NOK Nokia Corp

By Stu Woo in London and Dan Strumpf in Hong Kong 

Huawei Technologies Co. lost ground last year to Western rivals in cellular-equipment markets outside China, according to an industry research firm, a signal the U.S. campaign to curb the Chinese manufacturer is starting to make an impact.

Huawei's share of revenue from selling wireless-equipment around the world, excluding China, fell 2 percentage points, according to Dell'Oro Group, coming in at about 20% in 2020. Huawei remained in third place behind rivals Ericsson AB and Nokia Corp., which both picked up market share last year, according to the research firm. Ericsson solidified its ex-China market share lead at around 35%, up 2 percentage points, while Nokia gained 1 percentage point to finish the year with about 25% share.

Huawei late last year lost its briefly held crown as the world's largest smartphone maker, falling to No. 5 under the weight of the U.S. pressure. Now, it is feeling the heat in the company's core business of selling the gear that goes into mobile networks.

A Huawei spokeswoman referred to an internal speech earlier this year by Ren Zhengfei, the company's founder, in which he told employees the company's ties with customers "were as strong as ever" and "we kept our transactions, delivery, supply and networks going uninterrupted."

In the same speech, Mr. Ren said Huawei's revenue and profits increased last year despite its challenges. But he said there was need to retreat from some markets: "We must dare to abandon some countries, some customers, some products and some scenarios," he said.

When Chinese sales are included, Huawei remains the world's largest wireless-equipment provider overall, and its global share grew last year. China eclipsed North America last year to become the industry's biggest market, according to Dell'Oro. It now represents about a third of global sales. Despite the pandemic, spending on cellular equipment, which includes antennas and connected components, exceeded expectations in multiple regions and reached $35 billion globally, said Stefan Pongratz, an analyst at Dell'Oro.

Outside of China, though, Washington is contributing to an industry shift. The Trump administration took aim at Huawei, saying Beijing could compel it to spy on or disrupt networks, a contention the company has denied. Pressured by the U.S., many allies have banned or limited the use of Huawei equipment in their build-outs of next-generation 5G networks, citing national security. The new Biden administration has said it considers Huawei a security threat and would work with allies to secure their telecom networks.

Nations that have enacted or are considering such restrictions -- including Australia, the U.K. and several other European countries -- comprise more than 60% of the world's cellular-equipment market, Mr. Pongratz said. More than 25 European telecom providers have switched from Huawei to another supplier in recent years, he said.

After the U.K. banned Huawei's 5G equipment, for example, Britain's BT Group PLC said it would replace its Huawei gear, a process that it estimated would cost about $700 million. It signed on Nokia to become its biggest infrastructure provider.

"The efforts of the U.S. government have curbed the rise of Huawei," Mr. Pongratz said. "They're starting to make a difference."

Huawei's ascent to the top of the telecom-industry over the past decade worried U.S. leaders, who said the company could send its major non-Chinese rivals, Ericsson and Nokia, out of business. So great were the concerns that then-Attorney General William Barr last year said that Washington should consider investing in Ericsson and Nokia.

In China, Huawei's sales rose. The company accounted for half of China's 5G equipment orders last year, with smaller Chinese rival ZTE Corp. No. 2 at 29%, said Edison Lee, a telecom analyst at Jefferies. Ericsson came in at 12%. The Chinese market provides Huawei large and reliable customers. Some important foreign markets, most notably Germany, remain open to Huawei gear.

Write to Stu Woo at Stu.Woo@wsj.com and Dan Strumpf at daniel.strumpf@wsj.com

(END) Dow Jones Newswires

March 07, 2021 07:14 ET (12:14 GMT)

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