US blacklisting of Huawei is failing to halt company’s growth

In the days after the US government said it would ban Huawei Technologies from buying vital American components, the Chinese company’s founder, Ren Zhengfei, pulled together an emergency meeting of his top lieutenants at its headquarters in Shenzhen.

In a large conference room, the billionaire asked for a report from the head of each business unit on how they would be affected by the Trump administration’s ban, which blocks US companies from supplying everything from semiconductors to software. Their assessments were dire. “We thought we had lost the world,” said Will Zhang, who attended as president of corporate strategy.


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It turns out they were far too pessimistic. Huawei recorded an 18% rise in sales to a new high of 850-billion yuan (US$122-billion) last year, although that was down from about 23% in the first half and missed its own internal targets. Company projections for 2020 are similar. Huawei holds the enviable position of being the world’s largest supplier of communications equipment to telecoms operators and the largest smartphone maker globally after Samsung Electronics.

Huawei isn’t just surviving; it’s actually thriving in some areas. The question is for how long. Last week, executives warned in a New Year’s memo that survival itself is a priority, urging employees to brace for a difficult 2020. Inventories stockpiled months in advance of the May blacklisting are drying up. The company can no longer count on momentum alone to drive the business, rotating chairman Eric Xu warned.

How Huawei survived the US blacklisting could prove a case study in unintended consequences and a vast shift underway in global IT production. Huawei is a big customer for all of its suppliers, and a few actually cut ties after the blacklisting.

Others lost out to rivals in Japan and South Korea. But American companies with extensive global operations, including Microsoft and chip maker Micron Technology, found legal ways around the ban, leaning on production outside the US so Huawei-destined products wouldn’t be hit. Huawei itself put armies of engineers to work redesigning products to reduce its reliance on American parts.

Source: Techcentral