Huawei Revenues Drop By 16.5% In First Quarter As US Sanctions Take Effect

With the sanctions imposed by the United States hit the business, the Chinese tech giant Huawei reported a sharp drop in its revenues for the first quarter.

According to unaudited financial results revealed by the company, in the three months ending March 31, there was a 16.5 per cent year on year drop in the revenues of Huawei to 152.2 billion Chinese yuan ($23.5 billion). This is the second straight quarter when there has been a drop in revenue for the company.

This drop in revenues is also primarily because of the hit to the consumer business of the company which includes smartphones and other devices. Since 2019 when Huawei and Google had parted ways, the Chinese firm has not been able to ship its phones with Google’s licensed Android operating system. In the fourth quarter of 2020, there was a 41 per cent drop in the shipments of Huawei’s smartphones. Last year, its Honor budget smartphone brand was sold by the company to a consortium of investors.

The United States had added Huawei to its so called list of entities in 2019 which effectively meant that no American company could do business with Huawei including exchanging of technologies. Another move by the US in 2020 also effectively cut off the Chinese firm from key chip supplies it needs for its smartphones.

“2021 will be another challenging year for us, but it’s also the year that our future development strategy will begin to take shape,” Eric Xu, Huawei’s rotating chairman, said in a statement.

“We thank our customers and partners for their ongoing trust. No matter what challenges come our way, we will continue to maintain our business resilience. Not just to survive, but do so sustainably.”

Huawei however claimed that it had in fact managed to better its profit margin by about 3.8 per cent year on year to 11.1 per cent for the quarter. This is partly because of an amount of $600 million that Huawei got in patent royalties during the quarter.

The company had announced in March this year that it would start charging money from smartphone making companies in the form of royalties against the use of the Chinese company’s patented 5G technology. There are thousands of declared 5G patent families owned by Huawei and it is expecting that a new revenue stream will be available to the company from this part of its business even as there are troubles with revenue generation from other parts of its business.

Going forward, Huawei will also increase investments in software, the company said on Wednesday, so that it is able to incorporate software and services in its revenue mix.  The company has been boosting its efforts in software, including areas like cloud computing and smart cars, as U.S. sanctions hurt its hardware unit.

(Adapted from CNBC.com)

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