Before President Trump banned all U.S. companies from engaging in any kind of trade with Huawei, the Chinese smartphone company was well on the way to generate revenues of more than $125 billion and replace Apple as the world’s second largest smartphone manufacturer. However, posted the ban, the picture has changed quite a bit for the Chinese giant.
Huawei’s founder and CEO Ren Zhengfei said that the impact of the U.S. ban on Huawei’s business has been more than expected. The ban will lead to Huawei’s revenue taking a hit by $30 billion, with the company taking until 2021 to fully recover from its effect.
The ban has also had an adverse effect on Huawei’s smartphones international shipments which declined by 40 percent in the last month. The company is already preparing for a decline in its international smartphone shipments by 40-60 percent and has also asked Foxconn to reduce its smartphone production accordingly.
“We did not expect they would attack us on so many aspects,” Ren said, adding he expects a revival in business in 2021.
“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 connection with networks that use such components.”
Huawei is now expecting revenues of $100 billion for 2019 and 2020, while its original revenue estimate was between $125 billion to $130 billion. Despite the decline in revenues and smartphone shipments, Huawei will not be cutting down on its R&D spending or announce any large scale layoffs.
Our Take
The full impact of the U.S. ban on Huawei’s smartphone and other business is still not clear. While Huawei has reportedly created a stockpile of chips, it is only going to last for around 3-6 months. It remains to be seen what Huawei does once it runs out of this stockpile or if it needs newer versions of certain chips.
Huawei has also been barred from using Android and so it will be interesting to see what the company does when it launches its flagship Mate 30 series later this year. The company could launch the phone with its own Hongmeng OS about which little is known as of now.
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[Via Reuters]
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