China’s embattled telecoms giant Huawei reported growing sales of switches and phones in the past six months amid President Trump’s trade war with Beijing and his drive to cripple its business.
With the new fifth generation communications standard rolling out globally, demand for Huawei’s 5G hardware is overcoming the pressure from the Trump administration amid concerns about its ties to the Chinese military and the thefts of its customers trade secrets.
Figures released last week by the Shenzhen-based company show revenues of $58 billion in the first half of 2019, an increase of 23%. The company shipped 118 million smartphones, resulting in a 24% annual increase in sales; six out of 10 of the phones were sold in China.
Huawei, the world’s second-largest smartphone maker, chose to withhold results from the just-finishing second quarter. But a company press release accompanying the report declared that â€œoperations are smooth and the organization is sound as ever.â€
The company’s sales success is indicative of the Trump administration’s failure to persuade most of its allies to stop doing business with it. Demand for Huawei’s 5G hardware in China and other markets is overcoming concerns about the company’s viability. US companies, by contrast, are far behind Huawei’s development of 5G switches and phones.
Silicon Valley vendors are being hit by a sales slowdown, as are platforms for software development that enable companies in the United States and elsewhere to collaborate more efficiently.
Huawei Defies Pressure
Despite what Chinese executives described as â€œintense pressureOpens a new window â€ from the United States, Huawei signed 50 commercial 5G contracts in the first half of the year. Huawei also delivered 150,000 5G-ready base stations to companies and utilities across a range of sectors.
Among them are automobiles and energy, where 5G’s low-frequency transmissions provide the sensory backbone for autonomous vehicle tech and the devices that make up the Internet of Things. The company said it also made gains in cloud computing, artificial intelligence and in its data center and handset businesses.
In its first reported financials since being placed on the Commerce Department’s Entities List of banned trading partners, Huawei officials credited the sales surge to fifth-generation telecommunications technology rolling out in markets worldwide and efforts by the Chinese people to support it.
The company sells the network relays that take advantage of 5G’s wider spectrum of frequencies for optical and data transmissions.
US Companies Hurting
While a number of countries are reviewing Huawei’s participation in their 5G rollouts, only three, Australia, New Zealand and Japan, have restricted Huawei’s activities. In the interim, some American companies that do business with Huawei have begun to feel the pinch.
California-based chip designers AMDOpens a new window and Western Digital Corp.Opens a new window have ripped up partnership agreements with Chinese firms including Huawei. The ban is expected to cost the company’s American suppliers as much as $11 billion in 2019.
Data management specialist NetApp, which maintains a strategic alliance with Chinese computer maker Lenovo, issued revised guidance for its earnings last week. Company execs told analystsOpens a new window that key customers had cut their procurement spending by as much as 30% due to the trade war.
The trade war ballooned in the Spring when Trump imposed tariffs on $250 billion worth of Chinese goods, restricted Chinese investments and banned Huawei and other Chinese companies from doing business with U.S. companies on national security and intellectual property concerns.
Those moves were aimed at getting China to open its markets to US companies, protect American trade secrets and buy more farm products, none of which have yet happened.
Trump upped the ante last week after American and Chinese negotiators held inconclusive talks in Shanghai, adding $300 billion in mostly consumer goods to the tariff list.
China retaliated by suspending all purchases of US farm goods and letting its currency fall freely in markets against the dollar. That sparked a Wall Street selloff and prompted warnings in the United States that the trade war had now entered a dangerous new phase, with no end in sight.
While Trump insists that he’ll continue to play hardball amid the now-escalating trade war, the resulting uncertainty among US companiesOpens a new window to enter the 5G arena will surrender markets to foreign competitors.