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Huawei says U.S. ban hurting more than expected, to wipe $30 billion off revenue

Published Jun 17, 2019 12:46PM ET
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© Reuters. A Huawei company logo is seen at the company headquarters in Shenzhen
 
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By Sijia Jiang

HONG KONG (Reuters) - China's Huawei Technologies Co Ltd has taken a harder-than-expected hit from a U.S. ban, the company's founder and CEO Ren Zhengfei said, and slashed revenue expectations for the year.

Ren's downbeat assessment that the ban will hit revenue by $30 billion, the first time Huawei has quantified the impact of the U.S. action, comes as a surprise after weeks of defiant comments from company executives who maintained Huawei was technologically self-sufficient.

The United States has put Huawei on an export blacklist citing national security issues, barring U.S. suppliers from selling to the world's largest telecommunications equipment maker and No.2 maker of smartphones, without special approval.

The firm has denied its products pose a security threat.

The ban has forced companies, including Alphabet (NASDAQ:GOOGL) Inc's Google and British chip designer ARM to limit or cease their relationships with the Chinese company.

Huawei had not expected that U.S. determination to "crack" the company would be "so strong and so pervasive", Ren said, speaking at the company's Shenzhen headquarters on Monday.

Two U.S. tech experts, George Gilder and Nicholas Negroponte, also joined the session.

"We did not expect they would attack us on so many aspects," Ren said, adding he expects a revival in business in 2021.

"We cannot get components supply, cannot participate in many international organizations, cannot work closely with many universities, cannot use anything with U.S. components, and cannot even establish connection with networks that use such components."

Huawei, which turned in a revenue of 721.2 billion yuan ($104 billion) last year, expects revenue of around $100 billion this year and the next, Ren said. This compares to an initial target for a growth in 2019 to between $125 billion and $130 billion depending on foreign exchange fluctuations.

TRADE WAR

The Trump administration slapped sanctions on Huawei at a time when U.S.-China trade talks hit rough waters, prompting assertions from China's leaders about the country's progress in achieving self-sufficiency in the key semiconductor business.

Huawei has also said it could roll out its Hongmeng operating system (OS), which is being tested, within nine months if needed, as its phones face being cut off from updates of Google's Android OS in the wake of the ban.

But industry insiders have remained skeptical that Chinese chip makers can quickly meet the challenge of supplying Huawei's needs and those of other domestic technology firms.

Negroponte, founder of the Massachusetts Institute of Technology Media Lab, said the U.S. ban was a mistake.

"Our president has already said publicly that he would reconsider Huawei if we can make a trade deal. So clearly that is not about national security," he said.

"It is about something else," Negroponte added.

Huawei's smartphone sales have, however, been hit by the uncertainty. Ren said the firm's international smartphone shipments plunged 40%. While he did not give the time period, a spokesman clarified the CEO was referring to the past month.

Bloomberg reported on Sunday that Huawei was preparing for a 40-60% drop in international smartphone shipments.

The CEO, however, said Huawei will not cut research and development spending despite the expected hit from the ban to the company's finances and would not have large-scale layoffs.

($1 = 6.9239 Chinese yuan)

Huawei says U.S. ban hurting more than expected, to wipe $30 billion off revenue
 

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Comments (8)
kutlwano marite
kutlwano marite Jun 18, 2019 11:00AM ET
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once again the need for African super power to tame these beasts arises.
Nuin Salleh
Nuin Salleh Jun 18, 2019 1:27AM ET
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""Our president has already said publicly that he would reconsider Huawei if we can make a trade deal. So clearly that is not about national security," he said." ---- What???
Matt luck
Matt luck Jun 17, 2019 3:12PM ET
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I get spam from China state actors saying they will win this war. I'm a Democrat but I'm 100% on board fighting China and Russia by all means necessary. Might be the only thing I agree with Trump on.
Rob Mac
Rob Mac Jun 17, 2019 2:25PM ET
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Its much worse than what is being talked about. Like him or not Trump is saving us from financial ruin. It will get worse before it gets better. The bad actors must be brought under control and $$$ is all they understand.
Patron Silver
Patron Silver Jun 17, 2019 2:25PM ET
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tired of hearing 'get worse before it gets better'. This is the most asinine phrase to describe a trade war. Are you parroting some talking head on fox news?
Richard Le
Richard Le Jun 17, 2019 10:27AM ET
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Yes! Yes! Yes! let's liberate 1.4 billions chinese from communism.
bomz bomzov
bomz bomzov Jun 17, 2019 10:27AM ET
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70 years ago, the United States was the undisputed leader due to democracy, freedom and the free market principles. 50 years of free democracy export has led to increased competition, even in communist China uses elements of the free market.
Steve Bucher
Steve Bucher Jun 17, 2019 10:06AM ET
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Negroponte is a traitor by his propoganda of deceit. Trump agreed that if a trade deal was done then the deal would include means of verification so that the national security interest of the US would not be compromised. This is a prime example of a US university research head selling out to China by using deceitful propoganda. I am an independent not a Trump supporter but I will sit idle while our country is being manipulated.
Steve Bucher
Steve Bucher Jun 17, 2019 10:06AM ET
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Correction:I am an independent not a Trump supporter but I will NOT sit ideal while our country is being manipulated.
bomz bomzov
bomz bomzov Jun 17, 2019 10:06AM ET
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Rob Mac
Rob Mac Jun 17, 2019 10:06AM ET
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For sure and not just here they are everywhere. Its shady busines. All the more reason to not do business with corrupred communists. Their aggession is astonishing too. They exploit the free world. At least their English is horrid so we know who they are lol
Ng Zen ng
Ng Zen ng Jun 17, 2019 8:59AM ET
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The whole world is in moderation... but just mobile phone etc
Changyi He
Changyi He Jun 17, 2019 6:51AM ET
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Just 30 billion revenue dip from the next two years? SOXX already lost 100+ billion market value compare to the rest of nasdaq. This war of attrition will ******US chip makers. No wonder Qualcomm and Intel lobbied against this ban
Brady Murray
Brady Murray Jun 17, 2019 6:51AM ET
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Only 30 B so far. Lots more pain to come for the China spy agency.
Don Johnson
KingLabrador Jun 17, 2019 6:51AM ET
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He isn't being honest about the revenue hit, it's much more than he's letting on.. . . Chinese companies, like the state, don't give out honest figures on anything. The guy wouldn't even take questions from American reporters at the panel, once he was asked a difficult question they simply ended the Q&A, it's embarrassing.
bomz bomzov
bomz bomzov Jun 17, 2019 6:51AM ET
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Don Johnson  he live in communist concentration camp, and must think about words
Singh Raju
Singh Raju Jun 17, 2019 6:51AM ET
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Don Johnson  these are actually cheaters & looters Trump must ban Oppo vivo one plus , xiaomi..
 
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