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Huawei OZ Sales Being Questioned As US Government Moves On The Company

Huawei whose sales went backwards in the last quarter in Australia, is under investigation over sales of smartphones to U.S.-sanctioned countries like North Korea, Iran and the Sudan.

The investigation poses a serious threat to the Chinese smartphone maker.

Last month the Australian arm of the Chinese Company told research Company IDC that they would not be suppling anymore sales numbers, or data to the research group. Some rivals including a major telco has told ChannelNews that the Companies sales in the first quarter was less than the 57,000 reported.

One major carrier contacted ChannelNews after a story appeared in the Financial Review that indicated that Huawei was doing better in Australia than the IDC numbers actually indicate.huawei-ascend-p7-video-capture

Technology writer on the AFR, John Davidson, claimed that Huawei has become Australia’s third-largest mobile phone brand behind Apple and Samsung, according to the latest sales figures.

Strong but increasingly fragmented demand for Android phones has opened a crack in the Apple/Samsung duopoly, allowing through the likes of Huawei, Sony, Telstra, ZTE and Alcatel, says Kantar Worldpanel ComTech, a research outfit which monitors consumer behaviour.

Several brands and a major carrier has said “This is simply not true”. “The numbers are pure fabrication and are not based on real data” one vendor told ChannelNews.

Huawei also gave Davidson favourable treatment when it came to reviewing their latest smartphone.

According to IDC the #3 phone brand in Australia is Huawei arch rival Alcatel.

Davidson has said that the data that his story was based on was supplied by Huawei.

Now another controversy has blown up around the Chinese Company.

large portion of Huawei’s suppliers could be barred from working with the Chinese tech giant.

In a Subpoena sent to Huawei, the Commerce Department is demanding information about the company’s exports to Cuba, Iran, North Korea, Sudan, and Syria, in order to determine whether Huawei broke U.S. sanctions, the New York Times reported over the weekend.

The news comes three months after U.S. officials punished another Chinese IT giant, ZTE for violating sanctions to Iran.

Huawei declined to comment on the news, but a company spokesman said, in a prepared statement, “Huawei is committed to complying with the applicable laws and regulations in the markets where Huawei operates and export control measures promulgated by the international community.”

Fortune reported that Huawei is China’s most global tech company, a telecommunications giant selling $60 billion a year in servers, switches, and increasingly smartphones across Europe, Africa, and the Middle East. Almost 60% of sales come from outside China.

The subpoena is potentially momentous because Huawei’s business is so reliant on U.S. suppliers, who could be restricted from selling to Huawei if the company is found to have violated U.S. sanctions.

(Huawei hasn’t been accused of wrongdoing, and the New York Times makes clear the subpoena does not indicate a criminal investigation.)

Huawei spent $7 billion on American components in 2014, a third of its total component spending, for services, switches and other equipment. Its past suppliers have included U.S. firms ADI, Broadcom, Dell, Hewlett-Packard, IBM, Microsoft, Oracle, and Qualcomm. Without U.S. suppliers, its manufacturing is in jeopardy.

Huawei must be concerned. The U.S. government has for years warily eyed Huawei and its supposed ties to the Chinese military—ties grounded in Huawei’s founder Ren Zhengfei’s history serving in China’s People’s Liberation Army. In 2012, the U.S. House Intelligence Committee labelled the company a security threat. Huawei denied the committee’s assertion, but it remains effectively blocked from signing large U.S. telecom contracts.

ZTE’s case earlier this year could provide a roadmap of how the U.S. proceeds should it find Huawei in violation of sanctions. The Commerce Department initially restricted ZTE from purchasing American components without a special license before lifting the restrictions a couple weeks later. As part of the agreement to lift restrictions, it was reported, three senior ZTE executives including the CEO were replaced.

Depending what the U.S. discovers, Huawei could find itself in a similarly vulnerable position in what is serious news for China’s most ambitiously global company.

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