In August, Huawei CEO Ren Zhengfei said U.S. sanctions against his company had pushed it into a “live or die moment.” Based on its recent financial reporting, the conglomerate has passed through the first stage of its crucible intact. On Wednesday, Bloomberg reported the Chinese telecommunications company saw its year-on-year revenue increase by 24 percent from January through September.
In addition to generating $86.1 billion in revenue in the first three quarters of the year, the firm also moved 185 million handsets. As such, Huawei is unquestionably the world’s second-largest smartphone manufacturer after Samsung. Provided the corporation doesn’t experience a sales downturn in the last three months of this year, it’s on pace to break the $107.13 billion income record it set in 2018.
Survive and Prevail
Huawei’s ability to survive and prevail in spite of U.S. sanctions is due to several smart strategic moves and lucky breaks.
For one thing, while the United States government has undermined the corporation’s reputation globally, it’s helped its brand domestically. In China, the firm branded itself as the smartphone maker of choice for patriotic citizens. Though financially debilitating, the company’s marketing efforts benefited from it being a target of the Trump administration.
Furthermore, Huawei has been very aggressive about establishing itself as the definitive 5G network equipment provider. Bloomberg reports the company now has 60 contracts to develop fifth-generation data services around the world. Moreover, despite the Trump administration’s strenuous objections, the firm’s best in class equipment hasn’t been banned in Germany or India.
Besides, despite the federal government banning American businesses from trading with the firm, Huawei has been able to purchase select components from U.S. semiconductor manufacturers. Both Micron and Qualcomm have resumed selling chips to the Sino company thanks to loopholes in the Commerce Department’s trade ban. Had the smartphone maker lost its entire U.S. supply chain, its late 2019 sales might’ve been much weaker.
Huawei’s January through September financial disclosure did not include a breakdown of its Q3 income. However, the firm’s first and second-quarter revenue reporting indicates it made around $27.1 billion in the period. Consequently, the conglomerate’s earnings declined by approximately 15.8 percent quarter-on-quarter.
As the Trump administration sanctions against the company began in May, the U.S. government’s actions did hurt the firm’s income. However, in June, Ren Zhengfei predicted the trade ban would cost his firm $30 billion over the next two years. At this point, the executive’s forecast seems overly negative.
Admittedly, Huawei losing access to Google’s Android ecosystem will undoubtedly hurt sales of its forthcoming handsets. However, if the firm can work out the kinks in its Harmony operating system, it might be able to mitigate the impact of that setback.
Also, unless U.S. authorities prove Beijing spies on foreign rivals using Huawei tech, its 5G equipment sales will remain robust. Not only are the conglomerate’s 5G networking components the best, but they are also often the most affordable.
Conversely, if Washington constrains Huawei’s supply chain or forces it out of specific key markets, its product superiority won’t matter. Right now, things are looking up for the Sino corporation. But the firm’s future is still uncertain.