Huawei Reports Biggest Ever Revenue Drop as Growth Stutters

• US sanctions hit tech giant’s core handset business hard

• Group focusing on software and ‘less risky’ areas

Chinese telecom giant Huawei has reported its biggest ever revenue drop with second-quarter income plunging 38%, according to figures released on Friday.

Smartphone sales have been suffering from US sanctions imposed by former president Donald Trump in 2019 and the offloading of its budget brand Honor, while new growth areas have yet to fully mature.

For the first half of the year, Huawei’s overall revenues were 320.4 billion yuan ($49.6 billion), down 29% year-on-year, the Shenzhen-based firm said. Its net profit margin was 9.8%, up slightly from the same period last year.

Huawei’s consumer products division, which includes smartphones, achieved first-half sales of 135.7 billion yuan, down 47% from a year earlier.

The sanctions hobbled Huawei’s handset business as the firm was barred from acquiring technologies crucial to its operations, such as microchips, and cut it off from using Google’s Android operating system.

That led to Huawei dropping out of the top five vendors in China for the first time in more than seven years in the second quarter, shipping 6.4 million units, according to consultancy Canalys.

It was a big fall from the 27.4 million handsets shipped in China in Q2 2020, excluding shipments of Honor budget handsets. Huawei sold the brand in November.

The consumer business brought in over half of the company’s revenue in 2019.

Revenue also fell 14% in the first half from Huawei’s telecoms equipment business, which a spokesperson said was partially down to the slowdown in China’s 5G rollout.

Pivot to ‘less risky areas’

Huawei is trying to pivot towards software and business areas not at risk of US pressure, according to an internal memo from founder and CEO Ren Zhengfei seen by Reuters in May.

“Our aim is to survive, and to do so sustainably,” said Eric Xu, Huawei’s rotating chairman, in a statement on the results. “We’ve set our strategic goals for the next five years.”

The company started rolling out its Harmony operating system in June, meaning it is no longer wholly reliant on Google’s Android platform.

US sanctions barred Google from providing technical support to new phone models.

First-half revenue from Huawei’s enterprise business group grew 18% to 42.9 billion yuan, as the Covid-19 outbreak spurred industry demand for ICT connectivity, a spokesperson said.

Huawei is also seeing strong growth in its cloud services business, more than doubling in size in the first quarter to take a 20% market share in China, according to Canalys.