Huawei posts worst interim sales slump in decades as smartphone, telecoms gear businesses shrink amid US sanctions

Huawei’s first-half revenue fell 29.4 per cent to US$49.5 billion
Revenue from the company’s consumer business group, comprising mainly smartphone sales, nearly halved to US$21 billion in the same period

Huawei

Iris Deng

Published: 4:24pm, 6 Aug, 2021

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Huawei Technologies Co reported its worst interim revenue decline in decades, as US trade sanctions on essential hardware components and software hammered sales at its core smartphone business.

First-half revenue fell 29.4 per cent from a year ago to 320 billion yuan (US$49.5 billion), according to data released on Friday by the Shenzhen-based company, which has been reporting its financial results regularly for more than a decade even as it remains a privately held firm.

Revenue from Huawei’s consumer business group, comprising mainly smartphone sales, nearly halved to 135.7 billion yuan in the first half, from 255.8 billion yuan in the same period last year, as the company’s international market share dwindled over its lack of access to advanced chips.

Huawei’s mainstay network gear business, which sells to telecommunications network operators, declined to 136.9 billion yuan, down 14.2 per cent from a year earlier. The drop was attributed to project delays at China Mobile, the world’s largest wireless network operator, in which Huawei has secured the lion’s share of supply contracts for 5G base stations.

The company, the world’s largest telecoms equipment maker and formerly China’s biggest smartphone vendor, did not report its first-half net profit, but indicated that its interim net margin widened to 9.8 per cent from 9.2 per cent last year.

“Our aim is to survive, and to do so sustainably,” Huawei rotating chairman Eric Xu Zhijun said in a statement on Friday.

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Still, the company’s enterprise business proved a bright spot. This segment generated sales of 42.9 billion yuan, up 18.2 per cent from a year ago.

That result has bolstered Huawei’s moves to diversify its operations. Earlier this week, the company announced plans to crack the top ranks of cloud services providers in the Asia-Pacific region amid the struggles of its smartphone and network equipment businesses under US trade sanctions.

“We are looking to become a top three cloud services provider in the Asia-Pacific in the next three years,” Zeng Xingyun, president of Huawei Cloud operations in the region, told the South China Morning Post in Hong Kong this week.

Huawei, which was added to Washington’s trade blacklist in 2019, has been forced to make adjustments because of the US sanctions. The company has struggled with tighter restrictions imposed last year, covering access to chips developed or produced using US technology, from anywhere.

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Last month, Huawei released its flagship smartphones P50 and P50 Pro, which do not support 5G mobile connections.

“US sanctions over the past two years have limited our development of 5G smartphones,” said Richard Yu Chengdong, chief executive of Huawei’s consumer business group, at the virtual product launch. “We can only use 5G chips to provide 4G functionality.”

As such, the company faces the grim prospect of further losing relevance in the global smartphone market. In the second quarter, Huawei fell out of the top-five smartphone vendor shipment rankings in mainland China – the industry’s largest market – for the first time in more than seven years.