Back in early 2019, Huawei had been hit with a ban from the U.S., that placed the company in the “Entity List.” Since then, the company’s operations have been severely hampered while it has also lost support from Google, due to the blacklist. While the company did launch its own alternatives, it seems the transition wasn’t as simple as they wished, with the company reportedly losing out on billions of dollars.
According to Eric Xu, the Deputy Chairman and Rotating Chairman of Huawei, the company lost out on nearly 12 billion U.S. Dollars in 2019. Huawei’s previous projections regarding the year had an estimated 135 billion U.S. Dollars. However, the company has fallen just short of the amount, which was directly related to the various “U.S. sanctions” that were against the Chinese tech giant.
A significant chunk of the shortfall arrived from Huawei’s consumer division that accounts for over 54 percent of the company’s total sales in 2019. Xu stated that “it is the consumer business of Huawei that was hurt the most.” In other words, smartphones, tablets, laptops and more were affected by the U.S. blacklisting. Reportedly, these consumer-grade electronics products brought in 66.93 billion U.S. Dollars in revenue in 2019, which was about 10 billion U.S. Dollars less than what the company has initially been targetting.
For those unaware, after the U.S. ban, Huawei could not trade or buy products/services from US-based companies. This caused it to lose Google’s mobile services, which in turn meant that Huawei smartphones now had to ship with vanilla Android. Thus, this caused the development of the HMS (Huawei Mobile Services), but unfortunately, the platform is still in its nascent stages. Huawei’s partnership with Google also meant that both companies profited greatly from one another, but that has since been terminated.
Some analysts reckon Huawei’s reliance on its domestic market has left it overexposed to the coronavirus lockdown, which kept swaths of the Chinese consumer market home during the first quarter of the year. However, Shah says Huawei performed well with shipments buoyed by online sales of its youth-focused Honor brand.
“Since the lockdown started in Wuhan, Huawei ramped up production in the last ten days of January and increased its online strategy. They have enough stock to survive March, and already the China smartphone market is back to normal,” Shah says.
The Trump administration recently issued a fifth reprieve on Huawei’s addition to the entities list—which would require U.S. companies to seek permission before trading with the company—but continues to threaten its complete implementation. The U.S. Commerce Department placed Huawei on its entity list in May last year because the Trump administration sees it as a security threat.
“I think the Chinese government will not just stand by to watch Huawei get slaughtered on the chopping board,” Xu said during the press conference, adding that he believes the government would take countermeasures, potentially even banning U.S. components from China’s 5G networks.