Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

People pass a Huawei booth is seen at the IFA consumer technology fair in Berlin on Sept. 3, 2020.

MICHELE TANTUSSI/Reuters

Huawei Technologies Co. Ltd. this year will likely see slower 5G business and push further into software, while hoping its smartphones get a reprieve from U.S. sanctions, which last year struck the chip-reliant heart of its group, analysts said.

Limited access to high-end semi-conductors means rationing during China’s network upgrade, they said, while the dissection of its mobile arm will send Huawei tumbling down rankings while it continues to develop a proprietary operating system.

China’s leading telecommunications equipment maker found itself on a U.S. trade blacklist in May, 2019, because of national security concerns. Huawei has repeatedly denied it is a risk.

Story continues below advertisement

That effectively banned U.S.-based firms from selling Huawei essential U.S. technology. Last August, the ban was extended to foreign firms with U.S. business, reaching chief suppliers such as Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).

The change hit an Achilles heel as Huawei depends on TSMC to make advanced chips for its handsets, 5G network base stations, servers, cloud computing and artificial intelligence products, said Paul Triolo, head of global tech policy at Eurasia Group. Stockpiles only last so long, he said.

“Passage of this death sentence does not involve a swift execution,” technology analyst Dan Wang said in a client note. “Instead, the process is much more like a slow strangulation.”

Huawei declined to comment.

Mr. Wang said Huawei will feel the impact most acutely in its consumer business, which brought in 54 per cent of revenue in 2019.

In November, Huawei spun off budget smartphone line Honor in a sale founder Ren Zhengfei said would allow the brand to regain access to chips. Huawei could look to do the same with its premium lines this year, Mr. Triolo said.

Huawei was the world’s biggest smartphone maker as recent as the second quarter of 2020, but the Honor sale and chip shortage will likely take it out of the top six this year, data firm Trendforce said.

Story continues below advertisement

Its luck may change with the U.S. presidential inauguration of Joe Biden, from whom analysts expect more leniency toward Huawei’s smartphone business. The inauguration this month comes as chief financial officer Meng Wangzhou discusses a deal with U.S. prosecutors over allegations of doing business with Iran.

In the meantime, Huawei will likely focus on the Harmony operating system it is developing for its smartphones after being cut off from Alphabet Inc.’s Android, said Nicole Peng, vice-president of mobility at consultancy Canalys.

Elsewhere in software, Huawei will likely pivot more toward services such as cloud computing and Internet of Things devices, although these are unlikely to offset slowdown in smartphones and telecommunication infrastructure, analysts said.

Huawei’s network business does have bright prospects, but with major markets such as Britain and Japan banning its equipment, it will likely focus on China, analysts said.

The company has enough chips to make around 500,000 5G base stations, Jefferies analyst Edison Lee said. Yet rather than use up that supply, the government will likely slow 5G introduction, taking “a middle-of-the-road approach to balance between expanding coverage and waiting for Huawei to catch up,” he said.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies