Can you name the world’s largest smartphone makers? Surely, Apple, maker of the ubiquitous iPhone, and Samsung, the Galaxy manufacturer, come to mind. But you may be forgetting one that has rocketed to the top of the list in recent years: Huawei.
Why Huawei Is Hot
Huawei is a Chinese manufacturer that now stands as one of the world’s largest manufacturers of smartphones, and the largest maker of telecom equipment. As of the third quarter in 2019, Huawei captures 18% of the smartphone market share, surpassing Apple and just on the heels of Samsung, according to a report by Counterpoint, a global industry analysis firm.
Huawei reported more than $8 billion in profits in 2018.
However, the U.S. has refused to let Huawei purchase American-made software or chips for its products, and government officials have expressed concern that Huawei may use its latest wireless equipment to spy on Western nations. The U.S. has completely blocked Huawei from installing its telecom equipment here.
Despite having virtually no presence in the U.S. market, Huawei has seen remarkable growth. But can American investors profit from Huawei growth? Here’s what to know.
Can You Invest in Huawei?
Given the size and revenues of Huawei, you may assume it’s a great investment opportunity, alongside major U.S. tech stocks like Apple and Google. But according to Huawei, the private company is owned by its 96,768 employees, which means Huawei isn't not open to public stock trading. One recent academic paper disputes this claim and argues that it is more likely “effectively state-owned” by the Chinese government.
Huawei doesn’t sell shares of public stock, so it’s not possible to buy an ownership stake on any of the world’s markets. If you want to potentially own shares, you’d need to be an employee of Huawei based in China.
Huawei has been known to sell bonds to international investors, but they may be hard to find. The company last issued bonds outside China in February 2017, according to a May 2019 article by the Wall Street Journal, and there are no U.S. investment firms that actively market the ability to invest in Huawei bonds. The Journal reported that U.S.-based asset managers Fidelity and Blackrock may offer Huawei bonds in mutual funds, though the specific funds are unknown.
But even if you could easily purchase Huawei shares, it’s not entirely clear that it would be a good idea, given the complicated relationship between the company and the United States.
Alternatives to Huawei
You may be locked out of buying an ownership stake in Huawei, but that’s OK. Other investments allow you to profit from the growth of the smartphone market, growth in China, and the worldwide expansion of technological advancement.
Many of Huawei’s competitors are publicly traded and have shown good results in recent years. If you are wary about picking individual stocks, some mutual funds and exchange-traded funds (ETFs) include major device manufacturers. Look for funds focused specifically on the tech sector, such as the iShares U.S. Technology ETF or the Vanguard Information Technology ETF.
If you want exposure to the Chinese market, consider a broader fund that invests in Asia or emerging markets or Chinese market funds focused specifically on technology.
The Bottom Line
Huawei has quickly become one of the largest makers of smartphones in the world, surpassing Apple and trailing only Samsung as of 2019. But Huawei is not publicly traded, leaving investors unable to cash in on the company’s growth. A strained relationship between the company and the United States government further complicates things for anyone wishing to invest in the firm.
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