Huawei Revenue Halves as Profits Rise

· Chairman Released after three years House Arrest in Canada

· R&D Share Ups to 22% of Revenue

[ABS News Service/29.03.2022]

Chinese vendor Huawei registered its highest annual profit ever in 2021 due mainly to one-off gains from the sale of its Honor sub-brand and other businesses, but overall revenue dropped sharply as consumer business sales were cut by half.

In an online earnings call, rotating Chairman Guo Ping (pictured) put on a brave face and pointed to the positives, insisting its performance was in line with forecasts but acknowledged it has plenty of challenges ahead in 2022.

“We will continue our fight for survival,” he declared. Guo said its ability to thrive relies on its continued investment in R&D. “We are doubling down on our efforts in basic science. Since Huawei is unable to access certain advanced technology due to US trade sanctions, he said it must boost its strategic investments.

Net profit last year jumped 75.9 per cent from 2020 to CNY113.7 billion ($17.8 billion) due to one-off extraordinary gains, while revenue plunged 28.6 per cent to CNY636.8 billion, as its operations were hit by the sanctions.

The company stated that excluding the extraordinary gains, the company’s main business posted a year-on-year increase in net profit margin.

CFO Meng Wanzhou said on the call that despite the revenue decline, “our ability to make a profit and generate cash flows is increasing, and we are more capable of dealing with uncertainty.”

It was Meng Wanzhou’s first media appearance since her September release from three years of house arrest in Canada.

Meng attributed the improved margins to moves to adjust its product mix and improve its supply chain planning, enabling it to shorten the cycle from order to revenue. Moves to improve operational efficiency drove a CNY10 billion drop in selling and administrative expenses.

Group results

Revenue from its troubled Consumer Business Group (including devices) dropped 49.5 per cent year-on-year to CNY243.4 billion due to trade restrictions. Apart from smartphones and tablets, revenue from wearables and smart screens increased 30.3 per cent.

Turnover from its carrier group (including operator networks) declined 6.9 per cent to CNY281.5 billion, with 50 per cent of sales generated by markets outside China.

Enterprise revenue inched up 2.1 per cent to CNY102.4 billion, with cloud revenue growing 34 per cent year-on-year to CNY20.1 billion.

Domestic sales fell 30.9 per cent to CNY413.3 billion, accounting for 64.9 per cent of total company sales, unchanged from 2020.

R&D spending in 2021 rose 2.8 per cent to CNY142.7 billion, accounting for 22.4 per cent of total revenue, up from 15.9 per cent in 2020.