Huawei’s US issues could cost $10bn

Huawei said today the impact of US trade restrictions on its business will be less than what it initially feared, though the curbs could push its smartphone unit’s revenue lower by about $10bn this year.

Huawei’s $100bn business has been hit hard since mid-May after Washington added the world’s second-largest smartphone maker to an Entity List that threatens to cut off its access to essential US components and technology.

In its first assessment of the impact of the restrictions, Huawei founder and CEO Ren Zhengfei said in June the blacklisting would hit the company’s revenue by $30bn, leaving it without any topline growth for 2019.

‘It seems it is going to be a little less than that. But you have to wait till our results in March, Eric Xu, Huawei’s deputy chairman, said at a news conference to introduce new artificial intelligence chips at its headquarters in Shenzhen.

Huawei’s consumer business group, which includes the smartphones business, is developing an operating system of its own in preparation for the worst case scenario of being stripped of essential Google Android services is doing ‘much better this year than initially feared, Xu said. ‘But a reduction of more than $10bn could happen, he added.

Spurred by promotions and patriotic purchases, Huawei’s smartphone sales in China surged by a nearly a third compared to a year ago to a record high in the June quarter, helping it more than offset a shipments slump in the global market.

Huawei said last month the consumer business group turned in revenue of 221bn yuan in the first half of 2019.

In a temporary relief to Huawei, Washington said this week that it will extend by 90 days a reprieve that permits Huawei to buy from US firms in order to supply existing customers, while adding more than 40 of Huawei’s units to its economic blacklist.

Xu said the reprieve was ‘meaningless to Huawei, whose employees are ‘fully prepared to live and work with the ban.

Huawei, which has been developing its own chips to reduce its reliance on foreign technologies, reiterated yesterday that its chips, including a new AI chipset it launched yesterday, called the Ascend 910, are for its own use and it does not aim to become a chip vendor.

‘We are open to discussing partnerships with AI chipset development companies so there are chipsets of various kinds that could be used in Huawei products.

So, positioning our chipset business as a standalone is a scenario that is not going to happen, Xu said.

Huawei said it was no longer able to work with US chip designers such as Cadence Design Systems and Synopsys due to the trade restrictions, but the company has alternatives.

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