Can You Invest in China’s Huawei?


In August 2018, Huawei surpassed Apple to become the second largest smartphone maker in the world behind Samsung. Although the Chinese company has piqued the interest of investors with this achievement, it still remains a private entity that’s fully owned by its employees. That means it’s not traded on any public market, and people other than employees can’t invest in it.

Despite the inability to invest in Huawei, investors may still want to keep an eye the company that has overtaken Apple – especially since in October 2018, it unveiled smartphones with on-screen fingerprint recognition that are meant to rival Apple’s iPhone XS and Google’s Pixel 3. The phones are called the Mate20 and the Mate20 Pro, and they became available for purchase on Nov. 1, 2018. 

Where Huawei Does Business

Beyond making smartphones, the company also builds telecommunications networks and services, and it provides solutions for enterprise customers. Huawei has more than 180,000 employees in more than 170 countries. It does the majority of its business in China and the EMEA region, or Europe, the Middle East and Africa and in the Asia-Pacific region.

Huawei’s smartphones are not available from carriers in the U.S. The company has attempted to do business in the U.S., but it has not had much success due to suspicions that the company is untrustworthy. In 2018, AT&T and Verizon decided not to carry the company’s smartphones after reported pressure from politicians and the Federal Communications Commission to back out of the deal. In addition, Australia has banned Huawei from selling equipment that would be used for its government’s national broadband networks, but it can still sell to private companies there.

Important Numbers

Huawei operates in the carrier, enterprise, and consumer segments of the market. Since it’s not a public company and is not traded on any stock market, Huawei is not required to submit SEC filings. However, it still reports its numbers on a regular basis. 

For its fiscal year 2017, Huawei reported that its total revenue was $92.55 million, and its compound annual growth rate was 26%. The company said it shipped 153 million smartphones in 2017, and its global brand awareness rose 86%.

Huawei reported that business in China rose 29%, its business in the Asia Pacific region grew 10.3% and its business in EMEA rose 4.7% during the year, while its business in the Americas fell 10.9%. The company also reported that its consumer business rose 31.9% during the year, its enterprise business rose 35.1% and its carrier business rose 2.5%. 

Huawei also noted that it was doing business with 197 Fortune Global 500 companies in 2017, 45 of which are Fortune 100 companies.

Mystery and Secrecy 

Huawei is privately held by the company’s China-based employees only. Anyone working for Huawei outside of China cannot buy into the company. The shareholders admit they don’t understand the structure, are not provided updated information on their holdings and have no voice. Thirty-three union members elect nine candidates to attend the annual shareholder meeting. Shareholders receive dividend payments, and they have the potential to earn bonuses based on performance. Their salaries also are reviewed on an annual basis.

In 2014, upper management was asked if it would consider a stock market listing, but that idea was immediately rejected. This possibility can’t be completely ruled out in the future, though, especially if Huawei ever becomes in need of more capital. It’s not likely Huawei would list in the United States, partly because of its poor relationship with the country and consistent rumors that the company uses its technology for spying purposes.

As far as investing in Huawei, there’s one potential solution, but it’s far-fetched. In order to received dividends, you would have to become an employee of the company in Shenzhen, China, and you would have to make management believe you aren’t a spy. Good luck.

Original Source