Eric Xu, the rotating chairman of Huawei, released the company’s growth report in their new year message to the employees. The company has hit a record high in revenue with $121.72 billion (850 billion yuan), which is 18% more than the previous year. However, the growth of Huawei is slower than the earlier projection. Xu mentioned that the prime reason for slower growth is due to getting blacklisted for trade by the U.S.
A Glance At The Sanction
In May, the U.S. has placed Huawei in the Entity List, which means the U.S. firms cannot trade technology without government approval. Trump government deemed Huawei as untrustworthy as it was alleged that the firm might be involved in spying on the U.S. citizens by smuggling the data to the Chinese government. Many looked at this as a crackdown at China for the trade war between the two countries.
The sanction barred the Chinese firm from using Google services like Maps, Gmail, and Search. This lead to a considerable dent in Huawei’s future roadmap, which was evident when the Ren Zhengfei – the founder of the company – said that the annual revenue would remain flat till the end of 2020 at about $100 billion. However, the $120 billion in revenue in 2019 came as a surprise for everyone.
In the letter, the rotating chairman had stressed that the U.S. government stands on Huawei is strategic and long-term. Consequently, he was bearish, as he said that the companies would have tough times ahead. In 2020 we will continue to remain on the U.S. entity list,” said Xu.
Despite the ban, Huawei reported resilient sales in 2019, due to an increase in the sales of mobile phones. The company sold 240 million phones in 2019, retained its second position in terms of units sold. Huawei overpowered Apple last year by selling 200 million phones, thereby, gaining the second position behind Samsung.
Being an open-source platform, Android has been exempted by Huawei from the use of their operating system, which allowed them to keep their business resilient. “Huawei has managed well for two reasons — firstly, because it has replaced U.S. components remarkably quickly, and secondly because the entity list designation still permits the company to buy goods from many U.S. companies,” said Dan Wang of Gavekal Dragonomics, a Beijing-based research firm. “There’s a risk, however, that the U.S. government escalates sanctions and removes the latter option.”
“We are trying to build a mobile ecosystem. Most of the key apps, such as navigation, payments, gaming, and messaging, will be ready soon” said Charles Peng, Huawei’s consumer head of India. “We will leverage a substantial Indian developer base alongside Chinese equivalents to deliver alternatives to Google Gmail, YouTube, maps, and others. The company has also developed its operating system – Harmony – to completely replace Android as a workaround for the ban.
However, the company has no plans to use it with their upcoming phone and is sticking to Android for now. It is believed that Huawei will launch its operating system in 2020. “If we are barred from using Android in the future, HarmonyOS is ready to replace Android, and it will only take a few days to migrate. It will support a wide range of applications including Android, Linux, and HTML5,” said Richard Yu, CEO of Huawei’s Consumer Business Group.
Although there has been a surprising rise in 2019, Huawei will have difficult times ahead as the U.S. is putting pressure on its allies to ban the company, citing threat to privacy. However, Washington has received a mixed reaction from other countries as only a few countries like Australia and Japan have banned the company for their 5G network initiatives.
However, Germany and India have included the firm for participating in the trial of 5G spectrum. “We have confidence in the Modi government to drive 5G in India, Huawei has always been committed to India,” said Jay Chen, chief executive of Huawei India, after getting approval for participating in India’s 5G initiatives.
Nonetheless, Mr Xu has played down expectations for 2020, mentioning that the company would not grow as rapidly. “It’s going to be a difficult year for us. Consequently, survival will definitely be our top priority in 2020” he wrote.