Huawei reports 23pc growth despite US trade crackdown

30 Jul 2019124 Views

Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Pin on PinterestShare on RedditEmail this to someone

Image: alexeynovikov/Depositphotos

Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Pin on PinterestShare on RedditEmail this to someone

Huawei has emerged resilient even amid increasing difficulty relating to the US entity ban it was placed under in May.

Chinese telecoms giant Huawei came out strong in its latest earnings report, posting year-on-year growth of 23.2pc despite issues arising from an entity ban in the US.

The company reported that H1 sales revenue in its carrier business reached $21.3bn with a net profit margin of 8.7pc. According to the company, it has secured 50 commercial 5G contracts to date and has shipped more than 150,000 base stations to markets around the world.

In its enterprise business, Huawei reported revenue of $4.6bn for the period, and says it has continued to enhance its ICT profile across multiple domains such as cloud, artificial intelligence, campus networks, IoT and intelligence computing.

Huawei’s consumer business, which became the biggest share of the company’s revenue for the first time in 2018, hit $32.1bn. Huawei smartphone shipments, including Honor phones, reached 118m units, up 24pc year on year. It also reported growth in its shipment of tablets, PCs and wearables.

“Revenue grew fast up through May,” said Huawei chair Liang Hua. “Given the foundation we laid in the first half of the year, we continue to see growth even after we were added to the entity list. That’s not to say we don’t have difficulties ahead. We do, and they may affect the pace of our growth in the short term.

“But we will stay the course,” he continued. “We are fully confident in what the future holds and we will continue investing as planned – including a total of CNY 120bn in research and development this year. We’ll get through these challenges, and we’re confident that Huawei will enter a new stage of growth after the worst of this is behind us.”

A timeline of the entity ban

In May, the US Department of Commerce placed Huawei on an ‘entity list’ of companies that are unable to buy technology from US firms without government approval. This effectively banned Huawei from conducting business with US-based companies. As a result, Google announced that it would cease to enable Huawei’s Android licence.

A cascade of US chipmakers, such as Xilinx, Intel, Qualcomm and more, subsequently confirmed that they would comply with the US ban, though also quietly lobbied the US government to ease the restrictions.

The US has accused Huawei of aiding the Chinese government in espionage, a charge that the firm vehemently denies.

The ban had a ripple effect on the company’s business, leading it to delay the launch of its Mate notebook due to its reliance on Intel chips and Microsoft software.

Reporting by Bloomberg previously indicated that the company was preparing for a hit to its international smartphone shipment in the range of 40pc to 60pc as a result of the ban. Huawei founder Ren Zhengfei said at the time: “We didn’t expect the damage to be this serious.”

Some analysts have surmised that the ban even had a knock-on effect on Samsung’s chip business. Samsung reported profit drops in the range of 56pc in a preliminary release relating to its impending earnings report.

In the wake of talks mounted at the G20 summit between US president Donald Trump and Chinese president Xi Jinping, Trump announced that Huawei would be allowed to buy from US suppliers again in certain circumstances.

Huawei logo on the modern building facade. Image: alexeynovikov/Depositphotos

Eva Short is a Journalist at Siliconrepublic.com

editorial@siliconrepublic.com