Huawei reports meagre revenue growth in first quarter as coronavirus, US sanctions take a toll
- The company said its net profit margin in the first quarter was 7.3 per cent, lower than the 8 per cent in the same period last year
- IDC expects growth to resume in global smartphone shipments in 2021, driven by accelerated 5G efforts
The world's largest telecommunications equipment vendor generated revenue of 182.2 billion yuan (US$25.7 billion) in the first quarter of 2020, up from 179.7 billion yuan in the same period last year. No revenue figures for the company’s different business segments were released.
The company said its net profit margin in the first quarter of the year was 7.3 per cent, lower than the 8 per cent in the same period last year.
The sliding net profit margin reflects one of the most challenging times in the company’s history.
Huawei’s consumer business chief Yu eyes growth in 2020
“I think Huawei is doing relatively OK, especially in China in the first quarter,” said Nicole Peng, vice-president of mobility research at Canalys. “But in terms of overseas markets, it is tricky because there are other impacts beyond the pandemic for Huawei, such as the lack of GMS [Google Mobile Service] support [due to the US ban]. Overall, there will be a lot of challenges for Huawei this year.”
Huawei did not disclose its shipments of smartphones in the first quarter.
According to research firm IDC, global smartphone shipments are expected to drop 10.6 per cent year on year in the first half of 2020 due to the pandemic. A decline of 2.3 per cent is expected for the full year, with overall shipments volume at just over 1.3 billion.
IDC expects growth to resume in global smartphone shipments in 2021, driven by accelerated 5G efforts.
Last month, Huawei launched its new P40 series phones, dubbed the “monster camera” due to the number of lenses, but they did not come with Google apps. Further, the coronavirus outbreak, which has seen governments worldwide impose restrictions on large groups of people gathering in one place, has forced more people to shop online, dampening the entire smartphone industry.
Yu Chengdong, chief executive of Huawei's consumer business group, said in an interview with local media earlier this month that revenue “grew slightly in the first quarter” for the consumer business group, the major business segment for Huawei, which includes smartphones, personal computers, and tablets.
Its smartphone business continued to grow in its domestic market of China in the first quarter even as overseas users are hesitant to buy Huawei new smartphones without Google apps such as Gmail and YouTube.
Yu still expects revenue at the unit to grow this year despite pressure from the coronavirus health crisis, which has hit supply chains and squeezed consumer demand across the world. However, he warned about more potential risks if the US imposes further restrictions on Huawei.
A Reuters report last month said that the Trump Administration was considering tightening Huawei’s ability to access semiconductors made using US manufacturing equipment – including those made by Taiwan’s Taiwan Semiconductor Manufacturing Co.
Earlier this month, Reuters reported that Huawei was gradually shifting production of chips designed in-house away from TSMC and towards mainland Chinese wafer foundry SMIC in preparation for more US restrictions
Last month Huawei reported 19.1 per cent growth in revenue to a record 858.8 billion yuan (US$121 billion) in 2019. The consumer group accounted for 467.3 billion yuan of total group revenue while China contributed 59 per cent of total sales.
