Can Huawei Afford To Lose The US Market, And Has The Last Laugh?

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The US-China trade battle is escalating once again and now it has reached a level of hurting the global tech industry. In the latest development, Huawei, the Chinese Telecommunication giant, has met with a major roadblock in the US market. The US Government is now extending its efforts to thwart China’s high-tech ambitions. The US regulators are reportedly prohibiting federal subsidies from buying networking gear from Chinese OEMs – like Huawei Technologies Co. and ZTE Corp. –  to avoid a threat to national security.

According to The New York Times, Huawei last week laid off five American employees including William B. Plummer, who served as Huawei’s VP of external affairs and one of the top representatives of the company in the US market. His departure means that Huawei is currently lacking a lobbying presence in the US. The company is forced to revisit its strategy if its future plans to thrive further won’t include the US.

Huawei’s tactics are changing as its business prospects are obscure in the US, lately. Troubles for Huawei in the US have been mounting since 2012 when the US Government warned Americans that its gear could be spying on them, also they might destabilize American telecom networks. The company has repeatedly stated that its products pose no security risk and it complies with the law everywhere it operates.

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The Federal Communication Commission voted 5-0 on Tuesday in favour of withholding federal funds from being spent with equipment suppliers that raise national security concerns. Huawei and ZTE, both based in Shenzhen, China, are under the scope of being possible security threats. U.S has already imposed a 7 years ban on ZTE Corp. prohibiting American firms from selling parts and software to it. The Commerce Department blocked ZTE on Monday from exporting sensitive technology from America.

The image of Huawei in the US has darkened considerably since it got in the crosshairs of the U.S Government. Failed attempts to clear the political cloud around it, the Chinese tech titan has taken a severe blow. Mobile phone carriers Verizon and AT&T have dropped the plans of selling Huawei’s flagship (at that time Mate 10 Pro) while BestBuy likewise distanced itself from Huawei.

Recent layoffs amid mounting pressure from the US authorities – an aggressive but sloppily move though – suggest that Huawei has given up on the US market.

“Some things cannot change their course according to our wishes,” said Eric X, Huawei’s deputy chairman in a Huawei analyst event in China. He added, “With some things, when you let them go, you actually feel more at ease.”

Huawei And The US: Who Will Have The Last Laugh

The development leads us to think Can Huawei afford to lose the U.S market and inversely? If so, then for how long?

The Chinese Tech giant, already the world’s biggest supplier of network equipments, is also the third largest smartphone maker globally after Samsung and Apple. For the last few quarters, Huawei has been challenging the dominance of both the companies by launching very impressive premium devices, like of P10 and P20. Huawei, however, cannot miss out on the U.S market if it wants to outperform the South Korean and Cupertino giant to become a global leader among smartphone manufacturers.

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In its grand event in China, Huawei laid out its cutting-edge technologies that the future world will see. It announced its 5G-oriented SingleRAN Pro solutions. The company has invested heavily in AI research, IoT (Internet of things) and other transformative technologies to break out into new markets. It can lose big time if its soaring vision doesn’t see light in one of the world’s largest economies. Also, the two largest U.S telecom carriers, Verizon and At&T, have been barred to sell Huawei smartphones, which could result in a serious market share loss for any Mobile OEM.

On the other hand, the U.S being wary of Chinese OEMs, including Huawei, could have severe implications on trade ties. For Huawei, this ruling will evidently restrict its reach to an important demographic. Of course, Huawei hasn’t officially announced anything regarding its future plans for the U.S and painted the layoffs as a standard business procedure. Huawei CEO Richard Yu stated last month that even without a strong presence in the US, the company can still become the world’s largest smartphone maker.

Huawei, despite being under fire in the US, is reaching new heights in other markets. The company shipped 153 million smartphones, including Honor phones in 2017. Moreover, its net profit jumped 28% to $7.3 billion in 2017. In Q4 2017 alone, Huawei’s share of total handset industry profit soared by 59% YoY. However, the contribution of the US to the company’s overall revenue book is quite minuscule. In 2017, the US accounted for nearly 7% of the Huawei’s total revenue. But, in terms of stand-alone figure, it’s a sizable amount of $6.26 billion.

Personally, the current speculations by the US government for accusing Huawei of espionage or say having close ties with Chinese Government seems groundless and unfair. The company has won the trust and confidence of people in 170 countries. In the wake of this ruling, Huawei has the challenge to prove that the U.S has more to lose in disregarding it and the company can thrive in the global market without it.

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