The United States is ready to ruin the Chinese Huawei, and it did

The United States is ready to ruin the Chinese Huawei, and it did

She arrived back home in late September to a very different company, one forced into retreat by American sanctions that have left it fighting for its future.

When she was detained in Canada nearly three years ago, Meng Wanzhou was crisscrossing the globe as finance chief of all-conquering Chinese tech giant Huawei Technologies Co.

Highlights

  • Now, its revenue has dropped for three straight quarters. The company has fallen to No. 9 in smartphone sales, with buyers evaporating from Europe to China. Its global telecom market share is shrinking as it loses out in key markets, a result of U.S. pressure designed to halt the spread of Huawei’s 5G technology plus concerns by some customers over its ability to remain technologically competitive.

  • Huawei is in the midst of a deep slump. As recently as the start of last year, the world’s largest maker of telecommunications equipment was increasing market share in 5G rollouts and surging toward the top of the global smartphone market, shrugging off a year of export restrictions imposed by the Trump administration.

U.S. officials and members of Congress continue to call Huawei a national-security threat, concerned that the Chinese government could use the privately held company’s gear, embedded in telecom networks world-wide, to spy or disrupt communications.

Components are running scarce for lines of business such as mobile phones, the result of far-reaching rules enacted by Washington that curbed the ability of Huawei—which the U.S. has accused of stealing trade secrets and violating sanctions—to obtain parts and software made using American technology. Huawei has denied the U.S. allegations.

Huawei has repeatedly denied that it poses a security threat and has said the U.S.’s actions are unjustified. The company has beefed up its lobbying and public-relations budgets in the U.S. in an effort to get Washington to reconsider, but the U.S. hasn’t given the company a clear pathway to having the sanctions lifted.

The restrictions imposed by the U.S. have choked off Huawei’s access to chips from suppliers even outside the U.S., prompting the Chinese company to sell its budget phone unit and to forecast up to $40 billion in lost smartphone revenue this year. It relied on China for two-thirds of its revenue last year, compared with half in 2017.

HUAWEI HIRING TONY PODESTA, LOBBYIST BROTHER OF FORMER TOP OBAMA AIDE, TO WOO BIDEN ADMIN: REPORT Washington’s campaign has used some of the most destructive tools in its arsenal, and they have succeeded, forcing Huawei to experiment with new business lines, cede overseas territory and foster a supply chain independent of the U.S., all while its stockpile of high-end chips diminishes. Rarely, if ever, has the U.S. directly taken on such a big overseas company and had such an impact.

Huawei executives, who often refer to a battle for survival, are steering the company toward electric vehicles, software and coal-mining technology. Many of the efforts remain nascent and make up a small fraction of revenue. Huawei’s core business of selling telecommunications equipment is also starting to suffer. Huawei has said that in the first half of 2021, revenue from selling telecom carriers gear such as base stations and routers fell 14% from a year earlier to 136.9 billion yuan, about $21 billion.

Despite its troubles, Huawei generates profits each quarter and disclosed $55 billion in cash and short-term securities at the end of last year. Executives describe Huawei’s fat research and development budget as its insurance plan. Last year it said it spent $22 billion on R&D, more than Apple Inc. spent in its most recent fiscal year. Huawei said it expects revenue from selling telecom equipment to ultimately show “moderate, but solid, growth” by the end of the year as China’s 5G rollout picks up steam. But it acknowledges that its new ventures are unlikely to make up for the revenue lost by its slumping smartphone sales anytime soon.

While the deal that also freed two Canadians from Chinese prisons is hailed in China as a major victory for Huawei, there are few signs of the U.S. relaxing sanctions on the company. Biden administration officials said that Ms. Meng’s release didn’t indicate a softening of U.S. policy. Commerce Secretary Gina Raimondo told news outlets that her department would continue efforts to block Huawei from getting advanced chips. In June 2020, Huawei opened a sprawling retail store in an art deco building in Shanghai. Fans queued up outside, eager to view tables spread with smartwatches, tablets and smartphones inside.

The daughter of Huawei’s powerful founder and CEO Ren Zhengfei, Ms. Meng pleaded not guilty but admitted to some wrongdoing in exchange for the U.S. deferring prosecution and dropping the charges against her next year, provided she doesn’t violate terms of the agreement. Ms. Meng arrived home Sept. 25 to a hero’s welcome as part of an apparent prisoner exchange between China and Canada. Her movements had been restricted while she contested extradition to the U.S. on charges she lied to one of its banks about Huawei’s alleged business in Iran.