Huawei spending with US companies surges despite sanctions

Huawei increased spending with American suppliers by 70% last year, despite being blacklisted by the White House which prohibits American groups from selling to the Chinese telecommunications company.

Eric Xu, president of Huawei, said in an interview that the company spent $ 18.7 billion with U.S. companies in 2019, up from $ 11 billion in 2018.

U.S. officials placed the Chinese company on a sanctions list last May, as well as lobbying allies, including the United Kingdom and Germany, to ban Huawei as a provider of 5G mobile Internet networks.

However, Huawei has purchased software and hardware from U.S. companies, including Google, Microsoft, Broadcom and Qualcomm for its smartphones and tablets, a spokesperson said. U.S. companies have been able to request the U.S. government to continue trading with Huawei for limited periods.

Huawei has developed its own software, chips and applications – something Mr. Xu called “Plan B” – to deal with the disruption of being unable to use US-derived technology such as the operating system Android. “We did not expect Plan B to one day become Plan A,” he said.

But he added that Huawei did not want to stop using American suppliers.

The US campaign against the Chinese group has significantly affected the company’s finances, he said, after annual revenues exceeded expectations by $ 12 billion. “The US government campaign against Huawei in Europe has had a fairly significant impact on our business,” said Xu.

The president of Huawei said that U.S. pressure has slowed growth in all of its business units. The Chinese group has been unable to sell 5G smartphones in parts of Europe last year, while some European telecommunications companies, including Telia and TDC, have chosen to place orders for 5G equipment with competitors of Huawei. Huawei has also been unable to provide its customers with Intel-based chips for its servers, stifling the growth of its enterprise division.

Huawei had forecasted revenue of $ 135 billion in 2019. Instead, it reported sales of $ 123 billion. In 2018, revenues were $ 109 billion.

At a press conference after the results, Xu warned that the Chinese government would be likely to retaliate if the United States tightened its sanctions to prevent companies, such as Taiwan’s TSMC, from using US equipment chip maker to make chips for Huawei.

“The Chinese government will not just stay and watch Huawei be shot. I think it would take countermeasures. Why would the Chinese government not use similar cybersecurity concerns to ban the use of US 5G chips. . . on the Chinese market? “Said Mr. Xu.

Meanwhile, Huawei’s manufacturing lines have returned to normal following the coronavirus pandemic, he said.

Huawei cut expectations for the year, but Xu said consumer activity remains strong.

“Our performance in the first quarter of this year was quite good compared to the same period last year. Even taking into account the pandemic, the revenues of the consumer business are comparable or slightly increasing this year compared to a year ago, “he said.

Executives from his consumer business – the largest in the business – said they would meet their 2020 targets, he added. “I don’t know where their confidence comes from,” he said.

Huawei’s consumer activity increased 34% last year to $ 66.9 billion, while its carrier business – which sells telecommunications equipment to networks such as Vodafone – increased by almost 4% to reach $ 42.5 billion. Last year, the consumer segment only exceeded its transport unit in terms of size.

China has provided most of its growth, with revenues up 36%. Revenues from Europe increased by less than 1%; in Asia-Pacific, it fell 11%.

Additional reporting by Qianer Liu in Shenzhen

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