Huawei: The Chinese tech giant Trump couldn't kill

[OfTheCross]

The Chinese tech giant Trump couldn't kill

The U.S. sanctioned it, denounced it and charged its CFO with crimes, but Huawei, the giant Chinese telecom-gear maker, is still raking in profits.

Driving the news: Both U.S. restrictions and the global pandemic raised headwinds for Huawei, but Monday the firm announced record profits, and it remains the top global supplier of networking gear, despite a drop in revenue.

By the numbers: Huawei announced its year-end results on Monday showing that profits totaled 113.7 billion Chinese Yuan (roughly $18 billion), an increase of 75.9% year-on-year. Revenue fell to 636.8 billion Chinese Yuan, a 28.6% drop.

• Huawei remained the global leader in telecom gear for 2021, accounting for 28.7% of the market, per Dell'Oro group. However, that's down from 31% in 2020.

Catch up quick: Huawei was a prime beneficiary of the global race to connect people to the internet, and has long been a leader in network equipment — particularly in emerging markets, where its gear is far cheaper than Nokia's or Ericsson's. It's also been a leading maker of smartphones both inside and outside of China.

Yes, but: Huawei never gained much of a foothold in the U.S., where its products were long restricted thanks to concerns that the company was a national security threat.

• Critics cited its ties to the Chinese government and fears that its products contain secret "backdoors," a charge Huawei has denied.

Those concerns escalated under the Trump administration, which aimed to stop other governments from using Huawei gear to build their 5G networks.

• Under Trump, the U.S. put pressure on allies not to use Huawei gear and enacted an escalating series of sanctions that not only limited where Huawei products could be sold, but also prevented the company from getting needed chips and software from U.S. companies.

Between the lines: Huawei has seen its handset business severely hampered outside of China, and continues to face challenges in selling telecom gear in some countries.

• As a result, the company is trying to boost its business in new areas including green energy, autonomous driving and smart displays.
• In Saudi Arabia, for example, Huawei is part of an effort to build a carbon neutral city powered entirely by solar energy, which requires breakthroughs in both energy generation and storage.

What they're saying: Andy Purdy, Huawei's Washington, D.C.-based chief security officer, told Axios he is heartened by the company's ability to shift its business and grow profits.

• While the sanctions that have hampered Huawei remain, Purdy said that the war of words is less heated than it was under Trump: "I think there's been kind of a calming down of the rhetoric that was used a couple of years ago."
• Meanwhile, Purdy was careful in his comments on Russia's invasion of Ukraine, reiterating statements from other executives that the company is "studying various policies that have been issued in various countries" but continues to do business with both Russia and Ukraine.
• "We're just feeling the suffering of the people there and hoping that maybe the negotiations or other activity can lead to a ceasefire," he said.

The bottom line: It's prudent for companies to diversify their supply chains to ensure resilience, Purdy said. But he argues fuller decoupling will hurt people around the world, raising costs in developed countries like the U.S. and slowing efforts to better connect those without speedy internet access.

• "For example, preventing the ability of U.S. semiconductor companies to sell to Huawei and other Chinese companies is just a hugely tragic and costly mistake for the American semiconductor industry," Purdy said.
• "If we are going to have a 'splinternet' or break the world into a couple of camps, the negative impact on our people or organizations is going to be absolutely huge," he said.

Editor's note: This story has been corrected to show that Huawei's 113.7 billion Chinese Yuan represents roughly $18 billion, not roughly $100 billion.