SAN FRANCISCO, Aug 10 — Apple lost more ground in the shrinking smartphone market last quarter, with a sales tracker saying the tech giant was pushed off the top-three seller list by a Chinese rival. Apple fell to fourth place in global smartphone…
HONG KONG: China’s Huawei Technologies Co Ltd has taken a harder-than-expected hit from a US ban, the company’s founder and CEO Ren Zhengfei said, and slashed revenue expectations for the year.
Ren’s downbeat assessment that the ban will hit revenue by US$30 billion (RM125 billion), the first time Huawei has quantified the impact of the US action, comes as a surprise after weeks of defiant comments from company executives who maintained Huawei was technologically self-sufficient.
The United States has put Huawei on an export blacklist citing national security issues, barring US suppliers from selling to the world’s largest telecommunications equipment maker and No. 2 maker of smartphones, without special approval. However, the company has been granted a 90-day reprieve.
The firm has denied its products pose a security threat.
The ban has forced companies, including Alphabet Inc’s Google and British chip designer ARM to limit or cease their relationships with the Chinese company.
Huawei had not expected that US determination to “crack” the company would be “so strong and so pervasive”, Ren said, speaking at the company’s Shenzhen headquarters today.
“We did not expect they would attack us on so many aspects,” Ren said, adding he expects a revival in business in 2021.
“We cannot get components supply, cannot participate in many international organisations, cannot work closely with many universities, cannot use anything with US components, and cannot even establish connection with networks that use such components.”
Huawei, which turned in a revenue of 721.2 billion yuan (RM432.7 billion) last year, expects revenue of around US$100 billion this year and the next, Ren said. This compares to an initial target for a growth in 2019 to between US$125 billion and US$130 billion depending on foreign exchange fluctuations.
Ren was asked if he could confirm media reports citing anonymous sources which said its overseas smartphone sales had fallen by up to 40%. “Yes, (sales) have fallen 40%,” he said.
Ren gave no further details on the sales plunge but a Huawei spokeswoman later clarified that he was referring to a 40% fall from May to June in the wake of the US blacklist.
Ren added, however, that sales growth in China’s domestic market remained “very fast”.
Huawei was the world’s number two smartphone producer last year, ahead of Apple and behind South Korea’s Samsung, as well as the largest provider of telecom networking equipment.
Huawei has said it shipped a total of 206 million smartphones in 2018, about half in China and half overseas.
Ren, 74, said Huawei planned to cut production by US$30 billion over the next two years to ride out the storm. He did not specify which lines of business would be hit most.
Huawei earned just over US$100 billion in revenue in 2018, so a US$30 billion reduction would equate to about 30% of last year’s overall business.
But Ren, who compared Huawei to a damaged but still-flying aircraft, added that he expected the company to soon back on track. “In 2021, we will regain our vitality and (continue to) provide services to human society,” he said.
The Trump administration slapped sanctions on Huawei at a time when US-China trade talks hit rough waters, prompting assertions from China’s leaders about the country’s progress in achieving self-sufficiency in the key semiconductor business.
Huawei has also said it could roll out its Hongmeng operating system (OS), which is being tested, within nine months if needed, as its phones face being cut off from updates of Google’s Android OS in the wake of the ban.
But industry insiders have remained sceptical that Chinese chip makers can quickly meet the challenge of supplying Huawei’s needs and those of other domestic technology firms.
Two US tech experts, George Gilder and Nicholas Negroponte, also joined the session.
Negroponte, founder of the Massachusetts Institute of Technology Media Lab, said the US ban was a mistake.
“Our president has already said publicly that he would reconsider Huawei if we can make a trade deal. So clearly that is not about national security,” he said.
“It is about something else,” Negroponte added.
Huawei’s smartphone sales have, however, been hit by the uncertainty. Ren said the firm’s international smartphone shipments plunged 40%. While he did not give the time period, a spokesman clarified the CEO was referring to the past month.
Bloomberg reported on Sunday that Huawei was preparing for a 40-60% drop in international smartphone shipments.
The CEO, however, said Huawei will not cut research and development spending despite the expected hit from the ban to the company’s finances and would not have large-scale layoffs.
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CHINA-based Huawei took the second place from Apple in a tightening global smartphone market, during the second quarter of this year, according to figures released Tuesday by International Data Corporation.
South Korean consumer electronics titan Samsung remained the top smartphone maker, shipping 71.5 million handsets, but Huawei moved into second position with shipments of 54.2 million, according to IDC Worldwide Quarterly Mobile Phone Tracker.
Silicon Valley-based Apple shipped 41.3 million iPhones, claiming 12.1% of the global market compared to 20.9% for Samsung and 15.8% for Huawei.
It was the first time since early 2010 that Apple wasn't in one of the top two spots in the smartphone market, according to IDC.
“The continued growth of Huawei is impressive, to say the least, as is its ability to move into markets where, until recently, the brand was largely unknown,” said Ryan Reith, program vice president with IDC's Worldwide Mobile Device Trackers.
The iPhone did well, with the top-of-the-line iPhone X model a big seller in many markets, according to IDC. Apple was expected to wrest back control of the market with the release of new iPhone models in the fall.
Apple, Huawei and Samsung were the main contenders when it came to competition for high-end smartphones priced at US$700 (RM2.8 million) or more, according to Reith.
Preliminary findings by IDC indicated a total of 342 million smartphones were shipped during the second quarter in a 1.8% decline from the same period a year earlier.
The drop marked the third consecutive quarter of year-over-year declines in the global smartphone shipments, according to IDC.
Market saturation and climbing average selling prices were among factors curbing growth in the smartphone market, said Worldwide Quarterly Mobile Phone Tracker research manager Anthony Scarsella.
“Consumers remain willing to pay more for premium offerings in numerous markets and they now expect their device to outlast and outperform previous generations of that device which cost considerably less a few years ago,” Scarsella said. — AFP
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