Huawei’s profits jump by 25%, despite US efforts to curtail its business

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Shenzhen, China (CNN)Huawei made bumper profits in 2018, but reported negative growth in its carrier business — a potential sign of strain in the face of a US-led campaign against the company.

Sales increased by 19.5% to about 721 billion yuan ($105 billion) —missing earningsforecast by the company earlier this year.
Huawei is the world’s largest telecommunications equipment maker, and a leading smartphone brand that is growing faster than Samsung (SSNLF) and Apple (AAPL).
    But growth in its carrier business, the segment that provides telecommunications products including 5G equipment to carriers around the world, dropped by 1.3%. At a press conference on Friday, rotating chairman Guo Ping said the decline was mainly because the company upped investment in research and development last year, as well as investment cycles in the global telecom industry.

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    The United States has been leading an effort to curb Huawei’s ambitions to become the global leader of next generation wireless technology, or 5G.
    Washington has been urging allies to restrict or ban the use of Huawei equipment in their 5G networks, alleging Beijing could use the company’s products to spy on other nations. Huawei denies that any of its products pose a national security.
    The US campaign is having mixed results. Announcing its approach on Wednesday, the European Commission said that EU member states would conduct 5G risk assessments by June, and a wider security review by December. It made no mention of a blanket ban on Huawei equipment.
    The United Kingdom, however, could be moving closer to the US position on the Chinese tech company. UK security officials delivered a harsh rebuke to Huawei on Thursday, raising new concerns over its engineering work and questioning the company’s commitment to security.
    Guo acknowledged the geopolitical headwinds on Friday, emphasizing the company’s strong track record in cybersecurity.
    He also addressed concerns about the company’s supply chain.
    US criminal charges against Huawei and its chief financial officer Meng Wanzhou raise the possibility that Washington could ban American companies from doing business with the Chinese tech company. US prosecutors accuse Huawei and Meng of violating US sanctions on Iran. Huawei and Meng deny the charges.
    Last year, Washington blocked American companies from selling another Chinese tech firm, ZTE, vital components. The ban, which brought the company to its knees, was tied to ZTE breaking Iran sanctions.
    Like ZTE, Huawei buys key parts for its telecom equipment from US companies.
    Asked by CNN if the company could survive such a ban, Guo hinted that US companies could be more hurt than Huawei by the move.
    “Huawei will ensure global supply continuity,” Guo said, through a translator on Friday. “All of our partners, including partners from the US, they will also benefit from Huawei procurement and collaboration with us.”
    For the first time, revenue from Huawei’s smartphones and consumer electronics business surpassed sales generated from the company’s telecom equipment segment. The consumer business now accounts for nearly half of the company’s total sales.
    Huawei sold more than200 million smartphones in 2018, boosting revenue in the company’s consumer business to about 349 billion yuan ($52 billion) — an increase of more than 45%.
      Richard Yu, CEO of Huawei’s consumer business, said earlier this year that Huawei will displace Samsung as the world’s largest smartphone seller by 2020.
      Huawei sold fewer phones than Samsung and Apple last year, but it was the only smartphone maker to report sales growth, according to data from market research firm IDC. Huawei smartphone shipments grew by 33% in 2018, compared with an 8% decline for Samsung and a 3% dip for Apple.

      Read more: www.cnn.com

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