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China tech

Huawei profit surge helps shake off US security concerns

Trade war stings Chinese company's telecom equipment business

Huawei Technologies reported record profits for 2018 despite mounting pressure from the US over espionage concerns.    © Reuters

TAIPEI -- Huawei Technologies said record profits and surging growth overseas would help it fend off US concerns that its equipment could be used for spying by the Chinese government.

The world's biggest telecom equipment maker said earnings jumped 19.5% to 721.2 billion yuan ($105.19 billion) for 2018, while profits surged 25% to 59.3 billion yuan, the company said in its annual report released Friday.

The results were driven largely by its smartphone and consumer electronics business, which delivered a 45.1% bump in revenue, making it the Shenzen-based company's biggest revenue earner for the first time.

Huawei's record year came despite mounting U.S. pressure on its allies to shut Huawei out of their 5G networks over security concerns surrounding the family-owned company.

"Moving forward, we will do everything we can to shake off outside distractions, improve management, and make progress towards our strategic goals," Guo Ping, Huawei's rotating chairman, said the in company's latest annual report.

At a press conference in Shenzhen on Friday, Guo said the U.S. was trying to crash Huawei just because it could not compete with the Chinese company, and that the U.S. "has lost all of its table manners" and had a "loser's attitude."

Huawei's chief financial officer Meng Wanzhou, the daughter of the company's founder Ren Zhengfei, was arrested in Canada last year at the request of U.S. authorities and is currently free on bail awaiting extradition proceedings.

Huawei has denied all the cyber espionage allegations, suing the American government on March 7 over the U.S. ban on its business expansion. Washington and Beijing are currently negotiating to end a year-long trade dispute, with Huawei likely an issue in the talks.

Guo said that looking ahead, the company would make cybersecurity and user privacy protection an absolute priority, and expected strong growth for its overall business in 2019 despite the uncertain macroeconomic environment.

Huawei's signature telecom equipment business reported a 1.3% decline in revenue last year, with the company citing "investment cycle fluctuations." Still, the business still made up 40.8% of Huawei's overall operation.

Huawei shipped 206 million smartphones in 2018, up 35% on the previous year, narrowing the gap with rivals Samsung Electronics and Apple, which both saw declines in the number of handset shipments amid a slowing industry.

The Chinese company last year notched a global market share of 14.7%, which puts it just behind the 14.9 percent market share for Apple, the world's second-largest smartphone vendor, according to research company IDC.

Overall, Huawei saw annual revenue from the Americas rise 21.3% last year, with revenue from Europe, the Middle East and Africa up 24.3%.

Huawei said it had secured more than 30 5G commercial contracts and shipped more than 40,000 5G base stations as of February 2019. "Companies that choose to work with Huawei will be the most competitive in the 5G era," the company said.

Market watchers said Huawei's robust momentum in the smartphone market would likely extend into this year and help it surpass Apple to become the world's no.2 smartphone maker, but that it could see declines in its telecom equipment division.

"We do expect some slowdown in Huawei's networking and telecom business for 2019," said Remus Hsu, an analyst at the Taipei-based Market Intelligence & Consulting Institute. "There won't be dramatic changes but it's still an opportunity for its rivals such as Nokia, Ericsson and Samsung to gain a bit of market share."

CLSA tech analyst Cherry Ma said she expected Huawei's smartphone shipment to grow by 15% to approximately 240 million units, driven by consolidation in China and gains overseas.

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