Huawei’s 2021 profits surged despite a 28pc revenue decline

28 Mar 2022

Huawei logo at the MWC in 2019. Image: Huawei

The tech giant said its financial structure has become more resilient and flexible, as it continues to deal with the impact of US sanctions.

Chinese tech giant Huawei has reported a sales decrease today (28 March), as its revenue dropped by more than 28pc in 2021. However, the company reported a net profit of 113.7bn Chinese yuan, a year-on-year increase of nearly 76pc.

This is the first time on record that Huawei has reported a yearly decline in revenue, according to CNBC. The company’s rotating chair, Guo Ping, said that the tech giant’s performance for 2021 was “in line with expectations”.

He added that Huawei’s enterprise business experienced steady growth, while its consumer business expanded into new domains.

The tech giant’s enterprise business reported revenue of more than 102bn Chinese yuan, representing a 2.1pc increase. However, its consumer business dropped by nearly 50pc to 243.4bn Chinese yuan.

The company’s carrier business saw a 7pc decrease, with a reported revenue of 281.5bn Chinese yuan, making it the largest business segment for Huawei in 2021.

“Despite a revenue decline in 2021, our ability to make a profit and generate cash flows is increasing, and we are more capable of dealing with uncertainty,” Huawei CFO Meng Wanzhou said.

Huawei has been facing pressure from the US in recent years. At the beginning of 2019, the US levied several criminal charges against the Chinese telecoms company.

A few months later, Huawei was placed on the US entity list due to security concerns, which essentially barred US companies from doing business with Huawei without government approval.

Despite this, Huawei reported that its 2019 sales jumped to $122bn. At the time, however, company chair Eric Xu predicted that 2020 would be a “difficult year”.

In May 2020, the US Department of Commerce introduced further restrictions preventing foreign manufacturers of semiconductors using American technology in their operations from shipping their products to Huawei unless they get a licence from the US.

Later that year, Huawei was classified as a national security threat by the US Federal Communications Commission in. This banned American telecoms firms from spending government money on equipment from the Chinese company.

Meanwhile, the Covid-19 pandemic and subsequent chip shortage also caused problems for smartphone makers including Huawei.

Amid these issues, the Chinese company reported a revenue increase of 3.8pc for 2020. This represented slow growth compared to the previous two years, when the company achieved year-on-year revenue growth of almost 20pc.

Despite the sanctions and the revenue losses for 2021, Huawei said its overall financial structure has become more resilient and flexible. The company said it has signed more than 3,000 commercial contracts for industrial 5G applications.

The tech giant also appeared to prioritise R&D during 2021, with 107,000 employees – more than half of its global staff – working in this sector for the year. Huawei’s expenditure for R&D was more than 22pc of its revenue for 2021.

“Moving forward, Huawei will advance its journey of digitalization, intelligent transformation, and low carbon,” Guo said. “Relying on talent, scientific research and an innovative spirit, we will continuously increase investment to reshape our paradigms for fundamental theories, architecture and software, and build our long-term competitiveness.”

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Leigh Mc Gowran is a journalist with Silicon Republic