Huawei ‘faces $30 billion setback’ because of US embargo, says founder

18 June 2019 | Alan Burkitt-Gray

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The US embargo on Huawei will cost the company $30 billion in revenue, the founder said yesterday, but the Chinese company still expects sales to be $100 billion this year.

Ren Zhengfei (pictured), the founder of the company, said the embargo – banning US companies and citizens from dealing with it – has hit hard.

“We cannot get components supply, cannot participate in many international organisations, cannot work closely with many universities, cannot use anything with US components, and cannot even establish connection with networks that use such components,” he told media in a briefing held under the name “Coffee with Ren”.

Huawei caused raised eyebrows a year ago when it said its annual sales would pass $100 billion in the last financial year – but in fact the company reported $104 billion sales, including equipment, smartphones and services.

The effect of the embargo will be to keep revenue at around $100 billion in the current year, though Ren was previously expecting growth to $125-$130 billion.

By comparison, its Swedish rival, Ericsson, had annual sales last year of just $22 billion, though Ericsson focuses on network equipment and has long ago moved out of smartphones.

Ren is trying to shift Huawei into using more home-grown hardware and software – including its own chips and its own Hongmeng operating system for smartphones, an increasing necessity since Alphabet, the parent company of Google, is forced to restrict Huawei’s access to future updates of Android.

International sales of Huawei’s smartphones have fallen 40% in a month, media understood from the Coffee with Ren session in Shenzhen, Huawei’s home city in southern China, close to Hong Kong. Reports have indicated that the company could see falls of up to 60% internationally.

Ren’s daughter, Meng Wanzhou, is CFO of Huawei but is currently on bail in Canada, facing extradition proceedings from the US, which is accusing her of being involved in smuggling kit containing US hardware and software to Iran.

Meng will next appear in court in Vancouver to face extradition charges on 23 September.