US Sanctions Hit Huawei, Its Sale Growth Slows

Chinese telecom and smartphone maker Huawei reported a drop in its sales growth following the tightening of restrictions against the Chinese tech company by the United States which has cut off the company’s access from the key technologies to a much greater extent.

In the first nine months of 2020 it generated 671.3 billion yuan ($101 billion) in revenue, said the Shenzhen-based company on Friday. While that was still a 10 per cent year on year growth, it was much lower than the 24 per cent year on year growth that the company had reported in the first three quarters of 2019.

Detailed earnings were not disclosed by the private company apart from saying that its net profit margin was at 8 per cent which was lower than the 8.7 per cent achieved by it last year in the same period.

Following restrictions imposed by the US on the Chinese company to effectively squeeze out the access of the company to the advanced computer chips which it needs for its telecommunications equipment as well as its smartphones, the going has been tough for Huawei. Under the latest sanctions imposed by the US, global semiconductor companies that use American software and machinery have been banned from supplying products to Huawei without first obtaining a license to do so.

“As the world grapples with Covid-19, global supply chain was put under intense pressure and its production and operations saw increasing difficulties,” Huawei said in a statement Friday.

It will “do its best to find solutions, to survive … and to fulfill its obligations to customers and suppliers,” the company added.

This latest earnings report was preceded by the launch of its latest flagship smartphone, the Mate 40 by Huawei. Because of the previous restrictions slapped last year and sanctions imposed by the US on Huawei, no access to Google services is also available on the Mate 40 just like the company’s other recent releases.

Trouble obtaining cutting edge chips to power high-end smartphones will now have to be faced by the company because of the latest US sanctions. That will make the company much less competitive when pitted against its rivals such as Apple and Samsung.

Earlier this year, Samsung was beaten by Huawei to the top smartphone seller position. However analysts said that it was a result of different markets being affected by the Cvoid-19 pandemic. The economic recovery in China was also advantageous for Huawei. China now accounts for more than 70 per cent of the smartphone sales of the company. With other markets now opening up slowly, analysts now expect Samsung to take the lead back again.

The company is in an “extremely difficult” situation and is “suffering” because of the US government’s latest restrictions, said Richard Yu, chief executive of Huawei’s consumer business group, during the Mate 40 launch on Thursday.

Earlier this week, the 5G telecom equipment making business of the company also took a hit with Sweden banning use of equipment from Huawei and ZTE for 5G network construction in the country.

(Adapted from CNN.com)

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