Home / Business / The U.S. blacklist resulted in a $ 12 billion drop in sales

The U.S. blacklist resulted in a $ 12 billion drop in sales

Visitors come to the Huawei booth on the first day of the Mobile World Congress in Barcelona on February 27, 2017 in Barcelona.

Lluis Gene | AFP | Getty Images

Huawei reported slower earnings growth in 2019 when the U.S., which blacklisted the Chinese technology giant, weighed on its business.

Meanwhile, a senior executive at CNBC said the effects of the corona virus on its business are unclear.

Revenue last year was 858.8 billion yuan ($ 1

23 billion), an increase of 19.1% over the previous year. Net income was 62.7 billion yuan ($ 9 billion), an increase of 5.65% over the previous year. That’s slower than earnings growth of 25% in 2018 and 28% in 2017.

Eric Xu, rotating chairman at Huawei, told CNBC in an interview on Tuesday that the company had missed its own goals. At the beginning of 2019, Huawei forecast sales of around 858.8 billion yuan, or $ 123 billion, which it ended the year with. In April of last year, however, it prepared to revisit that target to $ 135 billion.

In May, however, the company was placed on the United States entity list, a blacklist that prevents American companies from doing business with it. This included companies like Google, which were no longer allowed to license their Android operating system to the Chinese company.

Xu blamed the blacklist for the $ 12 billion shortfall.

“We haven’t met our revised targets, the $ 135 billion mark. We were short of $ 12 billion. This was the result of US sanctions,” Xu said Tuesday, according to a CNBC translation of his comments in Mandarin .

“We had to address the challenges of continuity of supply and address the challenges of supply in the short term to deliver certain products to our customers. We also had to increase our investment in research and development (research and development).” Xu added and talked about why net earnings growth slowed. This was after a translation by Huawei.

Huawei faced a difficult year in 2019 as the U.S. continued its campaign to try to block the company from rolling out 5G worldwide. Next-generation cellular networks, known as 5G, promise super-fast data speeds and the ability to support future technologies such as driverless cars.

Washington has claimed that Huawei is a national security risk and argues that its network technology could be used by China for espionage. Huawei has repeatedly denied the allegations.

Consumer weakness after Google block

A large part of Huawei’s decline in sales was attributable to the Consumer business area, which accounted for over 54% of the company’s total sales in 2019. The company overtook Huawei’s core business with network devices and became the largest division in 2018.

“It is Huawei’s consumer business that has suffered the most damage,” said Xu.

The unit, which includes smartphones and laptops, had sales of 467.3 billion yuan or $ 66.93 billion in 2019. That was $ 10 billion less than Huawei’s target.

“We’re looking at the consumer business. If everything continues without interruption in the past year, the revenue from the consumer business would be at least $ 10 billion more than what we actually achieved,” he added.

He attributed this again to the impact of the blacklist in the US, which meant that licensed Google apps could not be available on smartphones. In China, where Google services are banned and Chinese consumers have alternatives, that’s not a big deal. In international markets, however, Huawei sells its phones with Google’s Android operating system, which contains apps such as Gmail or Google Maps.

Huawei has now launched two flagship smartphones without a licensed Google Android – the Mate 30 last year and the P40 earlier this month.

The Chinese technology giant was able to become the world’s second largest smartphone manufacturer by market share in 2019 and overtake Apple, primarily by doubling its efforts in China.

“China contributed to around three out of five smartphones sold for Huawei worldwide in 2019, and this will continue to increase in 2020,” Neil Shah, research director at Counterpoint Research, told CNBC.

Coronavirus care ‘fully restored’

The outbreak of the corona virus in China earlier this year forced the country to essentially shut down. As a result, companies were closed for a long time and factories were closed.

Huawei relies on manufacturing in China, from network devices to smartphones. However, the company says that its “manufacturing activities” in China are now “fully recovered”, although it is too early to know the exact impact of the corona virus on its business.

“Now we are able to assess the impact of the pandemic on our market performance in China. Given the ongoing spread of the pandemic around the world, it is currently very difficult to say how big it is. The impact on our business could be” Xu said.

When asked whether Huawei will be able to meet customer demand, Xu said that this should be possible in the short term, but “if the coronavirus pandemic continues and cannot be contained globally and some of our suppliers stop manufacturing to adjust”. We will get into trouble in the long run. “

Source link