Huawei CEO and founder Ren Zhengfei.Picture: REUTERS/ BOBBY YIP
Huawei CEO and founder Ren Zhengfei.Picture: REUTERS/ BOBBY YIP

Shenzhen — Huawei’s founder said on Monday the Chinese telecom giant’s overseas smartphone sales have tumbled since the US in May  threatened to blacklist the company.  

Huawei founder and CEO Ren Zhengfei warned that his embattled group would slash production to weather the US drive to isolate it.

This was the first clear indication from the company of the effect of the US pressure being applied due to concern in Washington that Huawei is in bed with Chinese security.

Speaking at a panel discussion organised by the company at headquarters in the city of Shenzhen in southern China, Ren was asked if he could confirm  reports quoting anonymous sources as saying its overseas smartphone sales had fallen as much as 40%.

Ren said: “Yes, (sales) have fallen 40%."

He gave no further details on the sales plunge, but a Huawei spokeswoman said he was referring to a 40% fall from May to June in the wake of the US blacklist threat.

Ren said growth in China remained “very fast”.

Huawei was the world’s number two smartphone producer in 2018, ahead of Apple and behind South Korea’s Samsung, as well as the largest provider of telecom networking equipment.

Huawei has said it shipped altogether 206-million smartphones in 2018, about half in China and half overseas.

Ren said Huawei planned to cut production by $30bn over the next two years to ride out the storm. He did not say which lines of business would be hit most.

Huawei revenue topped  $100bn in 2018, so a $30bn reduction would equate to about 30% of last year’s overall business.

But Ren, who compared Huawei with a damaged but still-flying aircraft, said he expected the company to be back on track soon.

“In 2021, we will regain our vitality and (continue to) provide services to human society,” he said.

Bone of contention

Huawei has emerged as a bone of contention in the wider China-US trade war that has seen tit-for-tat tariffs imposed on hundreds of billions of dollars worth of goods.

President Donald Trump’s administration has essentially banned Huawei from the huge US market. Last month, it also added Huawei to an “entity list” of companies barred from receiving US-made components without permission from Washington, though the company was granted a 90-day reprieve for now.

The US fears that systems built by Huawei could be used by China’s government for espionage via secret security “backdoors” built into telecom networking equipment.

Those fears stem in large part from Ren’s background as a former Chinese army engineer, and questions over the privately held Huawei’s corporate ownership structure, which some critics say is unusual and opaque.

Huawei denies any links with China’s government and says the US has not  provided proof of its accusations.

The Trump administration is pressing other countries to ban Huawei equipment from their networks, particularly the rollout of super-fast 5G networks, a global project in which Huawei had been expected to play a leading role.

The US campaign has already spurred a number of major technology companies, including leading semiconductor suppliers and brands such as Facebook and Google, to suspend co-operation with Huawei.

Global consultancy Eurasia Group said in an analysis last week Huawei that “has little hope of staying on the global cutting edge in either smartphones or networking technology as long as it remains on the US entity list”.

“Over time, this will erode Huawei’s ability to offer globally competitive products, and the company will likely be forced to resort to selling second-best products in the domestic Chinese market as it seeks to rebuild its international business without US technology,” it said.