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US sanctions damage Huawei

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Mr Ren retains a veto over key issues, including candidates for the board of directors and a supervisory board. The model for this, Mr Jiang explains, is partly that of the British constitutional monarch. He says the veto is designed to be a "deterrent and constraint" rather than to be regularly exercised. Mr Jiang joined the company in 1989, two years after it was founded, when it consisted of only about 40 staff. He says the employee-ownership model came about to bring in capital as well as to attract and retain staff, and has allowed Huawei to focus on long-term research and development.
Huawei has also tried to explain more about its ownership structure arguing that it will not allow interference from the Chinese state.

 

Chinese telecoms giant Huawei has admitted that sanctions imposed on it by the US in 2019 have had a major impact on its mobile phone business.

The US took action amid claims that the company posed a security risk and last July, the UK said it would exclude the company from building its 5G network.

Growth elsewhere in the company meant that it did make a profit overall.

But chairman Ken Hu, referring to the impact of the sanctions, told the Media: “It has caused a lot of damage to us.”

Mr Hu, speaking at the launch of Huawei’s 2020 report, called for a review of the global supply chain of critical technology.

Huawei has also tried to explain more about its ownership structure arguing that it will not allow interference from the Chinese state.

Mr Hu described 2020 as a year of challenges, with a significant hit to the mobile phone business and slowing revenue growth.

“Life was not easy for us,” he said.

Strength in other sectors and in the Chinese market meant overall revenue was up 3.8% at $136.7bn (£99.3bn) and profits up by 3.2% at $9.9bn.

Mr Hu said restrictions had hurt US suppliers and global consumers as well as Huawei. “We think this is a very unfair situation,” he told the Press.

In response, the company has stockpiled chips, invested in research and development, and diversified its supplies.

It has also reportedly been developing its own chip production within China. Building domestic capacity for the most-advanced chips is currently a high priority for China.

There is currently a worldwide shortage of chips, and Mr Hu called for a “rethinking” and a “review” of the globalised semi-conductor supply chain.

US authorities have argued that using Huawei’s 5G equipment opens up countries to the possibilities of data being accessed by the Chinese state, or becoming vulnerable to being switched off.

Huawei has defended its independence from the Chinese state by trying to explain its unusual model of ownership.

Jiang Xisheng, chief secretary of the board at Huawei, told the Media that its employee-shareholders “will not allow external interference into the company’s operations”.

The company gave the Media a remote video tour of the vault where more than 30 large cabinets contain records of the employees who own shares, listing when each individual bought them and for how much.

Ross Moyo

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