Huawei Technologies, the Chinese multinational technology giant, has been at the center of geopolitical tensions between the United States and China. The US government’s sanctions and export controls have significantly impacted Huawei’s operations, financials, and global standing. In this article, we delve into the effects of these sanctions on Huawei and how the company has navigated through adversity.
Before the sanctions, Huawei was a rising star in the tech world. It became the world’s largest telecommunications equipment manufacturer and a major player in the smartphone market. Its 5G technology was poised to revolutionize global connectivity, and its smartphones were gaining popularity worldwide.
The US Sanctions
In May 2019, the US Department of Commerce added Huawei to its Entity List, effectively restricting the company’s access to US technology and components. This move was primarily driven by concerns over national security and allegations of Huawei’s ties to the Chinese government.
Huawei heavily relied on US suppliers for critical components like semiconductors and software. The sanctions disrupted its supply chain, leading to shortages and delays in product launches.
Huawei’s smartphone sales outside China plummeted due to the absence of Google services (including the Play Store) on its devices. Consumers were hesitant to buy phones without popular apps and services.
The sanctions hindered Huawei’s 5G ambitions. Countries around the world reconsidered their partnerships with the company, fearing potential security risks. Competitors like Nokia and Ericsson gained ground in the 5G race.
Response of Huawei Technologies
Huawei doubled down on research and development, aiming to reduce dependence on US technology. It invested in developing its own chips, operating systems, and app ecosystem.
Huawei launched HarmonyOS, an alternative to Android, for its devices. While it faced challenges in attracting developers, the company remained committed to building an ecosystem around HarmonyOS.
Huawei diversified its revenue streams beyond smartphones and network equipment. It explored cloud services, wearables, and smart home devices.
With limited access to international markets, Huawei intensified its efforts in China. It strengthened partnerships with local carriers and expanded its consumer base within the country.
Financial Impact
Huawei’s revenue dropped significantly in 2021, marking its first decline in years. The absence of Google services and reduced global sales took a toll on its financials.
Despite facing restrictions, Huawei experienced growth for the third consecutive year. Its sales touched $12.5 Billion with a growth of almost 144%. The company’s revenues, however, remain below its peak in 2020.
Huawei’s net profit for 2023 increased significantly, with some of the income coming from the sale of its Honor smartphone brand. The smartphone business of Huawei has continued to thrive despite challenges such as UK government hostility and US sanctions. In September, Huawei achieved a milestone by producing a 5G smartphone using an advanced silicon chip, despite export restrictions imposed by the US.
The hit from U.S. export controls is forcing Huawei to look inward. Almost 70% of the company’s revenue last year came from Chinese consumers.
Geopolitical Implications
Huawei’s situation became a symbol of the broader US-China trade war. It strained diplomatic relations and impacted global technology alliances. The sanctions highlighted the need for technological sovereignty. Countries reconsidered their reliance on foreign tech giants and explored domestic alternatives. China invested a lot of money in replacing the USA vendors and helped its homegrown companies to become partners in growth.
Huawei’s journey post-sanctions has been one of resilience and adaptation. While challenges persist, the company continues to innovate, diversify, and assert its position in the tech landscape. The impact of US sanctions on Huawei serves as a cautionary tale for other global players, emphasizing the delicate balance between national security and technological progress.
