Q1 Phone sales down >30%

“2021 will be another challenging year for us, but it’s also the year that our future development strategy will begin to take shape,” said Eric Xu, Huawei’s Rotating Chairman. Huawei generated CNY152.2 billion in revenue, a 16.5% decrease year-on-year. The Network Business continued to grow. It wasn’t officially announced, but consumer products other than phones probably increased sales. The fitness tracker, earbuds, and watches are winning strong reviews.

Phones have been about half of Huawei sales. I infer the 16.5% overall sales fall resulted from a 30-40% fall in phone sales. Other lines of business will soon replace phones, including cars and cloud.

Huawei will survive and has a clear plan to thrive after a hard year or two. It has $40 billion in the bank and if needed essentially unlimited support from the government. It would be smart for the US to end the war but unlikely. Powerful Democratic Senators Schumer and Warner have joined with Republicans. Bideon is unlikely to take this on until after the November 2022 elections.

Ren has called on the spirit of Shangganling and Huawei’s people are responding.

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Harmony OS video running on Mate X2 (2 minutes)

It looks a lot like Android because it’s based on the Open Source Android code. But it took thousands of engineers and billions of dollars to replace Google’s apps and Google Mobile Services, which Google refused to make Open Source.

Harmony actually runs faster than many parts of Google’s Android. Software engineering has improved since Android was built 15 years ago. In particular, the file system is much faster.

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Huawei to Apple: Join us in Harmony

Zhang Qiaoming of Huawei invited Apple to add an interface and join the Hongmeng ecosystem. “If Apple can add interfaces, we do not exclude any manufacturer from embracing the ecology with us.”

Apple is highly unlikely to work with Huawei today. If DC gives up the war on Huawei, Apple may be well advised to join with the Hongmeng ecosystem in three or four years. Huawei’s goal is for Hongmeng to dominate the ICT world. There’s a long way to go; the programmers’ IDE (Integrated Development Environment) is not yet available.

Harmony/Hongmeng is intended to be much more than a replacement for Android. It will be a complete operating system for everything in your home, office, or car. It will be “The Internet of Everything,” controlled by the Huawei Cloud.

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Record $89B in China means 2020 +4% sales, $10B profit

The US war on Huawei brought down sales internationally but China’s 700,000 5G cells and explosive cloud growth meant Huawei had an up year. The chip blockade did hurt in Q4 and will continue to hold down sales in 2021. Huawei has sufficient reserves to outlast the United States until China catches up in chip production.

Perhaps the most important figure in the financial report was the $55 billion cash. Another $10 billion will come in from the sale of Honor/Glory. Huawei is only carrying $21 billion in debt, implying it has plenty of borrowing power on commercial terms.

“The supply restrictions for our smartphone business have caused us a great impact,” reflects Hu Houkon. “The growth rate of the consumer business has indeed not met expectations. Huawei’s mobile phone sales have been advancing all the way for so many years. Last year, it was affected by supply problems. Revenue is declining.”

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$400B China-Iran deal includes a $billion 4G-5G network, most likely Huawei

Add Iran to this map

China has agreed to buy $16 billion/year of Iranian oil in what amounts to a barter arrangement for Chinese goods. Telecommunications is specifically included, with a $billion or more for an upgraded mobile system. Huawei & ZTE will probably split the contract.

Iran’s population is 84 million, about the same as Germany or Turkey. That’s as much as Ireland, Norway, Finland, Denmark, Switzerland, Austria, Sweden, Belgium, and the Netherlands, combined. Nothing’s announced but it will be a big deal.

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Huawei Brazil saved by Chinese COVID vax (NY Times)

Bolsonaro, under US pressure, had excluded Chinese companies from 5G contracts worth US$3-5 billion. Ernesto Londoño and Letícia Casado report in the New York Times “Brazil has suddenly changed its stance.” Communications Minister Fabio Faria visited Beijing in February “to ask for vaccines.”

2,000 Brazilians are dying every day. The US has refused to deliver any vaccine to Brazil, even if it pays for it. Brazil is facing its worst health crisis since the Europeans invaded.

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Editorial: HSBC must help free Meng

Giant Hong Kong and Shanghai Bank Corporation found a technicality in London’s High Court in order to keep secret the evidence it provided the US government for the prosecution of Meng Wanzhou. The case has now moved to Hong Kong, where deference to US security interests is not so powerful.

HSBC is at the center of the case, which centers on a briefing by Meng in Hong Kong. It has a moral obligation to release all the evidence in the case.

It also has a practical reason to release the evidence. HSBC is vulnerable to backlash from China.

About 35 per cent of its bank accounts are [in Hong Kong.] In 2019, pre-tax profits from Hong Kong and China totalled $14.9 billion — more than the company’s entire profits of $13.3 billion after losses in other markets, such as the UK, were accounted for.

Jamie Nimmo @JamieNimmo63 Curse of Huawei case deepens HSBC’s Chinese nightmare
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China wanted Huawei protections in EU trade deal

Finbarr Bermingham at SCMP got a copy of the draft EU-China trade agreement that included

China reserves the right not to open this service to investors from countries that block or arbitrarily discriminate against Chinese telecommunications enterprises in law or policy.

Ultimately, the clause apparently was struck, although the final text has not been released.

The deal, agreed on Dec 31, allowed European companies to own 50% of cloud data centers in China. Angela Merkel was the lead proponent for the mega-billion trade deal, backed by Emmanuel Macron. Trump and Pompeo strongly opposed the deal.

China buys $200 billion from Europe every year. EU investment in China is $120 billion. Mercedes sells twice as many cars in China than in Germany.

In the long run, that gives China enormous bargaining power.

Huawei first in 3GPP security testing

Under pressure, Huawei has invested $tens of billions in security. It only makes sense that it is tking the lead in conventional security testing. 3GPP, the industry’s standards body, confirms Huawei is the first to pass GPP’s Security Assurance Specifications (SCAS) testing in both LTE and 5G.

While an important symbol, it’s very hard to extrapolate from testing to truly effective security, No one is certain what threats will arise in the 5G era, It’s highly likely many new issues will be discovered for which there is no test plan, 5G will involve many more components, many of them cheap IoT devices. Many experts are fearfulof the enlarged “Attack Surface.”

Nor does testing like this tell us much about the real issue, penetration by a nation-state. The Russians have recently cracked slews of US government systems. The hacking group Cozy Bear penetrated, among others, the US Department of (Nuclear) Energy. Separately, Microsoft was deeply breached.

The real evidence on security is deeply classified and often distorted for political purposes. Neither I nor anyone not a part of the security apparatus can provide real answers.

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Ren: Huawei Will Build Parts, not Cars

China is producing 25 million cars this year and Huawei intends to be at the heart of all of them, a $50 billion market. It’s also a primary supplier to Daimler and Audi in Germany.

Thousands of engineers are working in the Intelligent Car Solution business unit, which was upgraded to the same position as phones in the Consumer Business Group under Yu Chengdong.

So many are working on automotive, some in China believed Huawei would build a car. Ren has now strongly denied that:

Huawei does not build cars, but we focus on ICT technology to help automakers build good cars. In the past two years, despite the constant changes in the external environment, we must be clear that building ICT infrastructure is the historical mission of Huawei. The more difficult it is, the more it cannot be shaken. Therefore, the company once again reiterated: Huawei does not build complete vehicles, but focuses on ICT technology to help auto companies build good cars, build good cars, and become an incremental component provider for intelligent connected cars.uawei does not build cars, but we focus on ICT technology to help automakers build good cars. In the past two years, despite the constant changes in the external environment, we must be clear that building ICT infrastructure is the historical mission of Huawei. The more difficult it is, the more it cannot be shaken. Therefore, the company once again reiterated: Huawei does not build complete vehicles, but focuses on ICT technology to help auto companies build good cars, build good cars, and become an incremental component provider for intelligent connected cars.

Complete text below

The MDC 600, introduced in 2018, offered chips, platform, operating system, and a development framework for an autonomous car. It’s since become clear that fully autonomous cars are not coming that soon. Caixin reports the 2020 MDCs have a more modest goal:

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The Pain of Letting Honor Go

Many of the 6,000 Honor/Glory employees cried at the announcement. Ren made a remarkable speech.

“Don’t feel bad about Huawei, think about your future! In the future, we are competitors. …It is not certain who wins or loses? We will not be polite to you. Some of you seek to defeat Huawei in the competition. They are heroes. Don’t reject them.” 

QQ News reports

“Let’s see you dear mother, please kiss your son goodbye, see you mother, don’t be sad, don’t be sad, wish us a safe journey…”

With the singing, many Huawei and Honor executives burst into tears. At 4 pm on November 25th, the honorable farewell party at Huawei’s Bantian headquarters in Shenzhen was dignified. At the opening, all participants sang “Chinese Men”, “Unity is Strength” and “Song of Communist Youth League Members.”

A Huawei employee who participated in the farewell party told “Deep Net”, “Huawei will sing “Chinese Man” for induction training and important meetings. This time, “The Song of the Communist Youth League Member” should be sung by President Ren. Participants sent emails asking everyone to prepare in advance.”

Honor is already buying chips that Huawei couldn’t and prepare to introduce half a dozen new phones.

U.S. Offering Deal to Meng; Case always was b______

WSJ says the US is willing to essentially abandon the massive international case through a “deferred prosecution agreement” that would contain no real penalty. The US spent $millions trying to prove Meng committed serious bank fraud. It was obviously political; the bank was not ripped off, even if the Huawei work in Iran was minimized.

From the WSJ:

[Meng’s lawyers] have spoken to Justice Department officials in recent weeks about the possibility of reaching a “deferred prosecution agreement.” … Ms. Meng would be required to admit to some of the allegations against her but prosecutors would agree to potentially defer and later drop the charges if she cooperated.
Ms. Meng has so far resisted the proposed deal, believing whe did nothing wrong.

If the U.S. could prosecute Meng for doing business with Iran, the chief executives of Nokia and Samsung would need to live in fear. Samsung is the #1 seller of mobile phones in Iran. I reported more than a year ago that Nokia was also active in Iran. They confirmed it.

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