Bits and Splits -

Huawei reports record numbers despite tumultuous year

Huawei has become one of the world’s largest technology companies by revenue, suggesting the accusations over its ties to the Chinese government are failing to have much impact

The controversy surrounding Huawei’s alleged links to the Chinese government, and an effective ban on the use of its equipment in the US, has failed to put any kind of dent in the firm’s finances, as it reported record profits and revenues for 2018.

As sales rose 19.5% to CNY 721.2bn ($107.3bn or £82.3bn), Huawei has now joined an “elite” tier of technology companies with annual revenues of more than $100bn.

Its global clout now dwarfs rivals such as Cisco, which made sales of $49.3bn last year, and puts the Chinese networking supplier in the same leagues as companies such as Google parent Alphabet ($136.8bn of revenues in 2018) and Microsoft ($110.4bn). Net profit, meanwhile, rose 25.1% to CNY 59.3bn ($8.8bn or £6.7bn)

Much of this growth came from Huawei’s Consumer Business Group, which includes its bestselling smartphone brands, including sub-brand Honor, where sales rose 45%, representing 48.4% of the company’s total revenues.

Revenues at its Enterprise Business Group were up 23.8%, but down 1.3% at its Carrier Business Group, which sells into telecoms and mobile operators and is therefore the source of much of the controversy.

In its annual report, Huawei appeared to hint that the furore might even be helping it by increasing peoples’ awareness of the firm, which until recently was virtually unknown to the general public outside of China.

According to a recent Ipsos report cited by Huawei, overall brand awareness of the firm has increased to 88% in the past 12 months, and brand consideration among global consumers is up 2% to 44%. It also has net promoter scores in the top three in a number of high-income countries, including Germany, Italy and Spain. It said it believed consumers had come to view it as a trustworthy brand.

In remarks quoted by Reuters, rotating chairman Guo Ping directly addressed the US government’s outspoken views on its activities: “The US government has a loser’s attitude. It wants to smear Huawei because it cannot compete against Huawei. I hope the US can adjust its attitude,” he said.

“The easiest way to bring down a fortress is to attack it from within and the easiest way to reinforce it is from outside. Moving forward, we will do everything we can to shake off outside distractions, improve management, and make progress towards our strategic goals,” said Ping.

Huawei chairman Liang Hua added: “At present, however, a great cloud of political and economic uncertainty looms over global markets. The world is changing and we are facing new challenges. But Huawei will stay the course. We will work with our customers and partners to build an ecosystem that thrives on shared success. And we will do our best to push the limits of technology and promote social progress along the way.

“We will continue to engage governments, local communities, and our customers in active, open, and transparent dialogue. Together, we will make ICT infrastructure more secure and maximise its value.

“We have long-term, effective mechanisms in place to facilitate collaboration and regular communications on cyber security challenges with national governments in the UK, Canada, Germany, France, and other nations.

“To bolster these efforts, we opened a Cyber Security Transparency Centre in Brussels in March 2019. Moving forward, we will continue to promote this open and transparent approach to security management in other parts of the world.”

Dark clouds linger

Despite its optimism, controversy continues to dog Huawei in Europe and North America. On 28 March, a report from the UK’s Huawei Cybersecurity Evaulation Centre (HCSEC) Oversight Board slammed the company and said it had made no material progress on addressing a number of issues it had previously raised.

In the US, Susan Gordon, principal deputy director of national intelligence, told a conference in Texas that the federal government was now trying to figure out ways of living with Huawei’s presence in global 5G networks, which could include tighter encryption protocols and more use of network slicing and segmentation.

“We are going to have to figure out a way in a 5G world that we’re able to manage the risks in a diverse network that includes technology that we can’t trust. You have to presume a dirty network. That’s what we’re going to have to presume about the world,” said Gordon.

Although the US has previously made thinly veiled threats to allies such as the UK over its use of Huawei equipment, Gordon’s remarks suggest there is still some pragmatism in Washington, coming just days after the European Union (EU) instructed its member states to introduce new reporting standards and procedures around the security of their critical national communications networks, but stopped short of  implementing a ban on Huawei, saying this was up to individual members.

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