Huawei's profits jump by 25% despite US efforts to curtail its business
Shenzhen, China(CNN Business) Huawei's profits soared to nearly $9 billion last year, powered by its booming smartphone business, but a US-led campaign against the company weighed on sales of telecom equipment.
The Chinese tech giant said Friday that 2018 earnings jumped by 25% to 59.3 billion yuan ($8.7 billion). Sales fell short of an earlier company forecast, but still rose by 19.5% to 721 billion yuan ($105 billion).
Huawei sells more telecommunications equipment than any other company in the world, and its smartphone business is growing faster than that of Samsung (SSNLF) or Apple (AAPL).
Yet there are signs that US efforts to stop other nations from using Huawei equipment in their telecommunications networks may be having an effect. The company said sales of telecom equipment to carriers fell 1.3% in 2018.
At a press conference on Friday, rotating chairman Guo Ping said the decline was mainly due to investment cycles in the global telecom industry.
Charlie Dai, an analyst at research firm Forrester, agreed but also said the US campaign "did have further short-term impact toward Huawei's telco business in the US and worldwide in 2018."
The United States has been leading an effort to curb Huawei's ambitions to become the global leader of next generation wireless technology, or 5G.
Washington has been urging allies to restrict or ban the use of Huawei equipment in their 5G networks, alleging Beijing could use the company's products to spy on other nations. Huawei denies that any of its products pose a national security.
US has a 'loser's mentality'
In a fiery defense of the company, Guo accused Washington of behaving like a sore loser over 5G technology.
The United States is powerful, "but when competing with Huawei, it still loses in certain areas. And it can't accept this fact," Guo told reporters. "I think that is a loser's mentality, and the US government should change that mentality," he added.
The US campaign is having mixed results. Announcing its approach on Wednesday, the European Commission said that EU member states would conduct 5G risk assessments by June, and a wider security review by December. It made no mention of a blanket ban on Huawei equipment.
The United Kingdom, however, could be moving closer to the US position on the Chinese tech company. UK security officials delivered a harsh rebuke to Huawei on Thursday, raising new concerns over its engineering work and questioning the company's commitment to security.
Guo acknowledged the geopolitical headwinds on Friday but emphasized the company's strong track record in cybersecurity.
He also addressed concerns about the company's supply chain.
US criminal charges against Huawei and its chief financial officer Meng Wanzhou raise the possibility that Washington could ban American companies from doing business with the Chinese tech company. US prosecutors accuse Huawei and Meng of violating US sanctions on Iran. Huawei and Meng deny the charges.
Last year, Washington blocked American companies from selling another Chinese tech firm, ZTE, vital components. The ban, which brought the company to its knees, was tied to ZTE breaking Iran sanctions.
Like ZTE, Huawei buys key parts for its telecom equipment from US companies.
Asked by CNN if the company could survive such a ban, Guo hinted that US companies could be more hurt than Huawei by the move.
"Huawei will ensure global supply continuity," Guo said, through a translator on Friday. "All of our partners, including partners from the US, they will also benefit from Huawei procurement and collaboration with us."
For the first time, revenue from Huawei's smartphones and consumer electronics business surpassed sales generated from the company's telecom equipment segment. The consumer business now accounts for nearly half of the company's total sales.
Huawei sold more than 200 million smartphones in 2018, boosting revenue in the company's consumer business to about 349 billion yuan ($52 billion) — an increase of more than 45%.
Richard Yu, CEO of Huawei's consumer business, said earlier this year that Huawei will displace Samsung as the world's largest smartphone seller by 2020.
Huawei sold fewer phones than Samsung and Apple last year, but unlike its bigger rivals, it bucked the global trend and continued to grow, according to data from market research firm IDC. Huawei smartphone shipments grew by 33% in 2018, compared with an 8% decline for Samsung and a 3% dip for Apple.
