Huawei navigates US sanctions to make a profit in 2020

Technology

2020 was a difficult year for the telecoms industry, but Huawei may have a strong claim when it comes to who had the roughest ride. On top of the coronavirus pandemic, numerous waves of US sanctions inhibited the company throughout the year, with the Trump administration pressuring nation’s around the world to exclude the vendor from their upcoming 5G networks.
However, despite this seemingly unrelenting pressure, Huawei has today reported a profit for the 2020 financial year, making 64.6 billion yuan ($9…

2020 was a difficult year for the telecoms industry, but Huawei may have a strong claim when it comes to who had the roughest ride. On top of the coronavirus pandemic, numerous waves of US sanctions inhibited the company throughout the year, with the Trump administration pressuring nation’s around the world to exclude the vendor from their upcoming 5G networks.

However, despite this seemingly unrelenting pressure, Huawei has today reported a profit for the 2020 financial year, making 64.6 billion yuan ($9.83 billion), an increase of 3.2% on the previous year. However, this is markedly slower than the previous year’s growth of 5.6%.

Revenue also grew, but only by 3.8% – a far cry from the roughly 30% growth rate the company had enjoyed prior to the start of the US sanctions in 2019.

When looking at the figures in more detail, it becomes clear that Huawei is a company that has had to pivot substantially over the past year.

Take Huawei’s consumer business, for example, which represents over half its revenue. With Huawei’s smartphone business hit heavily by US sanctions affecting the semiconductor industry, Huawei was forced to sell its budget smartphone brand Honor back in November, with its position as one of the world’s leading smartphone manufactures falling under siege from rivals like Samsung. 

However, this business in fact raised $74.1 billion in 2020, up 3.3% on the previous year, growth which has been attributed to an increasing interest in smartwatches and laptops by Huawei officials. Whether this growth can be maintained, however, remains to be seen, with data suggesting that Huawei’s overseas phone shipments have fallen by around 40% in the last quarter of 2020.

Meanwhile, the growth of Huawei’s carrier business was more stagnant. Battling to maintain its 5G share in numerous countries around the world, this segment posted revenues of $46.4 billion, a year-on-year increase of just 0.2%.

But it was Huawei’s enterprise business that really shone in 2020, growing by 23%. For now, this segment is the smallest of Huawei’s three business groups, recording $15.4 billion in revenue.

Overall, Huawei’s growth appears to have been primarily driven by the support of its domestic market, with Chinese revenues up 15.4% this year.

Outside of China, however, it was a different story. Revenues were down 12.2% in Europe, the Middle East, and Africa; down 8.7% throughout the rest of Asia; and, perhaps unsurprisingly, down 24.5% in the Americas.

These results appears to demonstrate two clear trends. Firstly, that US sanctions are having a severe effect on Huawei’s bottom line, with the true extent of this only starting to be realised in the last quarter’s results, where revenue fell 11% to $33.5 billion. Secondly, that Huawei is willing to adapt to overcome these challenges, remaining committed to R&D (investing $21.65 billion in 2020, up from $20.1 billion the previous year) and expanding into new enterprise markets, such as agriculture.

With the disruption of the coronavirus pandemic still very much underway, and the new Biden administration in the US showing little signs of relenting in their geopolitical clash with China, 2021 will be a very interesting year for Huawei, who insist they will continue to innovate their way to further growth. 

“Over the past year we’ve held strong in the face of adversity,” said Ken Hu, Huawei’s Rotating Chairman. “We’ve kept innovating to create value for our customers, to help fight the pandemic, and to support both economic recovery and social progress around the world.”

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