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Huawei Acknowledges Potential $30B Revenue Shortfall

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Huawei Acknowledges Potential $30B Revenue Shortfall

U.S. President Donald Trump's administration banned China's Huawei from buying certain components made by American firms, which could cost the company tens of billions of dollars.

What Happened

Huawei founder Ren Zhengfei said during a panel discussion in China it now expects 2019 revenue to come at $100 billion, The Wall Street Journal reported. The revenue guidance marks a decline from a prior guide of $125 billion and a year-over-year decline from $107 billion in 2018.

Over the next two years, the company is likely to miss out on around $30 billion of revenue from the U.S. blacklist. Huawei bought $11 billion worth of U.S. technology in 2018, which is needed to manufacture products to sell to global clients.

Why It's Important

Zhengfei's public comments represent the first time the company acknowledged the financial toll from U.S.-China tensions, according to WSJ. The difficulties come at a time when the Chinese company surpassed U.S.-based Apple Inc. (NASDAQ: AAPL) to become the world's second-largest smartphone maker.

Meanwhile, Huawei's blacklist from U.S. suppliers is having a toll on American companies, WSJ wrote. Most recently, Broadcom Inc (NASDAQ: AVGO) issued a warning and said its revenue is likely to be $2 billion short of prior expectations as it was a major supplier of components to Huawei.

What's Next

Huawei acknowledged a financial impact to its future performance from the Trump administration but the company has at least one way to fight back, Bloomberg reported. The Chinese company is the owner of 56,492 active patents worldwide, which it can leverage to demand higher royalties and licensing fees.

"Given Huawei's position and the pressure they are feeling, they have nothing to lose at this point than to go after American companies in the patent arena," Peter Toren, a patent lawyer told Bloomberg. "They get poked in one area and they're going to stick back in another to show there are consequences for this continued pressure."

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Analysts: Huawei Export Ban To Drag Skyworks In 2019, Beyond

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