Chinese telecommunications giant Huawei said that “survival” was its top priority after announcing 2019 sales were expected to fall short of projections as a result of US sanctions.
The global leader in telecom networking equipment has been effectively banned by the United States from working with American firms on the grounds that it poses a national security threat – an accusation the Chinese company has consistently denied.
Chairman Eric Xu said Huawei's sales revenue for 2019 was likely to reach 850 billion Yuan (US$121 billion) – up roughly 18 percent from the previous year. Though he said “business remains solid”, the figure was lower than a previous forecast of US$125 billion.
In a New Year's message to employees, Xu said the US government was in the midst of a “strategic and long-term” campaign against the company that would create a “challenging environment for Huawei to survive and thrive”.
“Survival will be our first priority” in 2020, said Xu, the current chairman under the company's rotating leadership scheme. He said Huawei would need to “go all out” to build up its mobile services ecosystem – its answer to Google apps and services – to “ensure that we can keep selling our smartphones in overseas markets”.
A bright spot was its smartphone business, posting “robust growth” with 240 million units shipped in 2019.
While telecom experts consider Huawei a global leader in 5G equipment – in terms of both technology and price – the company has faced obstacles and suspicion from the US and other countries wary of its close relationship with the Chinese government.
US intelligence chiefs state flatly that Huawei cannot be trusted and its equipment is a threat to national security – an accusation the company has dismissed.
Founded in 1987 by former People's Liberation Army engineer Ren Zhengfei, Huawei was dragged into the spotlight a year ago when Ren's daughter, senior Huawei executive Meng Wanzhou, was arrested in Canada at the request of the United States.
Washington wants to put her on trial for allegedly lying to banks about violating Iran sanctions. Her extradition hearing begins on January 20.
‘A difficult year’
The backlash against Huawei has only grown since Meng's arrest.
Washington has banned US companies from selling equipment to Huawei, locking out the smartphone giant from access to Google's Android operating system.
Xu said Huawei expects to remain on the US entity list in 2020, adding that the world's number two smartphone maker will not grow as rapidly as it did in the first half of 2019.
“It's going to be a difficult year for us,” he said.
The US move against Huawei has come amid a wider trade war between Washington and Beijing, and analysts say the mini deal reached between the two countries will not help the company.
“Pressure on Huawei will continue in the foreseeable future even if US-China trade tensions de-escalate,” Kenny Liew, an analyst at Fitch Solutions said.
“Continued pressure is also aimed at ratcheting up the pressure on US allies to drop the Chinese supplier from their networks,” Liew said, noting that Huawei will increasingly rely on its domestic market to drive growth.
European telecommunications operators including Norway's Telenor and Sweden's Telia have also passed over Huawei as a supplier for their 5G networks as intelligence agencies warned against working with them.
Australia and Japan have meanwhile taken steps to block or tightly restrict the firm's participation in their rollouts of 5G. Earlier this month, Prime Minister Boris Johnson also strongly hinted that Britain would follow suit. But other nations have not shut the door on Huawei, with Germany so far resisting pressure to exclude the company from supplying technology for its 5G infrastructure.
Chancellor Angela Merkel has repeatedly said Berlin would insist on stringent security requirements without however banning individual companies.
Chinese law requires individuals and organizations to assist and cooperate with national intelligence efforts.