Huawei is downplaying coronavirus impact on its smartphone sales, but experts say it will suffer more than Apple

2020-02-23 02:01:00

Shop assistants wearing face masks wait for customers in a Huawei store in Beijing, China on February 17, 2020.
Shop assistants wearing face masks wait for customers in a Huawei store in Beijing, China on February 17, 2020.

Andrea Verdelli/Getty Images

  • The novel coronavirus has been a disaster for companies relying on China for supply chain and customers, with firms including Apple, Foxconn, AP Moller-Maersk, Air France-KLM all issuing warnings.

  • Chinese smartphone giant Huawei has been coy on coronavirus impact, with one executive stating there would be no impact on its global supply chain over the next three to six months.

  • Analysts are deeply skeptical and say Huawei will be worse affected than Apple, since it is hugely reliant on Chinese consumers for its smartphone business.

  • Visit Business Insider’s homepage for more stories.

The outbreak of the coronavirus has dented the smartphone industry, with Apple warning that it expected a hit to revenues thanks to factory shutdowns and store closures.

Samsung, the world’s biggest phone maker, is currently less affected since about half its production has moved to Vietnam.

But China’s biggest phone maker has been surprisingly — some say unbelievably — optimistic about the coronavirus’ impact.

Huawei is second-biggest phone manufacturer worldwide, outstripping Apple in terms of units shipped (Samsung is the largest).

In a statement sent to Business Insider this week, Huawei’s president of carrier business Ryan Ding played down the coronavirus’ effect on the company’s fortunes.

“We are still doing the daily assessment, but we can say that for the next three to six months, there will not be much impact on our global supply chain,” said Ding.

The coronavirus outbreak originated in the city of Wuhan, situated in the province of Hubei. Ding acknowledged local factory closures but said all Huawei’s factories in Guangdong, the province bordering on Hubei, have now re-opened.

He added: “But still, some of the factories in Wuhan have not resumed their work yet. So according to the current situation we can say that our assessment is that in the short term future there will not be much impact on our supply chain capability and manufacturing.”

Business Insider spoke to four analysts to get their take on how hard the outbreak is likely to hit Huawei.

‘I struggle to believe it is business as usual’

Huawei phone
Huawei phone

David Becker/Getty Images

“Considering how dependent Huawei and other China-based brands are on their own supply chain I struggle to believe it is business as usual,” analyst Carolina Milanesi said.

“Not having factories in Hubei is not the issue. The issue is how many people traveled to the province and are now not able to get back to work,” she added. “This coupled with a lockdown status many cities are implementing which… will affect Huawei’s performance.”

Forrester analyst Thomas Husson said Huawei’s business could easily take a bigger hit than Apple as the company has a bigger market share in China, where quarantines and restrictions have affected consumer behavior. 

“Huawei’s smartphone market share being much higher than Apple’s, the business impact is likely to be more important,” he said. This was echoed by Lynette Luna at GlobalData.

“It’s hard to believe at all that Huawei will come out unscathed in terms of supply chain and sales due to the coronavirus,” she said.

“It has a significantly larger retail presence in China than Apple does, and China accounts for more than 50% of its sales. In fact, we expect all Chinese vendors to be heavily impacted as they rely on domestic sales in China for most of their shipments. Even if the virus is contained in a few weeks, it will take some time for operations to go back to normal — two to three months.”

And it’s bad timing for 5G rollout

Alla Valente, another Forrester analyst, said that even if Huawei does manage to carry on with business as usual, coronavirus is likely to have a severe impact on the rollout of 5G tech.

“There’s an overall manufacturing slowdown of electronics, smartphone displays, fiber optics, and other components necessary for 5G rollout. This isn’t just a risk to Huawei but to the entire industry. It’s possible that the coronavirus has become a wake-up call for nation states to better assess the risks of global supply chains,” she said.

This comes at a sensitive time for Huawei pitching its 5G tech, as the US has been aggressively lobbying its allies to exclude Huawei from their 5G networks, alleging that Huawei acts as a proxy for Chinese government espionage. Huawei has repeatedly denied the accusation.

Valente added that coronavirus has been a wakeup call for businesses which are overly-reliant on global supply chains.

“For far too long, many businesses have dismissed the potential impact of pandemics as exaggerated scare tactics,” she said. “Coronavirus puts into perspective that pandemics aren’t a matter of if, but a matter of when.”

Read the original article on Business Insider

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