Huawei braces for major smartphone sale and revenue drop

(Image credit: Shutterstock.com)
(Image credit: Shutterstock)

Huawei founder Ren Zhengfei has suggested that revenues could fall below $100 billion, with reports claiming the company is bracing itself for a huge drop in smartphone sales.

The beleaguered Chinese mobile giant makes both telecoms equipment and devices, with demand for 5G kit and smartphones resulting in a 21 per cent rise in annual turnover to $108.5 billion.

Meanwhile it also became the world’s second largest mobile manufacturer, and declared its aim to become the biggest by next year at the latest.

Huawei smartphone sales

This success came despite the fact is has been effectively been frozen out of the US market on national security grounds. However, the US government is actively urging allies to follow its lead and has now banned American firms from doing business with Huawei.

The ruling limits Huawei’s access to components and means its handsets will no longer receive updates for the Android operating system from Google or access to its popular applications.

Although Huawei is building its own operating system and build its own components (it already makes its own Kirin processors), the absence of key services like Google Maps and the Google Play Store is a huge blow to its devices appeal in the West. Meanwhile, the production of components such as modems is an expensive, laborious task.

According to Bloomberg, the company expects smartphone shipments to fall by between 40 and 60 per cent in June and it could even pull the recently-announced Honor 20 from shelves in Europe if sales disappoint.

Despite the belief that revenues could fall below $100 billion in 2019 and 2020, Huawei has committed to maintain investments in R&D and believes it can recover by 2021. Ongoing demand for 5G networking kit and an aggressive pursuit of smartphone market share in China could be potential avenues for growth.

Of course, Huawei could be handed a reprieve. US suppliers are not happy about the situation given the potential loss of revenue. It is claimed that chipmakers including Intel and Qualcomm have been urging Washington to ease the restrictions on Huawei.

Via Bloomberg / Reuters