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Huawei's Doomsday Outlook May Galvanize Home Support

Tim Culpan
(Bloomberg Opinion) -- Huawei Technologies Co. is braced for a fall.China’s premier telecommunications equipment and smartphone maker is preparing for a drop of 40% to 60% in overseas handset sales, Bloomberg News reported Monday, citing people familiar with the situation.That’s quite a blow to the business, considering that consumer devices (mostly smartphones) accounted for 45% of the company’s revenue last year. But it’s great for Huawei’s campaign to portray itself as a victim of U.S. bullying. The Shenzhen-based company has even set up a Twitter account to share “The official truth and facts about Huawei.”A string of telcos have elected not to sell Huawei’s latest Honor brand phone, or are preparing to pull the plug should sales look weak, Bloomberg reports.Let’s put that in context, though. Around 51% of Huawei’s shipments in the March quarter were in China, according to my calculations based on data from Counterpoint Research.Western Europe, where Huawei faces most of its current headwinds, accounted for just 13.7% of shipments for the period, according to data compiled by Bloomberg Intelligence. The Middle East and Africa, and Central and Eastern Europe comprised around 9% each, while Latin America was 8%.Japan, Canada and the U.S., which may be considered nominally hostile to Huawei, together accounted for less than 1% of first-quarter shipments. The rest comes from the broader Asia-Pacific region. This is just one quarter’s data, but they largely track full-year numbers for 2018.In my estimation, the most Huawei-skeptic markets probably account for only 25% of the company’s smartphone sales. Which is around 50% of its overseas handset shipments. I don’t think all of those regions will cut Huawei sales to zero.Let’s remember, Huawei is preparing for a downturn of around 50% in international sales, according to the report. That doesn’t mean such a drop will happen. It’s smart for executives to game out all the possibilities, and the impact they will have. Making the world believe that it’s been badly bruised by an anti-Huawei campaign driven by the U.S. can only bolster support at home. Given that the company isn’t publicly traded, such a narrative doesn’t risk panic-selling of its shares.Nationalism will be Huawei’s strongest weapon in the battle to cut reliance on foreign technology. I wrote recently about the Silicon Wall that’s being built between Chinese and American spheres of influence as a result of U.S. President Donald Trump kicking off a technology Cold War. Being independent of the West is Beijing’s stated goal.To rouse the troops, instill a sense of purpose, and rally the entire country in support of its cause, it might help Huawei to be seen as a victim. That can only enhance its status as a homegrown hero. To contact the author of this story: Tim Culpan at tculpan1@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

(Bloomberg Opinion) -- Huawei Technologies Co. is braced for a fall.

China’s premier telecommunications equipment and smartphone maker is preparing for a drop of 40% to 60% in overseas handset sales, Bloomberg News reported Monday, citing people familiar with the situation.

That’s quite a blow to the business, considering that consumer devices (mostly smartphones) accounted for 45% of the company’s revenue last year. But it’s great for Huawei’s campaign to portray itself as a victim of U.S. bullying. The Shenzhen-based company has even set up a Twitter account to share “The official truth and facts about Huawei.”

A string of telcos have elected not to sell Huawei’s latest Honor brand phone, or are preparing to pull the plug should sales look weak, Bloomberg reports.

Let’s put that in context, though. Around 51% of Huawei’s shipments in the March quarter were in China, according to my calculations based on data from Counterpoint Research.

Western Europe, where Huawei faces most of its current headwinds, accounted for just 13.7% of shipments for the period, according to data compiled by Bloomberg Intelligence. The Middle East and Africa, and Central and Eastern Europe comprised around 9% each, while Latin America was 8%.

Japan, Canada and the U.S., which may be considered nominally hostile to Huawei, together accounted for less than 1% of first-quarter shipments. The rest comes from the broader Asia-Pacific region. This is just one quarter’s data, but they largely track full-year numbers for 2018.

In my estimation, the most Huawei-skeptic markets probably account for only 25% of the company’s smartphone sales. Which is around 50% of its overseas handset shipments. I don’t think all of those regions will cut Huawei sales to zero.

Let’s remember, Huawei is preparing for a downturn of around 50% in international sales, according to the report. That doesn’t mean such a drop will happen. It’s smart for executives to game out all the possibilities, and the impact they will have. Making the world believe that it’s been badly bruised by an anti-Huawei campaign driven by the U.S. can only bolster support at home. Given that the company isn’t publicly traded, such a narrative doesn’t risk panic-selling of its shares.

Nationalism will be Huawei’s strongest weapon in the battle to cut reliance on foreign technology. I wrote recently about the Silicon Wall that’s being built between Chinese and American spheres of influence as a result of U.S. President Donald Trump kicking off a technology Cold War. Being independent of the West is Beijing’s stated goal.

To rouse the troops, instill a sense of purpose, and rally the entire country in support of its cause, it might help Huawei to be seen as a victim. That can only enhance its status as a homegrown hero.

 

To contact the author of this story: Tim Culpan at tculpan1@bloomberg.net

To contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

For more articles like this, please visit us at bloomberg.com/opinion

©2019 Bloomberg L.P.