Huawei first-half revenue surges 23 per cent as China telecoms giant fights off US tech ban impact

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Huawei Technologies said its revenue expanded by 23.2 per cent year-on-year in the first half of 2019, as the world’s largest telecommunications equipment vendor battles the effects of being added to a US trade blacklist earlier this year.

The Shenzhen company generated revenue of 401.3 billion yuan (US$58.3 billion) in the first six months of the year, up from 325.7 billion yuan during the same period in 2018, thanks to a jump in smartphone shipments and robust demand for its 5G equipment, the company announced on Tuesday.

The net profit margin was 8.7 per cent in the first six months. Huawei’s key business segments – consumer, carrier and enterprise – produced revenue of 220.8 billion yuan, 146.5 billion yuan and 31.6 billion yuan respectively.

Huawei managed to boost sales despite the effects of being included on the US Commerce Department’s Entity List, which prevents the company from buying American-made technology. Chairman Liang Hua said although mobile operations faced many difficulties as a result of the ban and the second half may see more impact, the company was confident about patching holes in its consumer business.

“There has been some impact on our business [from the US ban] such as intelligent computing and on our server and consumer business in non-China markets … but generally in the first half the impact has not been large,” Huawei’s chairman Liang Hua said in Shenzhen on Tuesday.

Liang added that Huawei’s smartphone business outside China has now recovered to 80 per cent of the sales level before it was added to the US Entity List on May 16.

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Huawei previously reported a 39 per cent year-on-year increase in revenue for the first quarter of 2019, indicating resilience in the face of US pressure to curtail its participation in the roll out of global 5G network infrastructure. However, analysts expect the US trade ban to gradually exert pressure on Huawei, as it feels the effects of losing key US technologies, including semiconductors and software, such as Google apps on its phones.

“If the US allows us to use [Google’s] Android OS on our smartphones, then this ecosystem is always our preferred choice,” said Liang. “If the US does not allow us to use it, we need to ready our own capabilities and ecosystem.”

Liang added the US ban had forced it to abandon some non-essential products but had not impacted its roll-out of 5G services. Huawei also recorded positive operating cash flow in the first half, according to Liang.

The US trade ban was estimated to have wiped out US$30 billion of sales growth this year, Huawei’s founder and CEO Ren Zhengfei said in an earlier interview, who also indicated that the US decision to relax the trade ban on Huawei will not have much impact on the company. US Commerce Secretary Wilbur Ross said earlier this month that Washington would allow American companies to sell their products to Huawei as long as these would not pose a threat to national security.

US President Donald Trump said last month that US sales could resume as he sought to restart trade talks with Beijing. However, clarity on exactly what the new US policy is towards Huawei has been slow to emerge. The president agreed at a meeting with the heads of top US technology companies to make “timely” decisions on requests by US firms to sell to Huawei, according to a White House statement last week.

Huawei plans to spend 120 billion yuan on research and development (R&D) this year as the company continues to invest in the future, Liang said in his speech on Tuesday. The chairman said he is confident that Huawei will enter a new period of development after overcoming short-term difficulties and challenges.

Huawei has secured 50 5G commercial contracts globally to date, 28 of which were signed in Europe. The Chinese company leads global 5G equipment sales. Finland’s Nokia and Sweden’s Ericsson had secured 43 contracts and 22 contracts respectively as of the end June, while Huawei’s crosstown rival, ZTE, has publicly announced 25 commercial deals.

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Smartphone sales, which have accounted for more than a half of group revenue due to the popularity of its two phone brands – Huawei and Honor – could see an increase of up to 30 per cent in global shipments this year, Ren said in a recent interview.

“Market share is not a goal we are pursuing proactively in our consumer business,” said Liang on Tuesday. “There won’t be one dominant player in China’s smartphone market as there is always going to be competition. Any consumer products that want to win market share will have to win over the hearts and meet the needs of consumers.”

Huawei surged ahead in China in the second quarter of 2019 to achieve the highest smartphone market share for any vendor in eight years, according to a report on Tuesday from industry research firm Canalys. It now has a market share of 38.2 per cent in China, compared to 27.6 per cent in the same period a year ago, on the back of shipping 37.3 million units.

Huawei has targeted a significant increase in its share of China’s smartphone and telecoms network equipment markets to help offset potential losses overseas because of US action, the Post reported in late June, citing people familiar with the matter.

This article Huawei first-half revenue surges 23 per cent as China telecoms giant fights off US tech ban impact first appeared on South China Morning Post

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