Huawei Technologies Co expects smartphone shipments to grow 20% next year even if it\u2019s blocked from the latest Google software, suggesting the Trump administration efforts to contain the company\u2019s rise may not be working.<\/p>\n
The world\u2019s largest smartphone maker after Samsung Electronics Co can rely on its massive home market and in-house software to keep the division humming, said Will Zhang, president of corporate strategy.<\/p>\n
Sourcing the hardware for smartphone manufacturing wasn\u2019t a problem because of the availability of global supply, he told Bloomberg News.<\/p>\n
Huawei is approaching a critical juncture in its fight for survival, six months after Washington barred it from buying key US components and software without special licenses.<\/p>\n
Those include Google\u2019s Android operating system, semiconductor design tools from Synopsys Inc and Cadence Design Systems Inc. and radio frequency chips made by Qorvo and Skyworks. That threatens to dent Huawei\u2019s smartphone business, which ships more than twice as many devices as Apple Inc, while impeding its ability to make fifth-generation networking gear.<\/p>\n
\u201cThere are many ways for our US partners to find global solutions, rather than ship from a single US-based source,\u201d Zhang said at Huawei\u2019s Shenzhen headquarters.<\/p>\n
China\u2019s largest technology corporation is a central facet of sensitive negotiations intended to defuse trade tensions with the US Commerce Secretary Wilbur Ross has expressed optimism that the US would strike a \u201cPhase One\u201d trade deal with China this month, adding that licenses would come \u201cvery shortly\u201d for American companies to sell components to Huawei.<\/p>\n
Till then, the US blacklist is exacting an uncertain toll on the Chinese networking giant.<\/p>\n
Zhang said in the past Huawei set one target for smartphone shipments, but now because of increased uncertainty in the market it developed three different goals that include best and worst case scenarios. Under a moderate scenario, smartphone shipments could rise around 20% next year, he said. \u201c<\/p>\n
Even for the pessimistic one, we see small growth,\u201d said Zhang.<\/p>\n
The best case projection is for 40% growth.<\/p>\n
Huawei, which gets roughly half of its revenue from its smartphone division, has so far managed to sustain an enviable pace of growth despite its precarious situation. It gained market share against Apple and Samsung in the third quarter by expanding smartphone shipments 29%.<\/p>\n
In its home market shipments jumped 66% in the third quarter but only rose about 18% sequentially abroad, according to Canalys. Huawei posted a 24% surge in revenue in the first nine months of 2019, boosted by a 26% jump in smartphone shipments to 185 million units.<\/p>\n
Billionaire founder Ren Zhengfei once predicted the Trump administration\u2019s move could knock $30 billion off his company\u2019s revenue. That amount was later trimmed to $10 billion. Zhang revised down the total impact amount again on Tuesday. \u201cNow I think it\u2019s less than $10 billion,\u201d he said.<\/p>\n
A significant part of that comes from Huawei\u2019s server business, which he said had been expected to generate revenue of $8 billion this year. \u201cBut that will be cut in half,\u201d he said, because Huawei was having difficulty making servers that employed the dominant x86 architecture used by US giants Intel Corp and Advanced Micro Devices Inc.<\/p>\n
\u201cAlthough servers are not our core product, every project involves one,\u201d Zhang said.<\/p>\n
He also said 20% to 40% of Huawei\u2019s products were affected by the ban. \u201cSome impact was small, so we could easily find a solution within half a year or three months. But for servers, it impacted our business, our revenue and our strategy for the future as well.\u201d<\/p>\n
Longer term, the company is exploring ways to get around a Google blockade. Huawei introduced its Mate 30 series in September, the first marquee phone that runs an open-source version of Android and lacks Google-licensed apps from Gmail to YouTube and Google Play Store.<\/p>\n
Huawei is also developing its own operating system, HarmonyOS, which is designed primarily for Internet of Things devices but can also power smartphones. In September, the company offered $1.5 billion to lure global developers to create software for its own ecosystem.<\/p>\n