Huawei and U.S. sanctions
Huawei is the second-biggest smartphone maker in the world. The company had an ambitious plan to overtake Samsung, which is the number one producer. However, the trade war between the U.S. and China altered the plans for the Chinese tech giant. U.S. officials accused Huawei of intellectual property theft, cyberespionage, etc. On May 10, the U.S. Commerce Department added Huawei to the list of companies that are prohibited from doing business with American companies.
Last month at the G-20 summit, Donald Trump had a meeting with Chinese President Xi Jinping. Even though the trade war is not over; Trump expressed the desire to ease the restrictions placed on Huawei. This was great news for Huawei. From now on, U.S. companies can resume selling parts and components to Huawei after obtaining the license. According to the senior U.S. official, it will take from two to four weeks for the American companies to restart the process. Thus, it means that the Commerce department made swift decisions to prepare the return of Huawei to the American market.
U.S. companies especially which specialize in producing components such as chips, actively advocated for this decision. It is not surprising why American companies are interested in doing business with Huawei. In 2018 Chinese tech giant spent $70 billion on buying parts and components from companies around the world. Out of $70 billion American companies accounted for $11 billion as they sold parts and components to Huawei.
Initially, Huawei planned to sell around 250 million units in 2019. However, this was the plan before the U.S. imposed sanctions on the company. Some analysts predict that Huawei will sell around 260 million phones this year. This might happen if Huawei can get access to Google’s Mobile Services. Otherwise, the number of phones sold in 2019 will be around 230 million, which is still a good result.
The other side of the conflict
Improved economic ties between the U.S. and China doesn’t mean that Huawei managed to deal with all the problems. Moreover, there are several lawsuits against the company. The list of lawsuits includes intellectual property theft and violating Iran sanctions. CFO of Huawei is under the house in arrest in Canada. U.S. Department of Justice accused Meng Wanzhou of financial fraud.
Huawei is planning to cut jobs at its U.S. offices. At the moment it employs around 850 in three U.S. states. People familiar with the matter said hundreds of jobs might be lost if Huawei does not change the initial plan. They point out to difficulties which the company is facing due to restrictions imposed by the Commerce Department.
Another problem is that the telecommunications equipment business which is very important is Huawei is under scrutiny around the world. The company is the biggest manufacturer of the equipment used in 5G technology. However, questions regarding the safety of their equipment persist, and it is hard to predict how Huawei will cope with these problems.
To sum up, Huawei is a company with great potential. Geopolitical tensions and trade war hurt their plans to become the biggest smartphone producer. Trump’s decision to ease the sanctions is certainly good news for Huawei. As a result, it will help them reassure the customers that Huawei is a trustworthy company.