Huawei’s Smartphone Business Remains Crippled Due to US Sanctions, Revenue Slides in Q3

Revenue of China's Huawei plummeted 38 percent in the third quarter compared to the same period a year earlier, with US sanctions having hobbled its smartphone business and new potential growth areas still in their infancy.

The Chinese telecoms giant posted revenue of CNY 455.8 billion (roughly Rs. 5,34,064 crore) for the first three quarters on Friday, down by almost a third on the same period a year earlier, with a profit margin of 10.2 percent.

Revenue for the third quarter alone came to CNY 135.4 billion (roughly Rs. 1,58,649 crore), based on Reuters calculations.

Performance was "in line with forecast", said rotating Chairman Guo Ping.

Former US President Donald Trump put Huawei on an export blacklist in 2019 and barred it from accessing critical US-origin technology, impeding its ability to design its own chips and source components from outside vendors.

The restrictions have badly hurt Huawei's handset business, with rotating Chairman Eric Xu saying in September that revenue from smartphones would dip by around $30 billion (roughly Rs. 2,24,828 crore) to $40 billion (roughly Rs. 2,99,770 crore) this year.

While Huawei did not break down its third quarter figures by business segment, the company said that the decline is mainly attributable to its consumer business.

Huawei occupied 8 percent of China's smartphone market share in the third quarter, down from 30 percent a year earlier when it was the market leader, according to Counterpoint Research.

On the other hand, Honor, formerly a sub-brand which Huawei sold to keep it alive last November, sold 96 percent more phones in the same quarter compared to a year earlier, grabbing a 15 percent share of the China market, Counterpoint said.

Huawei is looking to develop new growth revenue streams outside of base station infrastructure and handsets, with a cloud business, and smart ports, mining and smart electric vehicles businesses.

In June it launched its Harmony operating system on smartphones, and is looking to supply software to autos companies.

But these new lines will take some time to bear fruit, executives said.

The company, however, has received a boost from the return of its chief financial officer and daughter of its founder Ren Zhengfei. Meng Wanzhou returned to work at its headquarters on Monday after almost three years fighting extradition to the US in Canada, with Chinese officials signalling the case against her had been dropped to help to end a diplomatic stalemate.

© Thomson Reuters 2021