Richard Yu, CEO of Huawei’s consumer business group, is giving a keynote presentation this afternoon at CES in Las Vegas. But he might be scrambling to figure out what to talk about. It had been anticipated that he would announce a ground-breaking deal in which AT&T would begin selling Huawei smartphones. However, the Chinese company was stung with reports yesterday that AT&T had backed out of the arrangement.
This is just the latest setback for Huawei’s ambitions in the United States.
Six years ago, congressional investigators issued a report warning that Huawei’s networking equipment could potentially be used for spying in the U.S. Although Huawei’s gear is not officially banned in the country, that report has cast a dark shadow on the company’s U.S. ambitions.
Elsewhere in the world, Huawei is thriving. The company is privately owned, but it chooses to publish an annual report. According to its last report, its sales revenue in 2016 was $75.1 billion, up 32 percent from the previous year. It has three business units. The carrier business accounts for 55.7 percent of the company’s revenues; the consumer business accounts for 34.5 percent; and the enterprise business accounts for 7.8 percent; with miscellaneous accounting for the balance.
Thus far, Huawei has not gained a toehold with large U.S. telecom companies due to the chilling effect of the 2012 congressional report.
The Wall Street Journal spoke with Ken Hu, one of Huawei’s three rotating chief executives, who insists the company isn’t a security threat. Its “global business is testament to the fact that Huawei is not a vehicle for any government or any agency of putting surveillance on another country,” Hu told the Journal.
But despite Huawei’s assurances, the topic is politically explosive. The comments on the Wall Street Journal’s story are full of the expected vitriol.
For big U.S. service providers it would be nice to have Huawei as a competing vendor against the handful of other big telecom equipment providers: Nokia, Ericsson, and Cisco. There is especially a desire for more competition as providers such as AT&T and Verizon begin building out their 5G networks.
A Huawei presence in the U.S. might also be good for consumers who pay more for wireless service than consumers in other countries.
One thing that distinguishes Huawei from its telecom equipment competitors is that it has a huge smartphone business. In 2016 it shipped 139 million smartphones, a 29 percent increase over 2015. It competes with Apple and Samsung as one of the top three smartphone manufacturers in the world.
Huawei today is advertising its smartphones on some U.S. media outlets, such as Recode. Presumably, these ads were purchased in anticipation of announcing a deal with AT&T.
Neither Huawei nor AT&T have commented on the report that AT&T will not be selling Huawei phones. It will be interesting to see what Yu has to say in his CES keynote this afternoon.
***Update 1/10/2018 Huawei said talks with U.S. operators remain ongoing despite its failure to secure a channel partnership with AT&T for its Mate 10 Pro smartphone. But the company will persevere in its efforts to work with U.S. carriers.