It’s never a good thing to be caught in the crossfire of a trade war between two superpowers. That’s a lesson Chinese telecom firm Huawei learned last year, when it was blacklisted by the administration of US President Donald Trump.
Still, Huawei managed to pull through, and their books showed black across the board. How could they possibly fare in 2020 based on what we already know?
Accusations and blacklisting
With tensions escalating all throughout 2019 between the US and China, many Chinese companies saw their business impacted, but perhaps none more than Huawei. President Trump had long since disapproved of Huawei. In fact, Huawei and fellow Chinese telecom firm ZTE were both called a national security threat by a 2012 House report, while heads of US security agencies have recommended against using both companies’ products. 2019 was just the year they finally set down their opinions on the company in paper and made it law.
This all came to a head on May 15th when it was revealed that Huawei was put on a list of blacklisted companies by the US administration, barring American companies from doing business with it. Naturally, this shook the market, as Huawei supplies the US and global market with a lot more than just smartphones. Everything from telecommunication supply chains, semi conductor trade, and more were to affected by this executve decision, which Huawei has decried would hurt Americans jobs and companies. Furthermore, Google would no longer be able to supply Huawei with apps or their OS, instead forcing the company to having to resort to the open-source versions available to the general public.
The US eases up on Huawei?Still, Huawei saw some reprieve following this ban, in a surprise twist.
“A day after Google cut off Huawei from using Android on its phones, the US Commerce Department scaled back its restrictions on Huawei’s access to American components and software that go into its devices,” CNET reported at the time.
“The department on Monday created a temporary [90-day] general license that will allow the China-based phone maker to keep existing networks and issue updates to existing phones, tablets and other devices.”
This license has been extended multiple times since, now extending to February 2020, signalling a peplexing move by the US administration. The Western nation is intent on penalizing Huawei and China, but the temporary license serves as the leash it can extend or shorten based on the progress of the Trade War, allowing it a flexible pull-push of power and influence in proceedings.
Why was Huawei targeted in the first place?
It is no secret that Huawei is on very close terms with the Chinese government. In fact, the company has been on the state’s payroll for many years now.
According to Business Insider, “Huawei can attribute much of its success to its close relationship with the Chinese government. Huawei, founded only 32 years ago, received as much as $75 billion in state support since its inception, according to a recent report from the Wall Street Journal.”
“This financing enabled Huawei to sell cheap telecommunications equipment on favorable financing terms: By comparison, since 2008 Finnish competitor Nokia has received state subsidies equivalent to around 1/17 of what Huawei has received over the same period, per WSJ.”
Given that the US administration was cracking down on all Chinese companies in close relationship with their government, it was only natural Huawei would be next on the chopping block.
What does 2020 hold?
Despite the pressure Huawei faced in 2019, which negatively impacted its finances, it did manage to come pull through with a solid year – all while staying in the black.
“Despite navigating a treacherous political landscape in 2019, Huawei managed to post a record annual revenue of $122 billion,” according to Business Insider. “Huawei managed to grow revenue 18% year-over-year (YoY), driven in part by the company’s shipment of 240 million smartphones, making it the world’s second-largest supplier of smartphones behind Samsung, according to LightReading.”
Now, with 2020 potentially seeing more mainstream adoption of 5G, the company’s mettle will further be tested.
According to CNBC, 4 critical issues will steer much of its fate in 2020. These include:
1. 5G commercial contracts: “While Huawei has signed a number of 5G commercial contracts, there are still some significant markets that have not yet decided on whether to let the Chinese giant into their next-generation mobile networks.”
Countries like Japan and Australia have already banned Huawei from their 5G networks.
2. The black list, officially dubbed the Entity List will play a bigger role this year. Once the temporary license granted by the US expires, Huawei will find itself in unwelcoming waters.
3. HarmonyOS, Huawei’s smartphone operating system, will have to come to the rescue once the temporary license expires. While Huawei phones can still use the open-source version of Google’s Android OS, they won’t be able to offer consumers phones preloaded with Google apps anymore.
4. Huawei’s Chief Financial Officer Meng Wanzhou was arrested in Canada in December 2018 at the behest of the U.S. authorities. The American government alleges that Meng committed bank fraud in relation to skirting U.S. sanctions on Iran, with Meng denying the allegations. This is an issue that will overshadow a lot of Huawei proceedings during 2020.
As such, 2020 will prove a critical year for Huawei moving forward.