The Wall Street Journal - 31.07.2019

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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