What's going on?
On Monday, Chinese telecoms giant Huawei (pronounced “wah-way”) cut its revenue forecast for this year and the next. Wuh-oh.
What does this mean?
Last year, Huawei’s revenue grew 20% to $104 billion as it overtook Apple in global smartphone shipments. But the company is now expecting sales to decline to “just” $100 billion in 2019 – significantly less than the $120 billion it was previously forecasting.
Huawei’s hurting from its recent addition to a US blacklist barring companies from trading with it without special permission. American suppliers are unable to sell to the Chinese company, and firms like Google and Facebook have cut it off from popular apps and services (including the Android smartphone operating system). US chipmaker Broadcom lowered its own revenue forecast last week, partially as a result of the ban.
Why should I care?
For markets: Huawei sure is unpopular.
America is no longer using Huawei for its 5G network rollout; Australia and New Zealand have also imposed bans on its next-gen data technology, and Canada is weighing its options. British telecoms company Vodafone decided to hang up on Huawei’s hardware in January. It’s since had to source 5G equipment from other – likely more expensive – suppliers, weighing on its earnings. Likewise, US companies that had been using Huawei’s wares are having to go, ahem, elseware. But security concerns make the alternative, for now, unthinkable…
The bigger picture: The 5G revolution is coming.
Huawei had invested heavily in 5G technology, with infrastructure spending outstripping Nordic rivals Nokia and Ericsson. But the company’s now on the back foot as 5G rolls out without it: one million people in South Korea climbed on board the 5G train in just 69 days, but only one carrier used Huawei tech. Germany, meanwhile, raised $7 billion last week selling 5G frequencies to four telecoms companies – apparently having learned its lesson from the ruinously expensive 3G auctions of 2000 that nearly broke the German telecoms market.