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Huawei spending with US companies surges despite sanctions

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Via Financial Times

Huawei boosted its spending with US suppliers by 70 per cent last year, despite being placed on a blacklist by the White House that forbids American groups to sell to the Chinese telecoms company. 

Eric Xu, chairman of Huawei, said in an interview that the company spent $18.7bn with US companies in 2019, up from $11bn in 2018.

American officials placed the Chinese company on a sanctions list last May, as well as lobbying allies including the UK and Germany to ban Huawei as a supplier for 5G mobile internet networks. 

Nevertheless, Huawei has bought software and hardware from US companies including Google, Microsoft, Broadcom and Qualcomm for its smartphones and tablets, a spokesperson said. US companies have been able to apply to the US government to continue to trade with Huawei for limited periods.

Huawei has been developing its own software, chips and apps — something Mr Xu called “Plan B” — to deal with the disruption of no longer being able to use US-derived technology such as the Android operating system. “We did not expect that Plan B would ultimately become Plan A one day,” he said.

But he added Huawei does not want to stop using US suppliers.

The US campaign against the Chinese group has materially affected the company’s finances, he said, after its annual revenues undershot expectations by $12bn. “The US government’s campaign against Huawei in Europe has had quite a substantial impact on our business,” said Mr Xu.

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Huawei’s chairman said US pressure slowed growth across all of its business units. The Chinese group found itself unable to sell 5G smartphones in parts of Europe last year, while some European telecoms companies, including Telia and TDC, opted to place orders for 5G equipment with Huawei’s rivals. Huawei was also not able to supply customers with Intel-based chips for its servers, smothering growth in its enterprise division.

Huawei had projected its revenue would grow to $135bn in 2019. Instead it reported sales of $123bn. In 2018, revenues were $109bn. 

Mr Xu expressed hope that the spread of the coronavirus pandemic could ease tension between China and the US. “We are hoping for that almost every moment,” he said. The pandemic also hit the company as it halted production but manufacturing has returned to normal levels, he said.

Huawei has reduced its expectations for the year but Mr Xu said its consumer business remains strong.

“Our performance in the first quarter of this year was pretty good compared to the same period last year. Even allowing for the pandemic the revenue for the consumer business is on par or slightly growing this year compared to a year ago,” he said. 

The leaders of its consumer business — the largest in the company — have said they will hit their targets for 2020, he added. “I don’t know where their confidence comes from,” he said.

Huawei’s consumer business grew 34 per cent last year to $66.9bn while its carrier operations — which sell telecoms equipment to networks such as Vodafone — grew almost 4 per cent to $42.5bn. The consumer segment only overtook its carrier unit in terms of size last year.

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China provided the bulk of its growth, with revenue up 36 per cent. Revenue derived from Europe rose less than 1 per cent; in Asia-Pacific it fell 11 per cent.

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