Huawei’s phone division set to lose $10 billion following US ban

Huawei is set to lose about $10 billion from its phone division. This was revealed during a news conference held at Huawei’s headquarters in Shenzhen, China last Friday. The loss is said to follow the ban imposed by the United States on the Chinese OEM this year.

While this is seen as a significant loss for the Chinese company, its impact is said to be less than originally predicted. In June, CEO Ren Zhengfei anticipated the company expects to lose as much as $30 billion following US trade restrictions.

However, Ren is not succumbing to the pressure. In his June interview, the Huawei CEO said: “I don’t see that problem, because, in the Chinese market, the consumer business has not seen a decline.”

“It’s just that there might be declines overseas. In the worst case, 40%, but now it’s less than 20%. And that kind of decline is also changing. As I look at the declines in the consumer business, that would be about 10% roughly, so it’s not that big” added Ren.

As the latest prediction by Huawei has been revealed, its Deputy Chairman Eric Xu told reporters present during Friday’s news conference that the estimates made in June about the company phone division losses would be a little less than that.  He then added that people should wait until the company’s results are out in March.

For 2018, the Chinese company’s Consumer Business Group reported revenue growth of $49.2 billion. In the first half of 2019, Huawei generated a revenue of $31.2 billion. This includes revenue gained from its smartphones business.

The record-high number in June was said to be due to the increase in the number of smartphones sold in China. Compared to the same quarter last year, sales went up by a third in Q2 2019. This increase was said to be driven by strong promotions and patriotic purchases. The surge in China curbed the shipment slowdown of Huawei in the global market.

Over the past year, Huawei has found itself in the middle of scrutiny and a series of controversies. In December 2018, Huawei’s chief financial officer, Wanzhou Meng, was detained in Canada upon the request of U.S. authorities.

Meng is not only the company’s CFO but she is also the daughter of CEO Ren Zhengfei. She is facing extradition to the United States following charges of bank and wire fraud. There is an allegation that Huawei had conducted business with Iran in violation of U.S. sanctions.

Huawei has also been dealing with issues regarding their 5G technology.  The U.S. has warned European countries from using Huawei’s technology in its 5G rollouts.

In May 2019, President Donald Trump issued an Executive Order banning Huawei from U.S. communication networks, effective immediately. The government of the United States alleges that Huawei is close with the Chinese government and that its equipment might be used to spy on countries and companies.

The allegations were denied by Huawei. As a response to the ban, the Chinese company warned that this would have a significant effect on American companies that it does business with economically.  Huawei also said that this would affect tens of thousands of jobs in America and the global supply chain.

In response to the U.S. government’s orders, Google suspended its business dealings with the Chinese tech-giant including updates to its Android OS and restrictions to services like the Play Store and Maps. 

However, a day after this announcement was made, the US Commerce Department announced that it has given Huawei a temporary general license that would allow the Chinese company to work with existing networks and issue updates to current phones, tablets, and other devices.  The license issued expired on August 19 but the reprieve was extended for another 90 days.

Despite dealing with multitude issues, Huawei has been developing its chips to cut back relying on foreign technologies.  On Friday, it has launched its new AI chip called Ascend 910.

Earlier in the month, it has unveiled its OS named Harmony.  The OS is said to be the company’s backup in the event the situation between the United States and China escalates and it can no longer trade with US companies.

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