It almost seems like things are going from bad to worse for Huawei with each passing week. The U.S campaign against Huawei is in full swing and while the company have given the impression that they’re holding the fort quite formidably in recent weeks, it looks like they’re finally starting to feel the sting.
Founder and CEO, Ren Zhengfei, came out this week and gave a bleak outlook of the short term prospects of his company. In spite of reporting a 39% increase in revenue in the first quarter of this year, the Chinese tech giants expect revenue of about $100 billion in 2019, which is a decline from last year’s roughly $107 billion. What’s $ 7 billion when you’ve got 100 more of those to play around with? Well, this is just for 2019. Ren expects the ban to cost them a total of $30 billion in revenue if we’re including next year as well. And it doesn’t end there.
In terms of international shipments, it was reported that Huawei are internally charting a drop in the number of smartphones shipped in volumes of anywhere between 40 million to 60 million this year alone. Ren even confirmed on monday that international smartphone shipments are set to drop by 40%. To put things in perspective, in 2018, international sales accounted for almost half of the total phones the company moved.
That’s a big hit. Of course, this is all in the wake of the U.S blacklist and sanctions against them. Even Ren himself has come out and said that Huawei had not expected that US determination to “crack” the company would be “so strong and so pervasive”
“We did not expect they would attack us on so many aspects. We cannot get components supply, cannot participate in many international organisations, cannot work closely with many universities, cannot use anything with US components, and cannot even establish connection with networks that use such components.”
Ren Zhengfei, Founder & CEO of Huawei
So, is this really a big deal in the long run for a company like Huawei?
Well, we don’t think so, and neither does Ren Zhengfei.
$30 billion in lost revenue is a lot of money, but it is also worth noting that that’s just a drop in the ocean for a company like Huawei, who are backed by the might of China. Huawei remains a behemoth in the mainland and with the major concern from the fallout with the US being global sales, the company does not expect any trouble in the Chinese market.
Mr. Ren said that while the company’s current loss is below 20% compared to last year, with a worse case of a 40% drop, the company still expects more than $100 billion in revenue this year.
In regards to the trade war, I’m of the opinion that the USA relies on China more than China relies on the USA and i’m pretty sure we will soon start to see just how badly this trade war will affect the Americans.
According to an analysis by the Peterson Institute for International Economics, China has begun lowering tariffs imposed on other countries which just goes to show that The Trump administration’s high tariffs have opened new doors for U.S. commercial rivals in China.
“Trump’s provocations and China’s two-pronged response mean American companies and workers now are at a considerable disadvantage relative to both Chinese firms and firms in [other] countries. China has begun rolling out the red carpet for the rest of the world. Everyone else is enjoying much improved access to [the country’s] 1.4 billion consumers.”
Chad Bown, a senior fellow at the Peterson Institute
This isn’t even a full flex from China. They’ve yet to retaliate in a like for like manner by outright banning Apple products from China, though they have foreshadowed that they’ll be coming up with a blacklist of unreliable entities. There’s even been talk of US companies trying to ease the ban on Huawei. It’s a real mess right now and all I know is that should this trade war continue, it could possibly open up the equivalent of a Pandorra’s box of retaliation from both ends, with no real winners in sight.
