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Huawei crackdown

Huawei's grip on China market softens blow of US crackdown

Share of global 5G equipment market rises thanks to domestic sales

TAIPEI -- Huawei Technologies' dominance of its home market helped it withstand the worst of a U.S.-led international crackdown on its businesses in 2020, as the Chinese tech champion posted an increase in sales and profit.

Huawei's performance, detailed in its audited annual report published on Wednesday, shows how heavily it now relies on China, where demand for the company's fifth-generation telecoms network equipment soared.

By contrast, Huawei reported a big decline in overseas markets and lost ground massively in its key smartphone division, due to the coronavirus pandemic and U.S. restrictions on the company's access to American technology.

"We think that this is a very unfair situation for Huawei, and [Washington's crackdown] has caused a lot of damage to us," Ken Hu, Huawei's rotating chairman, on Wednesday told a press conference. "We call for a review and a rethink of the globalized semiconductor supply chain to see how we can move things forward."

The company's access to vital components and technologies has been blocked by the U.S., which accuses the company of links to the Chinese military and government -- claims the company has consistently denied. Washington has imposed controls on exports to Huawei and has tried to persuade allies to ban the company's equipment from their own 5G networks.

Huawei's overall revenue rose 3.8% to 891.4 billion yuan ($136.7 billion), while overall net profit for last year climbed 3.2% to 64.6 billion yuan, Huawei's data showed.

Huawei rotating chairman Ken Hu speaks at the Chinese smartphone maker's online earnings release event on March 31. (Screenshot of online event)

Almost 66% of revenues came from China, compared with 59% in 2019. Revenue from its home market grew 15% to 584.9 billion yuan in 2020.

However, revenue from the Americas dropped 24.5% year on year, while revenues from Europe and Asia-Pacific fell by 12.2% and 8.7%, respectively.

Huawei benefited from China's New Infrastructure Initiative last year, which pushed the rollout of 5G base stations as part of Beijing's efforts to stimulate the economy amid the COVID-19 pandemic.

The company's domestic smartphone business also benefited. At one point, Huawei's smartphone market share in China reached 46% in the April-June quarter, according to Counterpoint Research.

Huawei's revenue for its consumer electronics business grew 3.3% in 2020. "The sales of our wearables, tablets and PCs actually rose rapidly ... growing about 65% last year, which offset the negative impact from the smartphone side," Hu said. 

Despite the U.S. crackdown, the chairman confirmed for the first time that the company still plans to introduce new flagship smartphones, as it has for the past few years, as well as roll out more consumer electronics devices.

Hu acknowledged, however, that it is "difficult for Huawei to make a forecast for the smartphone business ... The smartphone business is part of our consumer electronics business strategy, but the smartphone business is not all that these strategies are about."

Its smartphone shipments for 2020 dropped 21.5% from a year ago to 189 million units, according to data from IDC. In the final quarter of last year, Huawei was fifth in the world by shipments, behind domestic rivals Xiaomi and Vivo as well as Apple and Samsung. Just a year before, in 2019, it recorded its highest-ever smartphone shipment of 240.6 million units and overtook Apple as the world's second-largest smartphone maker.  

Without access to key mobile chips, components and technologies, Huawei had to rely on stockpiled inventories. Most market watchers said they expect Huawei's smartphone shipments to fall further this year.

Jeff Pu, a smartphone analyst with GF Securities, estimated they might fall to 65 million units this year.

Huawei this year introduced a new generation of foldable phones, the Mate X2, for the Chinese market to show that its innovation remains intact despite U.S. pressure, while it has stuck to plans to roll out its next generation flagship smartphone later this year.

Huawei late last year sold its budget phone line -- Honor -- to a consortium backed by the Shenzhen government and more than 30 companies in order to help it regain access to vital components and technologies from the supply chain.

Honor in February launched its first smartphone after the spin-off and said it has resumed business relations with key suppliers of mobile processors, including Qualcomm of the U.S., MediaTek of Taiwan, Japan's Sony and Samsung Electronics.

In the telecom equipment sector, meanwhile, the strength of Huawei's business in China helped its global market share rise from 31% in 2019 to 33% in 2020.

Stephane Teral, chief analyst with LightCounting Market Research, said Huawei benefited "at the expense of Nokia," which did not take part in China's 5G rollout.

"Despite the unabated U.S.-led international campaign to convince many countries to ban Huawei and ZTE, little changed in the 2020 wireless infrastructure market dynamics," Teral told Nikkei Asia.

However Teral said that from this year, Huawei's overseas market outlook is expected to deteriorate.

"Starting in Europe, at least 40 telecom service providers did not select Huawei for their 5G rollouts last year; in Canada for example, Samsung was selected to replace Huawei; in New Zealand, Spark selected Samsung and in India Huawei will not be allowed to participate in 5G deployments," Teral said. Samsung, of South Korea, has emerged as the biggest beneficiary, he added.

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