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Huawei founder & CEO: US ban has hit us harder than expected

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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Huawei files to trademark mobile OS around the world after U.S. ban

LIMA/MEXICO CITY: China’s Huawei is in the process of potentially launching its “Hongmeng” operating system (OS) to replace the U.S. Android OS, an executive said on Thursday, after Reuters reported that the company has applied to trademark the OS in various countries.

Data from a U.N. body showed that Huawei Technologies Co Ltd is aiming to trademark the OS in at least nine countries and Europe, in a sign it may be deploying a back-up plan in key markets as U.S. sanctions threaten its business model.

President Donald Trump’s administration last month put Huawei on a blacklist that barred it from doing business with U.S. tech companies such as Alphabet Inc , whose Android OS is used in Huawei’s phones.

Andrew Williamson, vice president of Huawei’s public affairs and communications, said Hongmeng was moving forward.

“Huawei is in the process of potentially launching a replacement,” Williamson said in an interview in Mexico City. “Presumably we’ll be trying to put trademarks.”

A senior U.S. official on Thursday said Huawei’s clients should be asking themselves if the Chinese firm can meet its commitments given its dependence on U.S. companies.

Huawei, the world’s biggest maker of telecoms network gear, has filed for a Hongmeng trademark in countries such as Cambodia, Canada, South Korea and New Zealand, data from the U.N. World Intellectual Property Organization (WIPO) shows. It also filed an application in Peru on May 27, according to the country’s anti-trust agency Indecopi.

Huawei has a back-up OS in case it is cut off from U.S.-made software, Richard Yu, chief executive of the company’s consumer division, told German newspaper Die Welt in an interview earlier this year.

The U.S. official, meeting with officials in Europe to warn against buying Huawei equipment for next-generation mobile networks, said only time would tell if Huawei could diversify.

“It is a fair question to ask if one decides to go with Huawei and Huawei continues to be on our entity list, will Huawei be able to actually deliver what it promises any particular client,” Jonathan Fritz, the U.S. State Department’s director for international communications policy, told reporters in Brussels.

The company, also the world’s second-largest maker of smartphones, has not yet revealed details about its OS.

The applications to trademark the OS show that Huawei wants to use Hongmeng for gadgets ranging from smartphones and portable computers to robots and car televisions.

At home, Huawei applied for a Hongmeng trademark in August last year and received a nod last month, according to a filing on China’s intellectual property administration’s website.

CONSUMER CONCERNS

According to WIPO data, the earliest Huawei applications to trademark the Hongmeng OS outside China were made on May 14 to the European Union Intellectual Property Office and South Korea, or right after the United States flagged it would stick Huawei on an export blacklist.

Huawei has come under mounting scrutiny for over a year, led by U.S. allegations that “back doors” in its routers, switches and other gear could allow China to spy on U.S. communications.

The company has denied its products pose a security threat.

However, consumers have been spooked by how matters have escalated, with many looking to offload their devices on worries they would be cut off from Android updates in the wake of the U.S. blacklist.

Huawei’s hopes to become the world’s top-selling smartphone maker in the fourth quarter this year have now been delayed, a senior Huawei executive said this week.

Peru’s Indecopi has said it needs more information from Huawei before it can register a trademark for Hongmeng. Peru has some 5.5 million Huawei phone users. The agency did not give details on the documents it had sought, but said Huawei had up to nine months to respond.

Huawei representatives in Peru declined to provide immediate comment, while the Chinese embassy in Lima did not respond to requests for comment. – Reuters


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Citi launches co-branded credit cards with SE Asia’s Grab in push for more customers

HONG KONG: Citigroup has teamed up with Singapore-based ride-hailing firm Grab to launch co-branded credit cards, as it looks to boost its Asian customer base by about 13% via partnerships with digital firms, a senior Citi executive said.

The new cards mark the latest step in Grab’s big push into the financial services sector, an area it has earmarked for growth. For the U.S. bank, it is in line with its strategy to offer its products within online ecosystems as consumers spend more time on smartphones.

The Citi-Grab co-branded cards will be issued in the Philippines on Tuesday and in Thailand later this year, before being rolled our in other Southeast Asian markets.

“Today we have about 16 million customers in Asia, and our aspiration is to increase this by about two million in the next few years through partnerships alone,” Gonzalo Luchetti, Citi’s head of consumer banking for Asia Pacific, Europe, the Middle East and Africa, told Reuters.

Citi launched a co-branded credit card with Indian payments firm Paytm last month and with Qantas two years ago.

The bank’s net income from Asia Pacific was $4.4 billion in 2018, with a third of its $15.3 billion revenue coming from Southeast Asia – where Grab is the leading ride-hailing firm.

Grab, which started as a taxi-hailing app firm, has been aggressively expanding into financial services and said, earlier this year, that it was pursuing lending licences across Southeast Asia.

“The Citi-Grab credit card is a natural next step as we create more value for our digital first, always in GrabPay users,” Huey Tyng Ooi, managing director of GrabPay Singapore, Malaysia, and the Philippines, said in a statement.

Grab is also exploring spinning off its financial services unit and has mandated banks to approach potential minority investors, Reuters reported last month, citing sources.

Banks and insurance firms are among the potential investors in the Grab unit, a source has said.

Lenders around the world are trying to partner with digital players to get closer to consumers.

A recent case in point would be Goldman Sachs’ credit card deal with Apple that can potentially connect Goldman with hundreds of millions of iPhone users.


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