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The US ban on Huawei will cost the company $30 billion in lost sales

Jane Li

Huawei, the world’s largest telecommunications equipment maker, is likely to see its revenues drop by $30 billion over the next two years in the face of “so strong and so pervasive” attacks by the United States, the company’s founder and CEO Ren Zhengfei said today (June 17).

Speaking at a panel discussion that was broadcast live from Shenzhen, where the company is based, Ren said the company expected revenues of about $100 billion annually for each of the next two years, compared to $107 billion in 2018. As recently as February the company was targeting $125 billion of revenues in 2019, according to Reuters. This is the first time the 74-year-old leader, who has struck a defiant tone in the face of the US sanctions on his company, to quantify the impact of the ban.

“I didn’t expect the US to be so determined in attacking us so widely,” he said.

The adjustment of Huawei’s expectations comes as the company has become entangled in the rising trade tensions between China and the US, which have dovetailed with longtime US national security concerns regarding the company. In May, the US blacklisted the Chinese company, which bars American companies from doing business with it. Almost immediately Google said it would no longer be able to license the Android operating system to Huawei, while British chipmakers ARM also said it would have to cease supplying the company.

China has reportedly summoned major tech companies (paywall) including Microsoft and Dell from the US to warn that they could face dire consequences if they cooperate with the Trump administration’s ban on American companies selling key technology to Chinese companies, and has threatened to create a list of “unreliable entities.”

With the approach of the next-generation wireless network 5G, expected to usher in a new era of internet-connected devices, the US has expressed greater concern that Huawei is a threat to it, and has been lobbying allies to exclude it from building those networks. Last year, the US also requested that Canada arrest Huawei CFO Meng Wanzhou in connection with alleged violations of US sanctions on Iran. Meng, who is also Ren’s daughter, was arrested in Vancouver last December, and charged by the US in January. Her extradition hearing in Canada is set to commence next year.

Already Huawei, the world’s No. 2 smartphone maker after Samsung, is seeing sluggish international sales of mobile phones. Phones and other consumer devices account for more than half its revenues. There has been a 40% drop in its overseas shipments, said Ren, without clarifying the period (a company spokesman later told Bloomberg (paywall) he was referring to the past month). Bloomberg also said the company is looking at a reduction of phone sales by 40 million to 60 million units this year.

 

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