing to put up with such difficulties “tree growers.”
He said the company would remove managers who were performing in the bottom 10 percent as part of a plan to better prune talent.
“We will remove mediocre managers more quickly — people who have lost their enterprising spirit, who have built their position on personal connections or empty and unactionable reporting, and those who prioritize short-term gains and pass problems on to their successors,” he wrote, calling such people “the pit-diggers among us.”
Huawei Is Winning the Argument in Europe, as the U.S. Fumbles to Develop Alternatives
Germany seems poised to follow Britain in letting the Chinese maker build next-generation networks, despite last appeals from the United States.
America’s global campaign to prevent its closest allies from using Huawei, the Chinese telecom giant, in the next generation of wireless networks has largely failed, with foreign leaders publicly rebuffing the United States argument that the firm poses an unmanageable security threat.
Britain has already called the Trump administration’s bluff, betting that officials would back away from their threat to cut off intelligence sharing with any country that used Huawei equipment in its network. Apart from an angry phone call between President Trump and Prime Minister Boris Johnson, Britain appears to be paying no price for its decision to let Huawei into limited parts of its network, under what the British say will be rigorous surveillance.
Germany now appears ready to follow a similar path, despite an endless stream of cajoling and threats by Secretary of State Mike Pompeo, Defense Secretary Mark T. Esper and other U.S. officials at a global security conference in Munich last weekend.
In public speeches and private conversations, Mr. Pompeo and Mr. Esper continued to hammer home the dangers of letting a Chinese firm into networks that control critical communications, saying it would give the Chinese government the ability to spy on — or, in times of conflict, turn off — those networks. The security risks are so severe, they warned, that the United States would no longer be able to share intelligence with any country whose network uses Huawei.
Trump Extends Huawei Ban:
President Trump inked an extension to the US government’s ban on American companies’ business with China’s Huawei. The move essentially prevents US companies from doing business with Huawei through May 2021.
As Reuters reported, the action invokes the International Emergency Economic Powers Act, positioning China’s Huawei and ZTE as threats to national security. According to Reuters, the US Commerce Department is also preparing to extend the waivers it has provided to select US companies that will allow them to continue working with Huawei.
Hanging over the situation is the ongoing US-China trade war, a situation now further complicated by the COVID-19 pandemic that originated in China.
Trump’s action is noteworthy in light of a number of new developments, including reports that US companies may be given a green light to work with Huawei and other Chinese companies on 5G standards. And, separately, there are ongoing discussions about a government-funded program to pull Huawei equipment out of some US wireless operator networks and replace it with equipment from “trusted” suppliers.
Comments are closed.