Last month, Huawei CEO Ren Zhengfei forecasted his firm would lose $30 billion in the next two years due to its disputes with the U.S. government. However, judging by the Chinese telecommunication company’s second-quarter revenue, its predicted downturn might be delayed. On Tuesday, the conglomerate reported earning $32.2 billion in Q2 2019.
As such, the firm managed to beat its record $26.8 billion income by 20 percent. Huawei’s financial performance is remarkable considering the Trump administration blacklisted the company at the end of May. As a result, the corporation’s U.S. software and component suppliers stopped doing business with the Sino corporation. Subsequently, Japanese and British telecoms delayed the local release of the firm’s new handsets.
Huawei’s new financial reporting indicates it compensated for its international trade problems with a surge in its domestic wireless business.
Skyrocketing Chinese Smartphone Sales
In the second quarter, Huawei’s already strong domestic smartphone sales took off. In Q2 2019, the company sold 59 million handsets, a 24 percent year-on-year increase. The firm sold 64 percent of those handsets, 37.76 million mobile devices, in China.
That means the corporation improved its domestic smartphone sales by 31 percent year-on-year. Now, Huawei dominates 38 percent of the Chinese smartphone market. Notably, the firm increased its revenue and market share in a period in which its home market contracted by six percent.
Huawei Chairman Liang Hua attributed his company’s resurgence to Washington’s trade sanctions. “In a way, the US government’s foray against Huawei has helped us understand our objectives better,” said the executive. “This pressure has brought us together and reinvigorated the company.”
Huawei’s Gain is Apple’s Loss
Market research firm Canalys offered a less Capra-esque explanation for Huawei’s domestic market surge. Its analysts told CNBC the conglomerate grew its Chinese business due to a two-pronged strategy.
First, the phone maker ramped up its marketing spending to woo Sino consumers away from rival brands like Oppo, Vivo, and Xiaomi. Accordingly, all three tech companies experienced double-digit sales declines in the second quarter.
Huawei also played upon Chinese nationalism to bolster its domestic market performance. According to Canalys, the corporation’s retail partners pushed its smartphones as the mobile devices of choice by patriotic citizens. As a result, the firm’s biggest foreign competitor, Apple, saw its Sino business fall by 14 percent in Q2 2019.
Since Apple derives 20 percent of its overall revenue from China, its forthcoming quarterly report will likely reflect a steep plunge in its device segment.
With Washington reportedly ready to loosen its restrictions on Huawei, the company might avoid significant revenue shortfalls through 2019.