Huawei ban: US chipmakers lobbying to ease constraints, company expects fall in revenue

By Digit NewsDesk | Published on Jun 17 2019
Huawei ban: US chipmakers lobbying to ease constraints, company expects fall in revenue
HIGHLIGHTS

​US chipmakers are lobbying to ease ban on Huawei: Report

The company is preparing for a drop in international sales of 40-60 million phones.

It is estimated that the company’s revenue will be $30 billion less than forecasts, in next two years.

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Following the trade ban on Huawei, US-based chipmakers, like Qualcomm and Intel, have started to lobby, and are quietly pressing the US government to ease restrictions on the sale of equipment and services to the Chinese tech giant. Citing people familiar with the situation, Reuters reported that executives from Intel and Xilinx Inc attended a meeting in late May with the US Commerce Department to discuss a response to Huawei’s placement on the black list. Reportedly, Qualcomm has also appealed to the US Commerce Department over the issue.

The ban, which bars US firms from doing business with Huawei, was imposed on the Chinese company earlier this year. The Trump Administration cited national security issues for the ban. Chip makers argued that the products which Huawei sells use commonly available parts and are unlikely to present the same security concerns as the Chinese technology firm’s 5G networking gear.

“This isn’t about helping Huawei. It’s about preventing harm to American companies,” one of the people was quoted as saying. The report noted that out of $70 billion that Huawei spent buying components in 2018, some $11 billion went to US firms including Qualcomm, Intel and Micron Technology Inc. Last month, Huawei Chairman Liang Hua said that Google, which sells Android software for phones to the company, has also advocated so it can keep trading with the company.

Although Huawei has its own OS, without the support of Google’s Android software, its phones are less likely to be sold in the international market. It seems that Huawei has foreseen the impact as it is already preparing for a drop in international smartphone shipments of 40 million to 60 million. Citing people familiar with the matter, a Bloomberg report says that the company is exploring options including pulling the Honor 20 from the overseas markets.

To give a perspective of loss, Huawei sold over 206 million phones in 2018, and almost half of the phones it moved were bought in the international market. It means that the international market saw the sale of almost 103 million devices. Getting a drop in sales of 40-60 million smartphones could cost the company dearly. It is estimated that the company’s revenue will be $30 billion less than forecast, over the next two years.

Huawei Founder and CEO, Ren Zhengfei said that the company’s sales revenue for the next two years will be about $100 billion, which is down from the previous target of $125 billion he set in February 2019. The tech giant brought in a revenue of about $105 billion last year. The CEO also said that the company will reduce its capacity in the next two years, but he expected a revival in 2021.

“We never thought that the US's determination to attack Huawei would be so strong, so firm. We cannot get components supply, cannot participate in many international organizations, cannot work closely with many universities, cannot use anything with US components, and cannot even establish connections with networks that use such components. The major goal for human society is to create wealth and help more people to shake off poverty. Only through collaboration and development can humans' needs be met,” Ren said while having a dialogue with US futurist George Gilder and Nicholas Negroponte, co-founder of Massachusetts Institute of Technology's Media Lab, at Huawei's headquarters in Shenzhen.

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