LDN - Business

Huawei CEO says underestimated impact of U.S. ban, sees revenue dip

[June 17, 2019] By Sijia Jiang

HONG KONG (Reuters) - Huawei Technologies Co Ltd's founder and CEO Ren Zhengfei said the impact of a U.S. ban on the Chinese company was more severe than expected and warned that revenue would dip to around $100 billion this year and the next.

This is the first time that Huawei has quantified the impact of the U.S. action against the company and Ren's downbeat assessment comes after weeks of defiant comments from company executives who maintained Huawei was technologically self-sufficient.

Huawei had not expected that U.S. determination to "crack" the company would be "so strong and so pervasive", Ren said, speaking at the company's Shenzhen headquarters on Monday.

The United States has put Huawei on a blacklist that effectively bans American companies from doing business with the Chinese firm, alleging that Huawei's products could allow China to spy on U.S. communications.

The ban has forced companies, including Alphabet Inc's Google and British chip designer ARM, to limit or cease their relationships with Huawei.

Huawei's international smartphone shipments will drop 40%, Ren said on Monday, without specifying a period. Bloomberg reported on Sunday that the tech giant was preparing for a 40% to 60% decline in international smartphone shipments.

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Huawei founder Ren Zhengfei attends a panel discussion at the company headquarters in Shenzhen, Guangdong province, China June 17, 2019. REUTERS/Aly Song

Huawei had reported revenue of 721.2 billion yuan ($104.16 billion) last year and said a few months ago it expected revenue this year to jump to $125 billion.

"We did not expect they would attack us on so many aspects," Ren said but added that he expects a revival in the business in 2021.

"We cannot get components supply, cannot participate in many international organizations, cannot work closely with many universities, cannot use anything with U.S. components, and cannot even establish connection with networks that use such components."

Ren, however, said Huawei will not cut research and development spending despite the expected hit to the company's finances and would not have large-scale layoffs.

(Reporting by Sijia Jiang in Hong Kong and Brenda Goh in Shanghai; Writing by Sayantani Ghosh; Editing by Himani Sarkar and Muralikumar Anantharaman)

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