Huawei to pay bonuses to employees who helped it thrive through the U.S. supply chain ban
According to Reuters, Huawei announced today that it is paying out the equivalent of $286 million in bonuses to its research and development teams and employees that helped it get by without its U.S. supply chain. Besides rewarding some of its employees with a bonus, Huawei is also doubling the pay this month of nearly all of its 190,000 workers.
The story is well known by now. The U.S. considers Huawei a national security threat because, under Chinese law, it can be asked to spy on American companies and consumers. As a result, U.S. lawmakers are afraid that the manufacturer’s phones and networking equipment contain backdoors sending information to Beijing. Huawei has repeatedly denied this, but on May 16th the U.S. Commerce Department placed the firm on the Entity List preventing it from accessing its U.S. supply chain.
Right away, it seemed that the Entity List placement would harshly impact Huawei. The company had spent $11 billion on U.S. parts in 2018 and companies like Qualcomm, Intel and Micron announced that they were cutting ties with the company. And when Google followed suit, many wondered how Huawei would weather the storm. As it turned out, Chinese consumers, riding a wave of patriotism, bought Huawei devices in numbers as a reaction to what they consider to be U.S. bullying of the company. During the third quarter of this year, shipments of the company’s phones in China soared 66% year-over-year giving it an incredible 42.4% share of the domestic market.
Huawei, which shipped a total of 206 million phones last year, had expected to deliver 300 million units in 2019 before being banned from the stateside supply chain. It also hoped to supplant Samsung as the largest smartphone manufacturer in the world. After being placed on the Entity List, many expected that Huawei would be lucky to top last year’s numbers. But as October came to a close, the firm announced that it had already shipped 200 million units 64 days ahead of last year. And now it is targeting deliveries of 270 million smartphones for 2019; if that target is achieved, it would be an impressive 31% annual gain. While losing the license to use the Google Play services version of Android and Google’s core apps like the Play Store, Gmail, YouTube, Maps and Search might not matter that much in China, it has affected international shipments of Huawei’s handsets. However, the amazing domestic support for the company’s phones means that it will probably be one of the top growing phone manufacturers in the world this year.
The manufacturer’s performance does seem to dovetail with comments made by its founder and current CEO Ren Zhengfei. Ren said just last week in an interview with the Wall Street Journal that “We can survive very well without the U.S.” He also doesn’t expect the U.S. to remove Huawei from the Entity List. “They may as well keep us there forever because we’ll be fine without them,” the 75-year old billionaire said.
Huawei says that it has been able to obtain some parts from foreign factories owned by U.S. companies. In addition, the Commerce Department is expected to soon issue temporary 90-day licenses allowing some American tech firms to ship parts to Huawei “necessary to maintain and support existing and currently fully operational networks and equipment, including software updates and patches.” The first such 90-day period expired in August and the Commerce Department received 206 requests for the second and final round of temporary licenses. The manufacturer also benefited from a decision by chip designer ARM Holdings that reversed its previous decision not to sell to Huawei because of some “original American technology” in its designs. But last month, ARM said that its “v8 and v9 are UK-origin technologies” allowing it to license them to the company.