B4| Wednesday, July 31, 2019 *** THE WALL STREET JOURNAL.**
TECHNOLOGY WSJ.com/Tech
Resilient
Huawei posted a 23% increase
in first-half revenue despite
being blacklisted by the U.S.
First-halfrevenue
Source: the company
Note: 100 billion yuan = $14.5 billion
400
0
100
200
300
billion yuan
’162015 ’17 ’18 ’19
401.3B
determine who gets to per-
form those tasks. That would
give the association significant
control over the network, and
could allow it to force compa-
nies on the network to main-
tain data on the identities of
all its users and make it avail-
able to regulators.
Mr. Fanusie said the even-
tual outcome will be two
worlds of cryptocurrencies:
one regulated and one unregu-
lated.
Mr. Fanusie said law en-
forcement’s job will be easier
because officials will know
where to look for crime: at the
point where the unregulated
space mixes with the regulated
space. Eventually, even drug
smugglers need to cash out.
“The unregulated space will
be there,” he said, “but it will
be smaller.”
The software that runs
blockchain-based digital cur-
rencies, including bitcoin,
maintains a public ledger that
records every transaction.
That ledger is maintained by
groups whose work is publicly
reviewable. That means any
attempt at altering the record
should be visible for everyone
to see, making voiding or
counterfeiting difficult.
For bitcoin, so-called min-
ers process the transactions,
and “nodes” broadcast them
publicly. Anybody can down-
load the software to run either
process. That means there is
no central authority to force
compliance with the law. Bit-
coin service providers that
submit to regulations do so
voluntarily.
On Libra, the members of
the Libra Association would
has used bitcoin to its advan-
tage. Federal officers used the
bitcoin transaction history of
Ross Ulbricht to help convict
him in 2015 of running the on-
line drug site Silk Road.
The crypto sector has been
moving in this direction for
several years. Many prominent
businesses adhere to standard
banking rules, and several na-
tions, notably Japan and Swit-
zerland, have crafted laws spe-
cifically for digital currencies.
In the U.S., Attorney Gen-
eral William Barr discussed in
a speech last Tuesday how en-
cryption was “enabling dan-
gerous criminals to cloak their
communications and activi-
ties,” reviving a debate over
whether technology companies
should be required to provide
law enforcement a way to un-
lock some communications.
group that will govern Libra,
the Libra Association, will im-
pose rules on the companies
that use the network. Compa-
nies such as exchanges and
wallet providers that want to
use the Libra network will have
to comply with regulations
around money laundering. That
is something that can’t be
forced on the bitcoin network,
where there is no one party or
group controlling access.
“I believe that we can im-
prove on the current system,”
Mr. Marcus told Congress in
his recent testimony. “I think
this system might be poten-
tially better.”
Facebook declined to com-
ment beyond the testimony
given by Mr. Marcus. The Libra
Association also declined to
comment.
Law enforcement previously
grained in its structure. Cash
is valuable to criminals be-
cause there is no transaction
or ownership record. Bitcoins
carry an unalterable transac-
tion record with them, but not
always an ownership record.
With Libra, both the transac-
tions made and who made
them will be recorded.
“You’re going to see an ex-
pansion of exchanges and wal-
let services that have stronger
[anti-money-laundering] pro-
tocols and restrictions,” said
Yaya Fanusie, a former Central
Intelligence Agency analyst
and security consultant. “That
would be good for law enforce-
ment.”
Mr. Marcus implied in his
June 17 testimony that law en-
forcement could have access to
that information when needed.
Facebook and the nonprofit
the Chinese company. U.S. of-
ficials say it is a security
threat—a charge Huawei has
long denied.
Huawei smartphone ship-
ments in China rose 31% in the
second quarter, good for a re-
cord 38% share of the world’s
largest phone market, accord-
ing to Canalys. The technology
market analyst said Chinese
consumers flocked to the be-
leaguered company in a sign
of support.
Mr. Liang said Tuesday that
Huawei hasn’t seen any im-
pact from the U.S. blacklisting
on the company’s rollout of its
next-generation network tech-
nology. So far it has signed 50
commercial 5G contracts
world-wide, including 11 con-
tracts in the weeks since the
entity listing was announced,
he said.
Beijing views a relaxation
of Huawei’s blacklisting as a
precondition for trade talks
with Washington. Commerce
Secretary Wilbur Ross has
half of the year came from
consumer devices.
Huawei devices, however,
are almost nowhere to be
found in the U.S. because ma-
jor carriers won’t partner with
SHENZHEN, China— Huawei
Technologies Co. reported a
sharp rise in revenue despite
its blacklisting by the Trump
administration, but the Chi-
nese telecommunications gi-
ant said restricted access to
U.S. technology remains a
challenge.
The Shenzhen-based com-
pany said for the first half of
2019 its revenue was 401.3 bil-
lion yuan ($58.3 billion), with
growth accelerating to 23%
compared with last year’s first
half.
The closely held company
self-selects numbers it re-
leases, but the report offered
the first window into its fi-
nancial health since the U.S.
Commerce Department put
Huawei on its so-called entity
list in May.
The listing, which cited na-
tional security concerns, re-
quires suppliers to apply for
licenses to continue selling
American technology to Hua-
wei, restricting the company’s
access to components and
software used in its smart-
phones and cellular equip-
ment.
“Neither production nor
shipment has been inter-
rupted, not for one single
day,” Huawei Chairman How-
ard Liang said Tuesday at a
news conference.
However, Huawei said it
continues to face obstacles to
securing certain crucial tech-
nology and signaled tough
times for its once-booming
consumer products operation,
including its smartphone busi-
ness.
“We continue to see growth
even after we were added to
the entity list,” Mr. Liang said.
“That’s not to say we don’t
have difficulties ahead. We do,
and they may affect the pace
of our growth in the short
term.”
The U.S. blacklisting has
damped Huawei’s smartphone
success in overseas markets.
Mr. Liang said those sales are
at about 80% of their level be-
BYDANSTRUMPF
total procurement budget of
about $70 billion.
The company has been
working on a replacement op-
erating system in case it loses
access to Android. The soft-
ware, called Hongmeng, was
originally designed for tele-
communication networks, and
plans for developing a soft-
ware ecosystem around the
operating system are unclear.
Huawei’s chief U.S. security
officer, Andy Purdy, said in
Australia on Tuesday that the
Commerce Department could
take longer to grant export li-
censes than previously ex-
pected given the continuing
China-U. S. trade talks.
“There is nothing chiseled
in stone that indicates that
several weeks is actually going
to happen,” Mr. Purdy said, re-
ferring to recent comments
from Mr. Ross that licenses
could be granted in the next
few weeks.
—Mike Cherney
contributed to this article.
said the U.S. would begin
granting export licenses to
Huawei suppliers whose sales
to the Chinese company don’t
put U.S. national security at
risk.
Some U.S. companies have
resumed shipments to the Chi-
nese company, but Mr. Liang
said licensing of some key
technologies, including An-
droid, remains a question
mark.
“As for the timing when we
will get the licenses, we don’t
know,” he said.
Huawei has reported it
bought $11 billion of American
technology in 2018, out of a
fore the Commerce Depart-
ment’s action.
The slippage abroad has
been countered by a surge in
domestic purchases of Huawei
smartphones. But analysts
said prospects in a highly
competitive market rest on
whether the company can re-
gain access to Google’s An-
droid operating system for fu-
ture device models.
Access to the operating sys-
tem was curtailed under the
blacklisting.
“There are some hints the
entity list has already caused
damage to Huawei,” said Mo
Jia, an analyst with data
tracker Canalys. “The second
half will be certainly be a lot
more challenging.”
Huawei was the world’s
second-largest smartphone
vendor during the first quar-
ter, behind Samsung Electron-
ics Co. and ahead of Apple
Inc., according to Interna-
tional Data Corp. More than
half of its revenue in the first
Huawei Sales Boom Despite U.S. Sanction
Trade blacklisting has
mild effect overall, but
company says growth
may yet be harmed
The Chinese maker of network equipment and smartphones was cut off from some Americantechnology. A Huawei display at a trade conference in Barcelona.
TONI ALBIR/EPA/SHUTTERSTOCK
Lawmakers were up in arms
this month about whether Li-
bra, Facebook Inc.’s proposed
new cryptocurrency, would be
a haven for money launderers
and other criminal activities.
Facebook, though, says Libra
could be a valuable tool for law
enforcement, partly because of
the vast amounts of informa-
tion that will be generated
about its users. That was the
message Facebook executive
David Marcus took to Congress
during hearings this month.
The conversation represents
how some portions of the
crypto world are trying to
move beyond the industry’s
Wild West heyday and become
a viable payments option.
The ability to use crypto to
help catch criminals is in-
BYPAULVIGNA
To Counter Libra Criticism, Facebook Highlights Tracking
Strong smartphone
sales by the company
in China made up for
slippage abroad.
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