The Chinese tech leader has been accused of political espionage, but he is determined to maintain and even increase his profits in the international market.
Ren Zhengfei, a former officer in the People's Liberation Army of China, founded Huawei (pronounced Wah-Way) in 1987. Since then, the Shenzhen-based Chinese company has become the world's largest smartphone maker alongside Apple and Samsung. The company also manufactures consumer electronics and builds communications equipment and infrastructure. It has become a multinational giant with $121 billion in revenue in 2019.
Despite impressive growth, Huawei remains a privately held company wholly owned by its own employees. This means that the company is not traded on any public market and no one other than employees can invest in it. Despite the impossibility of investments, interest in one of the giants - smartphone manufacturers continues to grow.
Where does Huawei do business?
In addition to manufacturing smartphones, Huawei builds telecommunications networks and provides related services. As of 2019, the company employed over 190 people in over 000 countries. Most of the business is in China, the rest is in Europe, the Middle East, Africa and the Asia-Pacific region.
Key factors
Huawei is a multinational consumer electronics and communications equipment company.
Despite impressive growth, the company is 100% employee-owned.
Huawei is the subject of much controversy as US officials suspect the Chinese government is heavily involved in the company's business processes.
With the exception of America, Huawei continues to show rapid sales growth worldwide.
There is no indication that the company is planning a public offering or listing.
Where does Huawei do business and where does it not?
Global skepticism about Huawei has grown in recent years, with a 2012 report by the US Congress highlighting the security risks of using the company's equipment. While Huawei claims to be 100% employee-owned, US officials are skeptical that the Chinese government and the Communist Party can influence it. A Chinese law requiring Chinese companies to assist national intelligence networks, passed in 2019, added to these concerns.
US sanctions against Huawei
14 months ago, the US imposed sanctions on Huawei, which no longer allow the company to use American technology. This sanctions were a decisive factor for the UK in announcing a ban on the products of a Chinese manufacturer. βThe UK can no longer be confident that it will be able to guarantee the security of future Huawei 5G equipment affected by the change in US foreign direct product regulations,β Oliver Dowden, the countryβs digital minister, expressed his concern.
In January 2018, major US mobile companies AT&T and Verizon stopped using Huawei products on their networks. In August, Australia decided not to use the company's products as it builds its 5G networks nationwide. In November, New Zealand banned Spark, one of the country's largest telecommunications companies, from using Huawei products on its 5G network. Regardless of the decisions of the governments of these countries, Huawei can do business with private companies in each of them.
On December 1, 2018, at the request of the US government, Canadian officials arrested Meng Wanzhou, Huawei's chief financial officer and daughter of the company's founder. On January 29, 2019, the US government filed a formal extradition request for her, alleging that she violated US sanctions against Iran. The US also banned Huawei from doing business with US state-owned companies due to sanctions violations.
In June 2019, President Trump lifted restrictions on Huawei as part of ongoing US-China trade talks. However, Huawei has announced plans to cut 600 jobs in Santa Clara, California and has decided to move the center to Canada by December 2019.
How does Huawei make money?
Huawei operates in the carrier, enterprise, and consumer segments. Because the company is not public, it does not trade on any stock market and is not required to file with the Securities and Exchange Commission (SEC). However, she still reports regularly on her earnings.
In its 2018 annual report, the company reported total revenue of $8,8 billion, up 19,5% from a year earlier. Profits jumped 25%. The company said it sold over 200 million smartphones in 2018, an impressive increase from the 3 million sold in 2010.
Huawei reported that business in China grew by 19% in 2018, in the Asia-Pacific region grew by 15%, in EMEA (Europe, Middle East and Africa) grew by 24,2%, and in North and South America - fell by 7% and shows a decline for the second year in a row.
Why not invest in Huawei?
Huawei is privately owned by Chinese employees. Anyone who works for a company outside of China cannot buy its shares. The shareholders of the company admit that they do not fully understand the structure of the company, do not receive updates on their holdings, and do not have the right to vote. Thirty-three members of the union choose nine candidates to participate in the annual meeting of shareholders. Shareholders receive dividends and they have the potential to earn bonuses based on performance. Their salaries are also reviewed on an annual basis.
In 2014, Huawei's top management was asked if they would consider listing on the stock market, and the answer was no. But with the circumstances around the company, there is a chance Huawei will go public, especially if the company needs additional capital. It is unlikely that Huawei will enter the US market due to bad relations and the company's growing reputation as a spy.
As for investing in Huawei, which is called "here and now" - there is only one potential solution, but it is allegorical. To receive dividends, you need to become an employee of a company in Shenzhen (China), and make the management believe that you are not a spy.
Good Luck!
Source: habr.com