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Huawei Stops Smartphone Production Lines After Blacklisting, Report Claims
Zak DoffmanContributor

According to a report in the South China Morning Post, “Foxconn, the Taiwanese electronics manufacturer that assembles handsets for many phone brands including Apple and Xiaomi, has stopped several production lines for Huawei phones in recent days as the Shenzhen company reduced orders for new phones.” The newspaper cited “people familiar with the matter, who asked not to be named as the information is private.”

Huawei maintained its global number two spot for smartphone sales in the first quarter of the year, but its goal to hold off Apple and maintain that position for the rest of the year, quite apart from catching market-leader Samsung, looks lost.

Earlier this month, IDC reported that “the only [Q1] highlight from a vendor perspective was Huawei… which moved its way into a clear number two spot as the only smartphone vendor at the top of the market that saw volumes grow during 1Q19. Impressively, the company had year-over-year growth of 50.3% in 1Q19 with volumes of 59.1 million units and a 19.0% market share. Huawei is now within striking distance of Samsung at the top of the global market.”

The company had set the objective of catching Samsung by the end of next year. “As the new situation has emerged, it is too early to say whether we are able to achieve the goal,” Zhao Ming, president of one of Huawei’s brands told reporters at a Chinese launch event for new Honor devices. “All the difficulties make us stronger, no matter in mentality or in action,” he added.

There has been lots of speculation outside China as to the impact on new phone sales and prices as well as trade-in values since the U.S. blacklisting was announced. Most reports have suggested that sales are down, and trade-in prices have markedly reduced making upgrades more difficult for existing users. In the U.K., the company has also seen its flagship 5G devices pulled from the country’s first network launches.

Huawei has reportedly endured problems of a different kind in Hong Kong, where local media has claimed that “scores” of Huawei users have seen their smartphones “recently malfunction, suddenly shutting off and becoming unusable.” According to the reports, this followed an operating system update during the week. The media reports said that “Huawei did not have an immediate solution – customers could reinstall the phones’ system, but that would delete all the phone’s data.”

Unsurprisingly attention turned to the U.S. sanctions against the company which has resulted in Google withdrawing Android support for future smartphone models. This should not impact existing phones though. The Asia Times reported that “Francis Fong, the honorary chairman of the Hong Kong Information Technology Federation, said the situation was strange as it involved various handset models. He suspected it might involve security issues in the updated file sent to the Android handset.”

The Hong Kong news is almost certainly an awkward coincidence. Nothing suggests that any existing Huawei smartphones should malfunction as a result of the U.S. sanctions. But for the company, the stories around prices and sales numbers and user experiences will abound until the situation settles. And in a fast-moving consumer market, that is almost impossible to manage.

Huawei is relying on China to find a way through before too much market share erodes. On Friday, Beijing announced a “non-reliable entity list” in direct response to the U.S. sanctions, targeting U.S. firms that have withdrawn support from Huawei. “Foreign enterprises, organizations or individuals that do not comply with market rules, deviate from a contract’s spirit or impose blockades or stop supplies to Chinese enterprises for non-commercial purposes, and seriously damage the legitimate rights and interests of Chinese enterprises, will be included on a list of ‘unreliable entities’,” said a government spokesperson in Beijing.

The hope now for the embattled manufacturer is that U.S. President Trump conjures up some expedient trade talk concessions, where the Huawei situation is widely expected to become a major negotiation point.

https://www.forbes.com/sites/zakdoff.../#8fd2d936eed6

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