Huawei says US sanctions cause US$30 billion annual loss in its smartphone business

Rotating chairman Eric Xu Zhijun said Huawei has learnt to live with US restrictions after Washington threatened additional sanctions on the Chinese telecoms firm
Huawei has ventured into new industries after its smartphone business was crippled by a US chip ban

Huawei

Che Panin Beijing

Published: 8:35pm, 24 Sep 2021

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Huawei Technologies Co’s rotating chairman put on a brave face amid threats of fresh US sanctions, saying that the existing trade ban is causing at least US$30 billion in annual losses to its smartphone business, but the company has learnt to live with it.

“We’ve been trying to get used to the US sanctions since May 2019,” Eric Xu Zhijun said in a press briefing on Friday in Beijing. “Whether the sanctions are going to escalate or not, we are accustomed to working and living with the [US] Entity List.”

Xu’s comments came a day after US Commerce Secretary Gina Raimondo said that Washington would take further action against Chinese telecommunications firms if necessary following concerns raised by Republican lawmakers that Huawei had been given US approval to buy chips for its car components business.

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Former US president Donald Trump added Huawei to a trade blacklist in May 2019, barring the Chinese telecoms giant from doing business with US companies without government approval. The administration escalated the punishment in September 2020 with a blanket ban that effectively cut off Huawei’s chip supplies, dealing a major blow to its core smartphone business that had been highly reliant on advanced chips made with US technologies.

Huawei’s revenue in the first half of this year fell 29.4 per cent from a year ago to 320 billion yuan (US$49.5 billion). Sales from its consumer business, consisting mostly of smartphone sales, nearly halved to 135.7 billion yuan from 255.8 billion yuan in the same period last year.

Xu said it would take many years before Huawei could cover the losses with its new businesses, including 5G applications in mines and airports. Huawei‘s smartphone business generated around US$50 billion last year, according to Xu.

“It will take a rather long time to compensate for the US$30 billion to US$40 billion losses by applying 5G technology in different industry sectors,” he said.

Huawei has ventured into new areas in the recent year, such as smart car components, which are less dependent on advanced chips. Xu said the company had conducted proper assessment of supply issues before it got into the business.

“We decided to enter the [auto] business after a thorough appraisal on whether we can ensure steady supply,” Xu said. “If the answer was no, we wouldn’t have started.”

“There is an old Chinese saying: ‘there will always be a way forward’,” he added.

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In an apparent bid to strengthen its business resilience, Huawei has also been investing in domestic firms specialising in chip-making tools and materials over the past two years. Still, Xu said it would take a while for China to become totally self-sufficient in the semiconductor industry despite progresses made over the past few years.

“If Huawei can solve all of its supply issues, semiconductor [self-sufficiency] can be achieved, [but] I think there is still a long way to go,” Xu said.

Xu had said earlier that Huawei’s target for 2021 was “to survive”.

This article appeared in the South China Morning Post print edition as: ‘Trying to get used to US sanctions,’ Huawei boss says