Huawei Defies US Ban With 23% Lift in H1 Revenue

Robert Clark
News Analysis
Robert Clark
7/30/2019

Huawei's devices business has powered the company to a bumper interim result despite a sustained US government assault on the Chinese firm.

The company saw first-half revenue grow 23.2%, to 401.3 billion yuan ($58.3 billion), with the devices unit for the first time accounting for more than half of all sales.

The result outshone last year's interim report, in which Huawei posted a 15% rise in sales.

Huawei did not break out segment numbers last year, but the carrier division's 36.5% share of revenue is 4.3 percentage points below that in full-year results, while the enterprise unit's 7.9% share is 2.4 points less.

The consumer division improved its share by 7 percentage points, to 55%, after shipping 118 million smartphones for the period -- compared with 95 million last year -- and increasing tablet shipments by 10%.

However, Chairman Liang Hua acknowledged the ban on component supply had "some impact" and warned performance was likely to deteriorate in the second half.

The result covered just 45 days of the US ban, imposed on May 16, he said.

The vendor would need to "invest heavily in people and materials" to replace old product versions and manage supply continuity.

"All of these factors will have an effect on future business performance," he said.

Liang also insisted the ban had not affected the carrier business, noting that Huawei had won an additional 11 5G contracts since it was imposed.

Customers "still believe in us," he said. Shipments of 5G gear had not been interrupted because the company had been well prepared.


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But the biggest vulnerability appears to be in the best-performing unit.

The new Mate 20X phone will ship with Android OS, but Liang could not say what OS future devices will carry.

"We are working to fix the holes in our products to ensure supply continuity," he said. "Android is always our preferred choice, but if the US does not allow us to use it we have the ability to develop our OS and our ecosystem."

Just what that alternative OS will be, Liang did not say, but he did confirm that its own Hongmeng OS is a long way from prime time.

Liang said Hongmeng was conceived as an OS for IoT applications such as autonomous driving, remote healthcare and industrial controllers.

"This is the long-term plan that we have made. It's not just a tactic.

"We will evaluate how it can be used in various products in our portfolio."

Liang said Huawei's device sales outside China had taken a hit after Huawei was blacklisted but had since recovered to 80% of the pre-May 16 level.

On the upside, Huawei has become the undisputed champion in its home market.

According to research firm Canalys, Huawei took 38% of the China smartphone market in Q2, with domestic sales accounting of 64% of its own total.

"Huawei's retail partners are rolling out advertisements to link Huawei with being the patriotic choice to appeal to a growing demographic of Chinese consumers willing to take political factors into account," Canalys said.

Robert Clark, contributing editor, special to Light Reading

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