Huawei founder Ren Zhengfei expects US sanctions to curtail its revenue by about US$30-billion over the coming two years, wiping out the networking giant’s growth by withholding critical American technology.
Sales at China’s largest technology company will likely remain stagnant at about $100-billion in 2019 and 2020, the billionaire said during a panel discussion, quantifying for the first time the hit from a plethora of Trump administration restrictions.
Huawei, however, will aim to maintain its research and development budget and refrain from layoffs or major asset sales. The sale of a majority slice in Huawei Marine — announced in June — was a business decision that was unrelated to America’s campaign against the company, the 74-year-old CEO added.
Ren said on Monday he was surprised at the extent to which Washington has attacked his corporation. Huawei is said to be preparing for a fall of as much as 60% in overseas smartphone shipments, as Google cuts it off from Android updates and apps from Gmail to Maps. The founder has conceded that Trump administration curbs will cut into a two-year lead it’s painstakingly built over rivals like Ericsson and Nokia.
“We didn’t expect the US would so resolutely attack Huawei. We didn’t expect the US would hit our supply chain in such a wide way — not only blocking the component supplies, but also our participation in international organisations,” Ren told the panel in a broadcast from Huawei’s home city of Shenzhen. “That will make our revenue for this and next year around $100-billion.”
Ren has struck a defiant tone in the face of US sanctions that threaten his company’s very survival. At the heart of Trump’s campaign is suspicion that Huawei aids Beijing in espionage while spearheading China’s ambitions to become a technology superpower. It’s been accused for years of stealing intellectual property in lawsuits filed by American companies from Cisco Systems and Motorola to T-Mobile US. Critics say such theft helped Huawei vault into the upper echelons of technology — but Ren has laughed off that premise.
The US on 17 May blacklisted Huawei — which it accuses of aiding Beijing in espionage — and cut it off from the US software and components it needs to make its products. The ban hamstrings the world’s largest provider of networking gear and second largest smartphone vendor just as it was preparing to vault to the forefront of global technology. It’s rocking chip makers from America to Europe as the global supply chain comes under threat. The ban could also disrupt the roll-out of 5G wireless globally, undermining a standard that’s touted as the foundation of everything from autonomous cars to robot surgery.
But Huawei has also said it will ramp up its own chip supply and find alternatives to keep its edge in smartphones and 5G. His company today generates more sales than Internet giants Alibaba Group and Tencent combined. In 2018, Huawei overtook Apple in smartphone sales, a triumph that burnished Ren’s tech credentials.
“We didn’t expect the damage to be this serious. We did make some preparations, like the damaged plane I talked about. We only protected the engine and fuel tanks, but failed to protect other parts,” he told author-investor George Gilder and MIT Media Lab founder Nicholas Negroponte, who both agreed the US was making a mistake in singling Huawei out.
Ren, who survived Mao Zedong’s great famine to found Huawei in 1987 with 21 000 yuan, has said Huawei will do whatever it takes to survive. He has gone from recluse to media maven in the span of months as he fights to save the $100-billion company he founded. He emerged from virtual seclusion after the arrest of eldest daughter and chief financial officer Meng Wanzhou as part of a broader probe of Huawei.
Ren has since become a central figure in a US-Chinese conflict that’s potentially the most important episode to shape world affairs since the collapse of the Soviet Union. As Ren said in January, when the world’s biggest economies battle for dominion, nothing in their way will survive. His company is a “sesame seed” between twin great powers, he has said.
The CEO has had much to deal with of late. His company finds itself under fire, besieged by a US effort to get key allies to ban its networking equipment. The US assault helped crystallise fears about Huawei’s growing clout in areas from wireless infrastructure and semiconductors to consumer gadgets.
Then came the blacklist. Huawei appears to have anticipated this possibility since at least mid-2018, when similar sanctions threatened ZTE. Huawei is said to have stockpiled enough chips and other vital components to keep its business running at least three months. Ren on Monday said Huawei doesn’t implant backdoors in its products and that it remained willing to sign a “no-backdoor agreement” with the world if necessary.
“We will be reborn by 2021,” Ren said. — (c) 2019 Bloomberg LP