Huawei reports second straight quarterly decline in sales as US sanctions knocked company off its growth pace

Celia Chen

Huawei Technologies’ reported its second consecutive decline in quarterly sales, as growth in the world’s largest producer of 5G telecommunications equipment was hit by sanctions enacted by the United States and some allies.

Huawei’s first-quarter revenue fell by 16.5 per cent to 152.2 billion yuan, from 182.2 billion yuan (US$28.1 billion) in the same period last year mainly due to a shrinking consumer business, the company’s main revenue earner, the company said in a statement.

Huawei, which is not listed on any stock exchange, has been reporting its financial results regularly since 2000, as if it were a publicly traded company. Its net profit margin rose by 3.8 percentage points to 11.1 per cent, the result of the company’s ongoing efforts to improve quality of operations and management efficiency, as well as a patent royalty income of US$600 million, the company said.

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That implies the Shenzhen company’s quarterly net profit is at 16.9 billion, according to calculations by the South China Morning Post. The company did not disclose net income figures and did not break down revenue numbers for its numerous business divisions.

“2021 will be another challenging year for us, but it’s also the year that our future development strategy will begin to take shape,” said Eric Xu, Huawei’s rotating chairman in the company’s statement. “No matter what challenges come our way, we will continue to maintain our business resilience. Not just to survive, but do so sustainably. As always, we will remain focused on the needs of our customers and keep delivering practical business value.”

Huawei is emerging from its toughest year on record, after sanctions by the former Trump administration hit its smartphone and network gear-making businesses. The Biden White House has kept up the pressure, forcing the tech giant to seek new growth areas such as smart agriculture, health care, cloud computing and the connective tech for smart cars.

“The decline is within expectations considering the important role of its consumer business and how the US trade ban has impacted its smartphone business globally,” said Will Wong, a Singapore-based analyst at tech research firm IDC. “2021 will be a crucial year to make a turnaround, especially with the support of the automotive and cloud computing businesses ... the huge addressable market size for smart vehicles gives Huawei an opportunity to offset its smartphone losses.”

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Richard Yu, the head of Huawei’s consumer business, said at a press event in Shanghai last week, that US sanctions had hurt its smartphone supply chain.

“The electric vehicle is the only product that can offset losses in our smartphone business as they command high prices – although overall sales are not yet as high as smartphones,” Yu said.

Huawei last year reported group revenue of 891.4 billion yuan (US$136.7 billion), up 3.8 per cent from a year ago, its slowest annual revenue growth in the past decade.

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