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People wait in line in front of Huawei's flagship store for presales of the newly launched Huawei Mate40 mobile phone series in Shanghai, China, on October 23, 2020. Photo: AFP
TechTech War

Huawei said to cut smartphone output by 60 per cent in 2021 as US sanctions bite

  • The Chinese telecoms giant has told suppliers it will order fewer smartphone components this year, the Nikkei reports
  • Sanctions from the Trump era continue to block Huawei’s access to chips and other key US technologies
US sanctions on China
Josh Ye
Josh Ye
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Huawei Technologies Co has told suppliers that its orders for smartphone components will drop by more than 60 per cent this year as it continues to struggle under harsh US sanctions, the Nikkei newspaper reported on Thursday, citing unnamed sources at multiple suppliers.

The Chinese telecoms equipment and handset giant said it intends to procure parts for between 70 million to 80 million smartphones in 2021, the Nikkei reported. This marks a dramatic decline from the 189 million smartphones that Huawei shipped last year, according to figures from market research firm IDC. Huawei’s orders have consisted solely of components for 4G smartphones since US restrictions have prevented the company from buying components for 5G devices. Some suppliers reportedly anticipated the final orders to fall further to around 50 million units.

Huawei has declined to comment on the report.

The Shenzhen-based company had been expected to produce fewer smartphones after it spun off its budget brand Honor into an independent entity in November. The move allowed Honor to break free from US restrictions  that have cut off Huawei’s access to chips and other US technologies such as Google apps and services.

Honor CEO says no longer restrained by US sanctions on Huawei

Sanctions levied by the US government have dealt a huge blow to Huawei’s smartphone business. In 2020, the company’s smartphone shipments dropped 22 per cent from the year earlier, according to market research firm Canalys.

A 60 per cent decline this year would be better than expected, said Canalys vice-president of mobility Nicole Peng.

“Should the Biden administration not end US sanctions on Huawei in 2021, we expect Huawei to focus on niche categories such as luxury phones,” Peng said.

Huawei CEO Ren Zhengfei speaks to reporters in Taiyuan, Shanxi province, China on February 9, 2021. Photo: Xinhua

Peng said Huawei will keep building up Huawei Mobile Services (HMS), its own software ecosystem for mobile devices. HMS is the company’s answer to Google Mobile Services, the collection of apps that smartphone brands must license from Google to pre-install on their devices.

“Huawei is not going to stop investing in Huawei Mobile Services. So in turn, they will not stop investing in research and development of hardware to keep up with the new system,” Peng said.

Meanwhile, to cope with its declining smartphone sales, Huawei is also venturing into other services and businesses.

The company recently expanded the duties of Richard Yu, who heads Huawei’s consumer business, to include cloud services and artificial intelligence (AI). Yu, who joined the company in 1993, has been credited with leading Huawei’s rise as a global smartphone leader.
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