Huawei’s Global Business Bruised by Trump’s Sanctions

Huawei’s Global Business Bruised by Trump’s Sanctions
People visit a Huawei booth during the Mobile World Congress in Shanghai on Feb. 23, 2021. (Hector Retamal/AFP via Getty Images)
Cathy He

Chinese tech giant Huawei has conceded that U.S. sanctions have hurt its smartphone business after posting revenue declines in overseas markets on March 31.

Huawei was put on an export blacklist by then-U.S. President Donald Trump in 2019 and later barred from accessing critical technology of U.S. origin, affecting its ability to design its own chips and source components from outside vendors.

The ban put Huawei’s handset business under immense pressure, with the company selling off its budget smartphone unit to a consortium of agents and dealers in November 2020 to keep it alive.

But growth in other parts of the business meant Huawei recorded a net profit of 64.6 billion yuan ($9.83 billion) for 2020, up 3.2 percent—compared to growth of 5.6 percent a year earlier.

On the impact of U.S. sanctions, Ken Hu, Huawei’s rotating chairman, said, “It has damaged us a lot.”

“In 2020, we saw a slowdown in the growth rate and life was not easy for us,” Hu said at a news conference at Huawei headquarters in the southern city of Shenzhen on Wednesday.

Huawei’s growth was driven by its home market, with revenue in China up by 15.4 percent to 584.9 billion yuan.

Its business declined everywhere else, with revenues down 12.2 percent to 180.8 billion yuan in Europe, the Middle East, and Africa. Revenues were down 8.7 percent to 64.4 billion yuan in the rest of Asia, and down 24.5 percent to 39.6 billion yuan from the Americas.

The Trump administration took a hardline on Huawei and other Chinese tech companies, saying their equipment could be used by the Chinese Communist Party (CCP) to spy on Americans or disrupt communications networks. Chinese laws compel companies in the country to cooperate with CCP security agencies when asked.

Huawei has consistently denied having ties to the CCP, saying that it is a private company almost wholly-owned by employees. A trade union body owns 99.1 percent of the company, serving as a platform for more than 121,000 employees who own shares. A 2019 study, however, concluded that the shares, which are not like normal shares, do not give the employees real ownership rights.
Last year also saw a spate of countries bar Huawei, the world’s largest maker of telecom gear, from their 5G network rollouts amid a Trump administration effort warning countries of the security threats posed by China-based technology firms.

The Federal Communication Commission in December finalized rules requiring carriers using equipment from Huawei or ZTE, another Chinese telecom company, to “rip and replace” that equipment. It created a reimbursement program for that effort, and U.S. lawmakers in December approved $1.9 billion to fund the program.

Last month, the regulator designated five Chinese companies as posing a threat to national security: Huawei Technologies Co, ZTE Corp, Hytera Communications Corp, Hangzhou Hikvision Digital Technology Co, and Dahua Technology Co.

Reuters contributed to this report. 
Cathy He is the politics editor at the Washington D.C. bureau. She was previously an editor for U.S.-China and a reporter covering U.S.-China relations.
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