BEIJING (AP) – For nearly a decade, Huawei continued to grow global sales as Washington told U.S. phone companies not to buy its network equipment and to lobby allies to defraud China’s first global tech brand as a security threat.
Focusing on Europe, Asia, Africa and China’s booming market, Huawei became the largest manufacturer of switching equipment and a major smartphone market. When the White House denied access to American components and the popular music of Google and other smartphone services, Huawei unveiled its own processor chips and app development. Last year, it increased 19% to $ 123 billion.
No, Huawei Technologies Ltd. has suffered seriously as Washington intensifies a campaign to close the door on access to foreign markets and components in its escalating feud with Beijing over technology and security.
European and other phone carriers that bought Huawei gear despite US pressure are removing it from their networks. Huawei got a flicker of good news when it outperformed competitors Samsung and Apple as the No. 1 smartphone brand in the quarter that ended in June, thanks to sales in China, but demand abroad is falling.
“Huawei is losing market share dramatically outside of China,” said sector analyst Paul Budde. “Their international position is likely to get worse or better.”
Last week, the Department of Commerce announced in May announced rules that would prevent non-US companies from using U.S. technology to make processor chips and other components for Huawei without a government license.
The president of Huawei’s consumer business, Richard Yu, says it’s popping up with chips for smartphones. Yu said since September 15, contractors will be forced to stop making Kirin chips made by Huawei engineers and used in their most advanced handsets.
“This is a huge loss for us,” Yu said at an industry conference, China Info 100, on August 8.
Yu did not say how sales could be affected. Huawei declined to comment on how it responded.
Huawei is leading the way with a growing list of Chinese techs targeting the Trump administration as security risks in an initiative called “Clean Networks.” It wants countries to dismantle themselves as suppliers to telecom systems, submarine cables and smartphone app stores.
The White House has banned unsolicited transactions with popular Chinese-owned social media apps TikTok and WeChat. Washington is pushing the owner of TikTok to sell the short video app.
In June, the Pentagon added Huawei and video storage company HikVision to a list of companies it said were owned or controlled by the ruling Communist Party’s military wing.
Last year, the Chinese owner of Grindr was instructed to sell the dating app.
Huawei is almost ready. It says sales will rise 13% to 454 billion yuan ($ 65 billion) in the first half of 2020. And China is one of the largest markets. But after spending a decade and billions of dollars becoming a leader in next-generation technology, the company, which says it serves 45 of the top 50 phone carriers, is threatening to shut down many major brands .
That is a setback for the Communist Party’s ambition to make China a global tech leader.
Western companies and consumers may also lose access to Huawei’s creativity and networking equipment, which can cost 30% less than that of its rivals Ericsson AB of Sweden and Finnish Nokia Corp.
US, European and Japanese suppliers of processor chips and other technology are losing billions of dollars in potential sales to Huawei.
“It does not benefit any country to exclude Huawei,” said Nikhil Batra of IDC.
Huawei, founded in 1987 by former military engineer Ren Zhengfei, denies that it could help Beijing spy. Chinese officials lament that Washington is calling for false security fears, without proof, to block a competitor for American tech companies.
The Trump administration is increasing pressure on Europeans and other allies, including by threatening to withhold parts of intelligence if they allow Huawei into next-generation, like 5G, networks.
Huawei’s US market has evaporated after the company and Chinese rival ZTE Corp. were declared in 2012 security threats by a congressional panel. Small, rural carriers use even lower costs of Huawei equipment, but Washington is urging them to stop.
5G will expand networks that support self-driving cars, factory robots, remote operation and other futuristic applications. This makes 5G more intrusive and increases the cost of potential security breaches.
U.S. officials say buying a 5G network from China is too risky because suppliers need round-the-clock access for repairs and upgrades. “Clean Networks” mentions Huawei as part of the “Communist Party surveillance state.”
“We call on all freedom-loving nations and companies to join the Clean Network,” said Secretary of State Mike Pompeo.
Last year, Huawei raced to remove U.S. components from its products after President Donald Trump blocked access to U.S. processor chips and other technology including Google services. Huawei, ranks this year as no. 6 on Boston Consulting Group’s list of the most innovative global companies, said sales continued unabated.
The White House’s restrictions on using American technology to produce chips and other components for Huawei are more painful.
Huawei relies on vendors such as Taiwan Semiconductor Manufacturing Co., the largest manufacturer of the contract for chip. TSMC said this week that it is still studying the new rules.
The Communist Party has fought back by threatening unspecified consequences against countries blocking Huawei’s market access.
Following the latest sanctions, the State Department called on Washington to “stop suppressing Chinese companies.”
“The more hysterical the American repression of Huawei and other Chinese companies, the more evidence of the success of these companies and the hypocrisy and arrogance of the United States,” said a spokesman for the ministry, Zhao Lijian.
The party is also launching a decades-old campaign to build China’s own chip-making industry. This month, Beijing announced new tax breaks for semiconductor manufacturers.
In Europe, which delivered a quarter of Huawei’s sales in 2019, Germany and France are deciding what role it can play in 5G. Britain agreed to a limited presence in January, but changed course in July and banned Huawei from its mobile networks.
“There is a bit of panic” among European carriers, Budde said. “There are hectic negotiations” with other suppliers.
British mobile carrier BT and Vodaphone Group PLC are removing Huawei from their European networks.
Vodafone has warned that the rollout of 5G in Europe could be delayed by a maximum of five years if other governments impose UK-style limits.
“It would be very disruptive,” CEO Nick Read said in February.
Australia has banned Huawei from 5G networks. Japan, Taiwan and others restrict use of Huawei technology.
U.S. officials promote “trusted suppliers” including Ericsson and Nokia, Huawei’s only major competitor. U.S. officials say Washington may be able to pay Brazil and others for Western equipment to prevent Huawei.
The United States, Australia, Japan, and other governments are discussing how to reduce confidence in China. A bill for the US Congress would spend up to $ 1 billion to develop a software-based 5G to operate over traditional networks.
Huawei celebrated, praising its own ‘exceptional durability’, when Canalys announced that it had become the top-selling smartphone brand for the first time.
But those profits came from the domestic market. Sales outside China fell 27% from a year earlier.
Huawei has increased sales points in Russia, Turkey and other markets that are smaller but friendly to Beijing, said Ben Stanton of Canalys.
Those are the “biggest opportunities if the main bloc of Western countries rejects them,” he said.
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