How Sanctions Are Starting To Squeeze Huawei—Data Sheet

July 31, 2019, 12:46 PM UTC

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Media coverage of Huawei Technology’s announcements of its half-year financial results reminds me of the famed sketch from a 1888 German postcard where some people see a beautiful, young woman and others see an ugly, old hag.

Accounts in the New York Times and Wall Street Journal see the beauty: “Huawei’s Sales Jump Despite Trump’s Blacklisting,” declares the former; “Huawei Sales Display Resilience in the Face of U.S. Blacklisting,” agrees the latter. Reuters and the South China Morning Post also accentuate the positive.

But Bloomberg (“Huawei Sales Growth Slumps as Sanctions Start to Bite“) and TechCrunch (“What Huawei Didn’t Say In It’s ‘Robust’ Half-Year Results“) see the hag.

For those optimistically inclined about prospects for the Shenzhen-based telecom giant, Huawei’s announcement offered some obvious data points with which to lead: sales jumped 23% to $58 billion in the first six months of 2019 compared to the same period a year earlier, notwithstanding U.S. sanctions. Smart phone sales in the first half increased 24% year-over-year. Compare that to Apple, which just reported a 12% quarterly decline in iPhone sales.

Pessimists focused on the company’s second quarter, which the company didn’t break out but was easy to deduce because Huawei did report that first quarter revenue jumped 39% to $32 billion. Bloomberg, after a bit of simple math, concluded Huawei’s sales gained 13% in the second quarter, a shift it termed a “dramatic slowdown.” TechCrunch concludes that “being on the U.S.’s entity list — a ban that prevents American companies from doing business with Huawei — is putting a real squeeze on the Chinese firm.”

Huawei chairman Liang Hua acknowledged the firm faces “difficulties ahead” but stressed the company is “fully confident in what the future holds.”

I’m usually a good news kinda guy, but in this case, I have to side with the skeptics. Huawei is a global powerhouse, but the salient development here is that U.S. sanctions are inflicting real pain.

Huawei’s announcement came as U.S. and Chinese negotiators convened in Shanghai in an effort to revive stalled trade negotiations. Chinese officials greeted their American counterparts with a banquet Tuesday night at the famed Peace Hotel on Shanghai’s Bund. But even as the two sides sat down to dine, President Trump accused China of reneging on earlier trade promises and dismissed prospects of deal before the 2020 presidential election. Talks concluded Wednesday night China time with little progress.

On Tuesday, U.S. Commerce Secretary Wilbur Ross said the administration could respond as early as next week to companies that have requested special licenses to sell Huawei.

Meanwhile, the Wall Street Journal notes China has introduced new cybersecurity rules that could be used to inflict substantial pain on U.S. firms including Cisco Systems, IBM, Juniper Networks, and Dell Technologies should the trade negotiations fail.

Finding beauty in any of this seems to get harder every day.

Clay Chandler

On Twitter: @ claychandler



Viva Cuba libre. Cuba implemented a new set of rules governing Internet usage that will allow private homes and businesses to connect more easily via imported networking gear and Wi-Fi routers. But state-owned telecom carrier Etecsa will remain the only Internet service provider.

Can't look away. Speaking of new rules, a bill proposed by Sen. Josh Hawley dubbed the Social Media Addiction Reduction Technology, or SMART, Act would ban techniques used to hook people in to social media. Facebook's (and many other sites) infinite scroll would be illegal, as would autoplay videos. “Big Tech has embraced addiction as a business model,” Hawley tweeted. The bill obviously has along way to go before becoming a law.

Rotting in his cell. Prosecutors in California have charged defunct digital currency exchange BTC-e and executive Alexander Vinnik with multiple crimes, including money laundering and operating an unlicensed exchange. Vinnik, who was arrested in Greece two years ago on similar charges there, has denied the accusations.

Hitchhiker's guide to the galaxy. Enough sad news–some things are getting better. Waze is making it easier to find strangers who want to carpool. And YouTube's cable bundle alternative, YouTube TV, will be the first such online streaming video service to get local PBS channels for subscribers.

Bit and bytes. In data news, Apple joined the Data Transfer project, an effort already including Google and Facebook that is meant to make it easier for consumers to move data between cloud services. And Apple, Google, and Microsoft joined with a health insurance and hospital group known as the CARIN Alliance to make patient data and health records easier to access.

The best laid plans. In the quarterly earnings dance, Apple waltzed, Advanced Micro Devices stumbled, and Spotify discoed on. Apple said its revenue rose 1% to $53.8 billion, better than analysts expected, and more importantly forecast up to $64 billion of revenue for the next quarter versus the average analyst prediction of $61 billion. Apple shares, already up 33% in 2019, rose another 4% in premarket trading on Wednesday. At AMD, sinking sales of gaming consoles and GPUs for mining crypto prompted a 13% drop in revenue to $1.5 billion. Forecasting $1.8 billion next quarter, AMD let down analysts looking for closer to $2 billion on average. The stock, up a staggering 83% this year, slipped 4%. At Spotify, revenue grew 31% to $1.9 billion as the number of premium subscribers reached 108 million, also up 31%. Spotify's stock price, up 37% in 2019, slipped 2%.

Medium rare. Elsewhere in the world of finance, the problem for investors in hyper-hot stock Beyond Meat wasn't earnings. It was that underwriters agreed to let the company sell 3.3 million more shares, less than three months after the initial public offering. After rising to 9 times its IPO price, the stock dropped back 12% on Tuesday. New York online real estate startup Compass wants to go public in the next year or two, reports TechCrunch. Meanwhile, the company raised $370 million in a deal valuing it at $6.4 billion, almost 50% more than a year ago.


After yesterday's deep dive into the history of paper money, let's look to the future today. University of Pennsylvania professor (and all around good guy) Kevin Werbach examines some of the ramifications of Facebook's Libra digital currency proposal for a deep dive of his own at Foreign Affairs. And he's made a connection to the Crusades and the Knights of the templar. Yes! It's also just a great explainer of what Facebook is trying to do and what is at stake. And–spoiler alert–he ends on an ominous note:

Should the company be tempted to push too hard with Libra, the history of the Templars may be instructive. Money transfer helped the order become one of the wealthiest institutions in medieval Europe—a sprawling financial empire and powerful creditor to kings. After the crusaders were pushed out of the Levant, however, the Templars languished. And then the order collapsed abruptly at the beginning of the fourteenth century. The French King Philip IV, deeply in debt to the Templars, arrested and tortured many of its members on trumped-up charges of heresy. He eventually convinced the pope to ban the order, coincidentally canceling his debts. The Templars’ power and wealth were their undoing. Facebook should take heed.


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There are so many wearables these days, well beyond smartwatches and fitness trackers. There are your smart motorcycle helmets, your smart glasses, your smart tee shirt. But I'm kind of intrigued with L’Oréal's MySkin Track UV wearable sensor. It is cute as a button–and kind of looks like a button. It's maybe a little too easy to lose, too. Maybe someone could just add a UV sensor to the face of my smartwatch?

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.

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