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China tech

Huawei says telecom business to resume double-digit growth in 2019

China's tech giant faces headwinds as global market forecast to hit 2.8bn 5G users by 2025

Huawei predicts healthy growth this year in Europe and other regions outside of the U.S.   © Reuters

SHENZHEN -- China's Huawei Technologies said on Tuesday that its telecom equipment business will return to double-digit growth in 2019 on healthy demand in almost all regions except the U.S.

"We've seen an overall optimism and acceleration in the industry regarding 5G deployment since the second half of last year," Ken Hu, Huawei's rotating chairman, told analysts and reporters during the company's annual analyst summit. "We expect our carrier business to achieve double-digit growth this year."

David Wang, executive director of Huawei's board, said the company sees robust growth in China, Europe, Latin America, Middle East, and Africa -- basically all countries and regions outside the U.S. This prediction comes amid efforts by Washington in recent months to convince its allies around the world to block the Chinese company from participating in 5G projects. 

5G, the next generation to the current mainstream 4G mobile network, is expected to facilitate faster data transfers with lower latency and is seen as key to unlocking such innovations as self-driving cars, remote surgery, augmented reality and artificial intelligence.

"We see demand not only for 5G gear but also for 4G equipment adoption for many emerging markets," Wang said.

Nevertheless, Remus Hsu, a veteran analyst, told the Nikkei Asian Review that he expected Huawei would face headwinds this year due to exclusion in markets such as the U.S. and South Korea, that are leading in 5G commercialization. He added, however, that it could regain market share after China commercializes its 5G network in 2020.

"We do see its market share in telecom business dropping a bit, around 2% to 3%, this year as its rivals Ericsson and Nokia gain more 5G contracts in the first wave of 5G commercialization," Hsu said. "But we see its market share stabilizing and rebounding next year when China joins the 5G adoption."

Huawei enjoyed robust revenue and a profit surge in 2018, but its flagship telecom business saw a slight slump of 1.3% on the year. The company's consumer business, mainly its smartphone unit, becomes its top revenue contributor for the first time.

U.S. pressure on allies to shut Huawei out of their 5G networks due to security and cyberespionage concerns has yielded mixed results. While Australia, and Japan have followed the U.S. lead and blocked the Chinese company from their 5G projects, Germany has said it will not exclude Huawei from its 5G core network infrastructure, and Belgium's cybersecurity agency has said it found no flaws in Huawei's products.

Huawei has denied all allegations by the U.S. and sued the American government on March 7.

"We commend the EU's attitude and its decision to view security as a technical and not a political issue. ... The EU is doing a great job on this," said Huawei's Hu. "Politicizing security discussions poses a great challenge not only to the whole industry but also to society."

Huawei predicts that there will be 2.8 billion 5G users with coverage available to 58% of the world's population by 2025, Hu said. For 2019, however, there will be fewer than 5 million 5G devices, according to a Bernstein Research estimate. Chairman Hu said it will take only three years for the number of 5G users to reach 500 million, compared with the five years to took in the 4G age, and 10 years in the 3G era.

William Xu, Huawei's chief strategy marketing officer, said the company is working to facilitate basic research on a long-term basis, of more than five or even 10 years.

Huawei's focus will be on areas ranging from chip design to material sciences to cooling technologies. The company also plans to invests in research in emerging theoretical fields, such as optical computing, DNA data storage tech and atomic-scale manufacturing, Xu said.

"Huawei has more than 60 labs focusing on basic technologies, more than 700 Ph.D.s in math, and more than 200 Ph.D.s in physics and chemistry," Xu said. He added that the company offers at least $300 million in gifted money or research funding for all scholars partnered with Huawei, and the company is unfazed by the recent termination of collaboration with top universities such as the Massachussettes Institute of Technology.

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