Huawei posts strong annual report but warns of challenges ahead

Huawei posts strong annual report but warns of challenges ahead
Editor at TechForge Media. Often sighted at global tech conferences with a coffee in one hand and laptop in the other. If it's geeky, I'm probably into it.

Huawei held a virtual press conference to launch its latest annual report amid the coronavirus pandemic.

The past year was always going to be a difficult one for Huawei due to the US applying sanctions and increasing pressure globally to ban the vendor’s equipment. A pandemic that’s led to broader market disruption has only amplified those struggles.

"2019 was an extraordinary year for Huawei," said Eric Xu, Huawei's Rotating Chairman. "Despite enormous outside pressure, our team forged ahead with a singular focus on creating value for our customers. We worked hard to earn their respect and trust, as well as that of our partners around the globe. Business remains solid."

The company’s overall revenue in 2019 increased by 19.1 percent to ¥858.8 billion ($120.9 billion). Of that revenue, net profit increased by 5.6 percent to ¥62.7 billion ($8.8 billion).

While countries like Australia have decided to ban Huawei from national 5G infrastructure, the vendor’s global marketshare continues to grow. According to Statista, Huawei holds the largest marketshare (~35.3%) of any vendor. The second-largest, Nokia, holds less than half Huawei’s marketshare at around 16.1 percent.

However, it's likely too early to see the impacts of some pivotal moments over the past year in this report.

Many were awaiting the decision of the UK government, as a key US ally and major intelligence player, to observe their approach to Huawei’s equipment. Following an intense multi-year security review, the UK decided to allow Huawei’s equipment with significant caveats.

Huawei’s equipment will be allowed in no more than 35 percent of British access networks which connect devices and equipment to mobile phone masts. Furthermore, Huawei will not be permitted in any critical infrastructure or sensitive sites like nuclear sites and military bases. All equipment will also continue to be checked at the dedicated Huawei Cyber Security Centre in Banbury for any potential risks.

Following the decision, Huawei VP Victor Zhang said: “We were reassured by the UK government’s decision in January that we could continue working with our customers to keep the 5G roll-out on track. It was an evidence-based decision that will result in a more advanced, more secure, and more cost-effective telecoms infrastructure.”

Many operators are reluctant to give up their relationship with Huawei due to the costs and delays involved with removing existing gear and purchasing and installing equipment from another vendor.

Even under the UK's current plan to limit the use of Huawei's equipment, BT alone estimates the decision will cost it around £500 million over the next five years. Delays in the 5G rollout will also impact the economy and global competitiveness.

The consumer side of Huawei’s business is also under significant pressures. US sanctions forced Huawei to end its relationship with Google, meaning new smartphones – like the P40 flagship announced this week – will launch without Google’s services like the Play Store.

Further sanctions under consideration by the Trump administration may result in changes to the Foreign Direct Product Rule which intends to restrict Huawei’s access to chips made using American technologies and equipment.

Despite the pressures, Huawei’s consumer business flourished last year and grew 34 percent. For comparison, Huawei’s enterprise business grew 8.6 percent and its carrier business grew 3.8 percent.

"The external environment will only get more complicated going forward," Xu cautioned. "We need to keep enhancing the competitiveness of our products and services, promoting open innovation, and creating greater value for our customers and society at large.”

“This is the only way we can seize the historic opportunities presented by the digital and intelligent transformation of industries, and maintain robust growth in the long run."

You can find a full copy of Huawei’s 2019 annual report here (PDF)

Interested in hearing industry leaders discuss subjects like this and sharing their use-cases? Attend the co-located IoT Tech Expo, Blockchain Expo, AI & Big Data ExpoCyber Security & Cloud Expo and 5G Expo World Series with upcoming events in Silicon Valley, London and Amsterdam and explore the future of enterprise technology.

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