Foxconn ceases production on Huawei phones due to US blacklist

On Monday, Huawei CEO Ren Zhengfei made a grim prediction about his company’s future during a panel discussion at its Shenzhen, China headquarters. “In the next two years, I think we will reduce our capacity, our revenue will be down by about $30 billion compared to the forecast,” noted the executive.

Zhengfei named the United States’ ongoing campaign against his firm as the reason for its steep financial decline.

Huawei’s Rapid Downfall

The corporation’s current outlook is in stark contrast to its position earlier this year. In Q1 2019, Huawei posted record revenues and managed to unseat Apple as the world’s second-largest smartphone company. The firm’s explosive growth was primarily due to its international business expansion. Furthermore, the company made almost half of its handset sales to overseas markets in 2018 and Q1 2019.

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However, its fortunes changed drastically in May when the U.S. Department of Commerce prohibited American companies from doing business with the conglomerate. The federal government contends Huawei’s price can’t be trusted because they are subject to subversion by the Chinese government.

Huawei has denied Washington’s allegations, but the blacklist caused it to lose key relationships with suppliers like Google and Intel. Subsequently, several international telecoms have “paused” their relationship with the corporation. In late May, the firm took new legal action to reverse the Trump administration’s ban, but the case is still pending.

While the company seeks an outside remedy to its problems, its core business is collapsing. At the Shenzhen meeting, Zhengfei said the firm’s overseas phone sales fell by 40 percent between May and June.

Ripple Effects

Washington’s blacklisting of Huawei has had broader effects than just devastating the finances of the Chinese conglomerate.

Earlier this month, The Burn-In reported Idaho-based memory chip maker Micron was reducing staff as a result of the Sino-American trade war. Previously, the firm made 13 percent of its income from the component supply deal with Huawei. But because of the blacklist, it had to end that relationship and reduce the size of its workforce.

Furthermore, Chinese manufacturing giant Foxconn recently froze production on Huawei handsets. If the company’s sales numbers continue falling, Foxconn might also start making workforce redundancies.

Moreover, it’s worth noting Washington’s blacklisting of Huawei will likely harm Microsoft. For the last few years, the Chinese tech giant has worked to become one of the world’s biggest laptop and tablet manufacturers. However, because of the federal government’s ban, the firm won’t be able to install the Windows operating system on its forthcoming products.

As a result, Microsoft will lose out on Huawei’s licensing fees.

Additionally, the smartphone maker’s understandable new concentration on its domestic business will likely affect American corporations like Apple.

Last month, Chinese consumers began ditching their iPhones for Huawei products as a form of patriotic protest. The Chinese consumer backlash found Apple losing 3 percent of its market share to its Sino rival in Q1 2019. As the California-based tech giant derives 20 percent of its revenue from China, a sales slump in the region could be disastrous.

Despite its current problems with Washington, Huawei does have another lucrative international market to exploit. On June 6, the firm announced it would develop 5G infrastructure for MTS, Russia’s largest wireless carrier.

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