While hearings are unfolding until the rest of the week in the United States, it seems that China is also suffering from the US-China trade war that started in March 2018. According to a recent study published by MSNBC, Huawei’s forecast for 2019 has gone lower than expected.
Analysts report that the Chinese manufacturer could hit $30 billion below the initial forecasts of the year.
In other words, tariffs seem to hinder global companies such as Huawei, who is thinking to shut down its office in the United States as financial loss is likely to be historical.
The post-blacklist drop
When it comes to bad news, Huawei’s CEO is getting involved. Last week, Ren Zhengfei, the founder of the biggest Chinese smartphone manufacturer – and the second globally, expressed his concern at a panel organized by the company.
Mentioning the US-China trade war, Zhengfei started saying that “I think both sides will suffer. No one will win.” The founder confirmed top analysts’ prediction: tariffs have badly damaged its results; “revenues will be $30 billion less than forecast over the next two years“, reports MSNBC.
Since the company was blacklisted by the US Chamber of Commerce, the situation went only downhill for the Chinese manufacturer.
— SCMP News (@SCMPNews) June 24, 2019
When asked if there would be lay-offs in their American offices, Ren said that the tariffs “would not stop us”.
However, it will slow down the process tremendously, as every company who is inclined to do business with the Chinese company will have to be approved by the Chamber of Commerce.
Read more on Alvexo: “Will China-US trade war create a global recession?”
Still strong in China
Moreover, Ren Zhengfei confirmed that the revenue for 2019 will be around $100 billion for Huawei in 2019, a significant loss compared with last year’s, which almost reached $107 billion.
However, Zhengfei expressed his disappointment as he was planning to generate a revenue of $125 billion for this year. The CEO said that he is betting on a decreasing decline and is hopefully targeting an additional loss of 10% for next year.
— Rich Tehrani (@rtehrani) June 22, 2019
While the company is privately held, Chinese consumers reckon the company as a big pride and a part of what makes China modern nowadays. As a result, Chinese consumers are mostly purchasing Huawei phones.
Numbers are still going strong in the company’s homeland, as Zhengfei highlighted during the panel. “I don’t see a problem, because in the Chinese market, the consumer business has not seen a decline”.
Will the slowdown last?
According to the CEO, this slump is just temporary and the result of internal adjustments.
“We don’t know what will be the growth by the end of the year. But we believe the $30 billion U.S. will be a very small thing”, he concluded during the panel.
The US government's decisions are the result of an escalating trade war between the US and China. But they also tie into longstanding concerns about potential spying by Huawei and other national security threats: https://t.co/JVLNcpjgaA
— Recode (@Recode) May 23, 2019
However, no clear strategy was shared on how to counter the increased and expanded tariffs issues by the United States. Ren just said he would expect a slowdown in the business for the next years, as a consequence of the tariffs.
Huawei’s reputation in western countries has also suffered as the company was suspected to spy in several countries.
Huawei’s CEO added that he was very surprised by the US determination to “crack the company and to be so strong and so pervasive”, he concluded on Monday at the company’s Shenzhen headquarters.
Take The Next Step with Alvexo Leave your details and we’ll reach out shortly.