Huawei shrugs off US sanctions as sales grow 18%

Revenues hit $122 billion in 2019 as Chinese technology group rebuilt supply chain. Photo / Getty Images

Huawei has reported resilient sales in 2019, in spite of an intense effort by the Trump administration to weaken the Chinese technology group and shut it out of western markets.

Revenues this year surged 18 per cent, Huawei said on Tuesday, little changed from 2018's 19.5 per cent growth rate.

After the US banned exports to the company in May, Huawei's founder Ren Zhengfei predicted annual revenues would remain flat from 2018 to the end of 2020, at about Rmb721bn ($100bn).

But in a New Year's message, the company's chairman Eric Xu wrote that sales grew over the year to $122bn, a performance that analysts attribute in part to a rapid reconfiguration of Huawei's supply chain.

Washington has lobbied its allies to ban Huawei from their next generation of telecoms networks, alleging that its equipment poses a threat to privacy and national security.

Meng Wanzhou, the country's chief financial officer and daughter of Mr Ren, was detained in Canada in December last year on US charges related to violating Iran sanctions.

But there has been a mixed reception from US allies. Huawei on Monday secured a major victory in India, the world's second-largest telecoms market, which has agreed to let the company participate in trials of its 5G spectrum.

"We have our full confidence in the Modi government to drive 5G in India," said Jay Chen, chief executive of Huawei India. "Huawei is always committed to India."

Nonetheless, Mr Xu played down expectations for 2020, saying the company would not grow as rapidly. "It's going to be a difficult year for us," he wrote, adding that Huawei would remain on the US list of sanctioned companies.

The ban applies to all exports of US-origin technology to Huawei without a licence. But US companies have taken advantage of exemptions in the sanctions regime that allow it to sell goods to Huawei that are produced in a third country.

"Huawei has managed well for two reasons: it has replaced US components remarkably quickly; and the entity list designation still permits the company to buy goods from many US companies," said Dan Wang of Gavekal Dragonomics, a Beijing-based research firm. "There's a risk, however, that the US government escalates sanctions and removes the latter option."

Huawei announced that it shipped 240m smartphones in 2019, up from 206m the previous year. Analysts warn that the company faces its toughest challenge in the overseas smartphone market, where Huawei's new phones are sold without access to the Google Play app store because of US sanctions.

The brand has enjoyed high growth in the Chinese market, where Google's apps are banned.

"In 2020, we need to go all out to build the HMS [Huawei Mobile Services] ecosystem", wrote Mr Xu. The company is trying to attract developers to create apps for its new overseas app store, but has not been able to emulate the vast range available on Google's platform — with users complaining in particular of the lack of an alternative to Google Maps.

Written by: Yuan Yang

© Financial Times 2019