Huawei’s business damaged by US sanctions despite success at home

Chinese telecoms giant Huawei has admitted that sanctions imposed on it by the US in 2019 have had a major impact on its mobile phone business.

The US took action amid claims that the company posed a security risk and last July, the UK said it would exclude the company from building its 5G network.

Growth elsewhere in the company meant that it did make a profit overall.

But chairman Ken Hu, referring to the impact of the sanctions, told the BBC: “It has caused a lot of damage to us.”

Mr Hu, speaking at the launch of Huawei’s 2020 report, called for a review of the global supply chain of critical technology.

Huawei has also tried to explain more about its ownership structure arguing that it will not allow interference from the Chinese state.

Mr Hu described 2020 as a year of challenges, with a significant hit to the mobile phone business and slowing revenue growth.

“Life was not easy for us,” he said.

Strength in other sectors and in the Chinese market meant overall revenue was up 3.8% at $136.7bn (£99.3bn) and profits up by 3.2% at $9.9bn.

Mr Hu said restrictions had hurt US suppliers and global consumers as well as Huawei. “We think this is a very unfair situation,” he told the BBC at a press conference.

In response, the company has stockpiled chips, invested in research and development, and diversified its supplies.

It has also reportedly been developing its own chip production within China. Building domestic capacity for the most-advanced chips is currently a high priority for China. There is currently a worldwide shortage of chips, and Mr Hu called for a “rethinking” and a “review” of the globalised semi-conductor supply chain.

US authorities have argued that using Huawei’s 5G equipment opens up countries to the possibilities of data being accessed by the Chinese state, or becoming vulnerable to being switched off.

Huawei has defended its independence from the Chinese state by trying to explain its unusual model of ownership.

Jiang Xisheng, chief secretary of the board at Huawei, told the BBC that its employee-shareholders “will not allow external interference into the company’s operations”.

The company gave the BBC a remote video tour of the vault where more than 30 large cabinets contain records of the employees who own shares, listing when each individual bought them and for how much.

Critics have said the system is opaque, and is more of a profit-sharing scheme than a mechanism of real control.

Technically there are two owners of Huawei’s holding company – its founder Ren Zhengfei, who owns 0.9%, and a trade union body which owns the rest.

The company says the union is the platform for the more than 121,000 employees who own shares. These are not like normal shares, however. Non-Chinese staff are not allowed to own them and the shares cannot be publicly traded or kept when someone leaves. – bbc.com