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Huawei Q319, YTD Revenue Up 24.4% Y/Y, Supported by Nationalistic Buying in China
November 18, 2019
 
In the first nine months of 2019 Huawei generated revenues of 610.8 billion yuan (~$87.3 billion), up 24.4% compared to the same time last year, slower than the 39% yearly growth rate Huawei boasted in Q1 2019. Huawei will likely clear $100 billion in revenue by the end of the year, which exceeds Huawei founder Ren Zhengfei public predictions. 
Huawei’s has experienced strong performance in its telecom infrastructure business – its 4G and 5G base stations are still selling briskly, despite calls from the US for allies to shut out Huawei out of their networks. Huawei makes about half its revenue from smartphones, which is up to 185 million units YTD. Canalys and Counterpoint both estimate Q3 shipments of 66.8 million units. Huawei not only held ground, it actually closed in on Samsung as Chinese customers rallied around Huawei with patriotic fervor, giving the company a huge 66% boost in sales compared to last year, allowing Huawei to claim 42% of the Chinese market in Q3 2019, a record high and the company still sold around 25 million smartphones in other markets in Q3. In countries where Google apps are a must-have, Huawei is pushing its older models, as well as releasing a few new models with Google apps, despite lacking – in theory – a license to do so. 
 
Huawei investment in its own silicon has proven invaluable in this regard, as Huawei doesn’t depend on US-based Qualcomm for essential SoCs and modems and will be able to use the next-gen Arm v9 architecture, as the foundation of mobile chips coming out in 2020 and beyond. Huawei had been stockpiling components for around a year by the time US placed it on the blacklist. On Day 180 of the US ban, it’s clear that Huawei is more resilient than many had given credit it for. But that doesn’t mean that Huawei can survive the ban indefinitely. The next few weeks will bring some clarity on Huawei’s fate, for better or worse. On November 19, a temporary 90-day waiver that allowed Huawei to do some business with US companies is set to expire. Back in September, the US government signaled that it’s unlikely to renew this waiver again. If Huawei doesn’t obtain a renewal, it won’t be able to push out system updates to existing Android products, in another blow to its smartphone business. If Huawei doesn’t obtain a renewal, it won’t be able to push out system updates to existing Android products. On the same day, the FCC is set to vote on rules that would prevent Huawei from doing any business with US carriers, as well as require the removal of already installed equipment. At the very least, this will be another escalation of the US’ stance against Huawei and China’s 5G ambitions in general. Huawei is also due for an update on its Mate 30 Pro plans. The company has delayed the release of its flagship product in Europe and other markets outside of China. Without Google apps on board, the phone will be a tough sell. But Huawei can’t delay it indefinitely, unless it resigns itself to ceding hard-won ground to the competition. The Trump administration suggested it may give Huawei a respite, by granting export licenses to companies who want to sell non-sensitive products to Huawei. On November 4, US Commerce Secretary Wilbur Ross said that licenses “will be forthcoming very shortly,” saying that the government received 260 license applications. Google presumably applied for a license, but it’s up to the US government to decide whether Android and Google’s apps are security-sensitive or not. In addition, US and China are said to be closing in on a “phase one” deal that would roll back some tariffs and potentially ease the trade tensions between the two countries. While no one will publicly admit it, Huawei’s fate appears to be tied to the success – or failure – of these negotiations despite all of its planning and investments in infrastructure.