Sales of Huawei smartphones are expected to drop by 40% as the United States government's recent trade policies begin to take effect.
In May, President Donald Trump announced that many high profile Chinese companies would not be allowed to buy key technology and services from U.S. based firms without special agreements.
Huawei was hit heavily by the new rules which will restrict its access to the U.S. made chips, as well as Google's Android operating system.
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The company initially put on a brave face announcing plans to make their own operating system and to use locally made chips. Huawei founder, Ren Zhenfei, announced on Monday that the company was preparing for a drastic dip in sales, saying they expect total sales would be down $30bn over the next two years.
Revenue drastically drops
“In the next two years, I think we will reduce our capacity, our revenue will be down by about $30bn dollars compared to forecasts, so our sales revenue due this year and next will be about $100bn,” Mr. Ren said during a panel discussion in China.
He said the company had been surprised by Trump's administration policy and that the restrictions are bad news for both Chinese and American companies.
“I think both sides will suffer,” he said. “No one will win.”
Google warns of security threat if Android is dropped
Google executives have also warned that their ability to provide the Android operating system to the major mobile phone makers, may increase security risks. Consumers are unsure whether they should buy Huawei products, which is affecting sales.
Ren told reporters that the company has a lot of work to do, to become totally independent from the U.S. relationships.
“In the next two years, we are going to do a lot of switchover of different product versions that will take time and that will take time to ramp up, and it will take some time to test whether that works,” he said in Mandarin, according to a Huawei translation.
“After that step, we will be stronger."
Huawei to be frozen out of 5G rollout
The U.S. administration is determined to ensure Huawei isn't part of the global rollout of the new 5G network, claiming the company poses a national security threat. Nations across the world are currently negotiating with tech providers to deliver the superfast network.
The United States has put pressure on allies to freeze Huawei out of any deals. Australia and New Zealand have said they will not work with Huawei, but the United Kingdom may still use Huawei products.
Huawei has announced it will work with Russian telecom company MTS to develop Russia's 5G network.