Technology

Huawei posts 3.2% rise in profit as revenues decline from outside of China

US export blacklist put company’s handset business under immense pressure

A man walks past a shop for Chinese telecoms giant Huawei in Beijing. The telecom giant says it achieved a record profit last year. File photograph: Nicolas Asfouri/AFP via Getty Images

Wed Mar 31 2021 - 16:15

China’s Huawei Technologies reported modest annual profit growth for 2020 as overseas revenues declined due to disruption caused by the pandemic and the company’s placement on a US export blacklist.

Net profit for 2020 came in at 64.6 billion yuan (€8.37billion), up 3.2 per cent, compared to growth of 5.6 per cent a year earlier.

Huawei was put on an export blacklist by former US president Donald Trump in 2019 and barred from accessing critical technology of US origin, affecting its ability to design its own chips and source components from outside vendors.

The ban put Huawei’s handset business under immense pressure, with the company selling off its budget smartphone unit to a consortium of agents and dealers in November 2020 to keep it alive.

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"Over the past year we've held strong in the face of adversity," Ken Hu, Huawei's rotating chairman, said at an event at the company's headquarters in Shenzhen.

“In 2020 we saw a slowdown in the growth rate and life was not easy for us. The US restrictions have impacted our consumer business, especially our mobile phone business.”

Yet Huawei reported that its consumer business, which includes smartphones, brought in 482.9 billion yuan, up 3.3 per cent year on year, and accounted for over half of the company’s revenue.

While Hu did not specify how much smartphone revenue declined, he said its drop was offset by a 65 per cent rise in sales from connected devices such as smartwatches and laptops, and other devices.

The company is confident that it will keep a leading position in the market and that the company has enough stockpiles of supplies to meet customers’ needs.

The company’s carrier business, which includes 5G network equipment, brought in 302.6 billion yuan, an increase of just 0.2 per cent a year earlier.

Huawei's growth was driven by its home market, with revenue in China up by 15.4 per cent to 584.9 billion yuan.

Its business declined everywhere else, with revenues down 12.2 per cent to 180.8 billion yuan in Europe, the Middle East and Africa, down 8.7% to 64.4 billion yuan in the rest of Asia, and down 24.5 per cent to 39.6 billion yuan from the Americas.

Hu said he could not say clearly how much of the decline was due to the pandemic’s impact or from geopolitical factors, but said he was confident that overseas sales would impove in 2021.

Huawei is privately held, but in recent years it has released annual results audited by US firm KPMG in a bid for transparency.

Revenue from the company’s enterprise segment soared 23 per cent year on year to 100.3 billion yuan, although it still makes the smallest in revenue of the three business groups.

The company invested 141.9 billion yuan in R&D spending in 2020, up from 131.7 billion yuan a year earlier.

Huawei’s cash flow from operating activities was 35.2 billion yuan, down by 61.5 per cent on a year earlier. This was due to the increased expenditure on stockpiling supplies last year and due to increased R&D spending, said Hu. – Reuters

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