A Blog by Jonathan Low


Aug 1, 2019

Why Huawei's Sales Are Growing Despite US Blacklisting

In a global economy, dependent on a global supply chain, no one can afford to stand on principle for too long, especially in tech. JL

Raymond Zhong reports in the New York Times:

The Chinese tech giant said its sales for January through June grew by nearly a quarter from a year earlier. American tech companies decided they could resume selling to Huawei despite the blacklisting. Restrictions did not apply to hardware manufactured outside the US and did not contain sensitive American components. Huawei’s handset sales have been surging in China. Huawei’s smartphone sales outside China recovered to some degree. “Once we determined we could resume (selling) those products, it got back to normal quickly.”
A little over two months after Huawei’s chief executive began comparing his embattled company to a bullet-riddled fighter plane, the Chinese tech giant said its sales for January through June grew by nearly a quarter from a year earlier, a sign that the Trump administration’s clampdown has hardly brought the company crashing to the ground.
“Neither production nor shipment has been interrupted, not for one single day,” Liang Hua, the chairman of Huawei’s board of directors, said on Tuesday at the company’s headquarters in the southern city of Shenzhen. “No matter how many difficulties we might face, we remain confident in the company’s future development.”
Still, Huawei’s troubles with Washington have not left it unscathed. Its smartphone sales outside China plummeted after the Trump administration restricted the company’s access to American technology in May, though Mr. Liang said that they had since recovered somewhat.
Revenue for the first half of the year came in at $58 billion. But second-quarter sales grew by less than 13 percent from a year earlier, compared with 39 percent growth in the first quarter. Huawei did not indicate this in its news conference on Tuesday, highlighting only the combined figures for the first half of the year. Because it is not a publicly traded company, it can be selective about which financial results to release.

Mr. Liang also warned that the second half of the year might be more challenging than the first.
Huawei’s future has been uncertain ever since Washington began ratcheting up efforts to undermine the company, saying that its products are dangerously susceptible to influence and disruption by the Chinese government. Huawei rejects the insinuations.
Its fate is now entangled with talks between the United States and China to end their yearlong tariff war. As those negotiations have swung between optimistic highs and gloomy lows, so has the outlook for Huawei’s business.
After American officials spent months warning the world about the risks of using Huawei’s equipment to build next-generation wireless networks, the Commerce Department took direct aim at the company’s operations in May by putting it on an export blacklist. This meant that American companies like Qualcomm and Intel would need special permission to sell Huawei the microchips and other specialized components that go into its products.
American tech suppliers swiftly halted shipments to Huawei in response. The Chinese company’s founder and chief executive, Ren Zhengfei, predicted in June that revenue this year would be around $30 billion less than previously forecast. That gap alone represents more revenue than Ericsson, one of Huawei’s main rivals in telecom equipment, took in all year in 2018.
Before long, though, some American tech companies decided that they could resume selling certain items to Huawei despite the blacklisting. Their lawyers determined that Washington’s restrictions did not apply to hardware that was manufactured outside the United States and that did not contain much in the way of sensitive American components and technology.
“Once we determined that we could continue to resume most of those products, it really got back to normal pretty quickly,” Dave Pahl, the head of investor relations at the chip maker Texas Instruments, said during a conference call with analysts last week.
Then, after meeting with China’s top leader, Xi Jinping, in Japan last month, President Trump said the administration would permit more American sales to Huawei, in a gesture meant to smooth the path toward a trade deal.
Huawei cannot breathe easy, however. The Commerce Department still has not indicated exactly how it will decide who gets licenses to sell to the company. American trade negotiators were in Shanghai on Tuesday to try once more to piece together an accord.

Some of Huawei’s American partners have already started making potentially hard-to-reverse changes to their operations in response to the blacklisting. The electronics manufacturer Flex said last week that it had scaled down its activities in China for supplying Huawei.
At the news conference on Tuesday, Mr. Liang said that Huawei’s ability to supply equipment for next-generation 5G wireless networks had not been affected by the Commerce Department’s restrictions. The company had made adequate preparations in advance, he said.
In fact, he said, Huawei has signed 11 additional 5G contracts since the May blacklisting, bringing its total to 50, across 30 countries.
Mr. Liang also said Huawei’s smartphone sales outside China had recovered to some degree since the blacklisting. In the immediate wake of the Commerce Department’s action, many phone buyers in Europe and other places shied away from Huawei handsets out of concern that the devices would not be able to run Google’s Android operating system and other Google apps.

Huawei’s handset sales have been surging in China, where many Google services are blocked anyway. But for the rest of the world, it remains unclear whether the Silicon Valley giant will be given permission to serve Huawei smartphone users. Mr. Liang acknowledged that Huawei still had work to do to ensure the health of its consumer device business, which accounted for over half the company’s revenue in the first six months of the year.
“If the U.S. allows us to use Android, then using Android and its ecosystem is always our preferred choice,” Mr. Liang said. If not, he said, Huawei is capable of developing and deploying its own replacement operating system, although he declined to give details about the company’s efforts in this area.
For many years, Huawei’s chief executive, Mr. Ren, was a reclusive figure who almost never spoke to reporters. Of late, he has been a near-constant presence in the global news media, sounding exuberant about his company’s prospects for surviving Mr. Trump’s onslaught.
Speaking this month with a group of Italian journalists, Mr. Ren boasted that Huawei had already patched up 70 to 80 percent of what he called the “bullet holes” in its products — the ways in which they rely on American-sourced parts or technology.
By the end of the year, he predicted, Huawei will have filled more than 90 percent of these holes.
“We can stand on our own right now,” Mr. Ren said. “We don’t need to depend on the U.S. to continue serving our customers. The more advanced a system is, the more capable we are of standing on our own.”


trishapandiyan said...

Popular conceptions of 'technology'Technology Write For UsiBOMMA tend to associate that term with activities governed by science and involving important 'hardware' content, i.e., tools, devices, machines. Conversely, 'technique' would pertain to more mundane activities; built upon non-reflexive routines and implying more direct forms of engagements with materials. This view has been severely challenged for the last three decades. As stressed by Haudricourt 'technology

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