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Huawei ‘fighting for survival’, though first-half sales hit $58bn

Liang Hua chairman Huawei.jpg

Huawei did well in the first half of this year, but has been fighting for survival since the US effectively banned it on 16 May.

Sales in the first half totalled 401 billion yuan ($58.3 billion), a rise of 23.2% on the first half of 2018. Profit margin was 8.7%, said Liang Hua (pictured), chairman of the board.

But the second half will be different, said Liang, speaking today at a press conference in Shenzhen, the southern Chinese city where it is based. He would not suggest a figure for Huawei’s sales in the second half.

“We will continue investing in the future and enable our survival,” said Liang, making it clear that Huawei has a long struggle ahead.

The US Department of Commerce (DoC) added Huawei to its entity list on 16 May, banning US citizens and companies – and non-citizens in the US – from trading with it. Since then the DoC has said some limited licences may be available, but Liang said that only “non-core” suppliers were back in Huawei’s supply chain. Huawei has “not seen” licences for key products and he would not speculate when any might arrive.

He made it clear that Huawei’s continued business in the 5G market and other areas has been the result of stockpiling of goods. “We have not been impacted because we have been well prepared.”

He said that since 16 May “we have secured 11 5G commercial contracts”, on top of those already signed. The company says it now has a total of 50 contracts for 5G.

“We have now recovered to 80% of our performance before we were added to the entity list,” he said. The company has analysed its core products and “if we have difficulties continuing supplies of the core products we will have to switch [suppliers].” The company may “give up some of the non-core products”, he said.

Huawei’s biggest concern is whether Google will be allowed to supply the Android operating system for products due to be announced later this year. It has talked about using its own operating system “and this is not just a tactic”, he said. “We have the ability to develop it and the ecosystem, but we prefer Android. We are fighting for survival, and at the same time seeking growth.”

After the Shenzhen press conference, Victor Zhang, the company’s president of global government affairs, told Capacity that the company is “on track” to improve the quality of its software engineering – heavily criticised last year by the Huawei Cyber Security Evaluation Centre, which is staffed by UK security experts, vetted by intelligence agencies. The centre reports to the UK government’s National Cyber Security Centre (NCSC).

“Internally we have finished the plan and we are discussing it with the NCSC and operators to ensure we have a mutual understanding,” said Zhang.

Originally Huawei said it was committing $2 billion to the programme, though the UK said in March this was not enough. Zhang said he expected the programme to take “two to three years”, and added: “We will invest more as the programme is implemented.”