Huawei Technologies Co Ltd, the #1 telecom equipment company #2 smartphone maker, reported a 13.1% rise in revenue in the first half of the year, showing slower growth as U.S. officials continue to pressure the company’s suppliers and customers. Revenue rose to 454 billion yuan ($64.90 billion) in the first half of the year. ($1 = 6.9958 Chinese yuan renminbi or RMB). That was compared to 401.3 billion yuan revenues the year before. Huawei’s growth rate was down from 23.2% in the first half 2019. Huawei said net profit margins were 9.2%, up from 8.7% in the first half 2019.
FILE PHOTO: Huawei’s new flagship store is seen ahead of tomorrow’s official opening in Shanghai, following the coronavirus disease (COVID-19) outbreak, China June 23, 2020.
REUTERS/Aly Song/File Photo: REUTERS
The results were published as Huawei fights a U.S.-led campaign to ban it from Europe’s 5G markets and choke off its supplies of components based on U.S. design expertise or manufacturing technology. Speculation has risen that UK authorities will this week move to exclude Huawei from the country’s 5G market just months after saying they would restrict it to 35% of any radio access or fiber broadband network.
The UK government previously thought such restrictions – combined with a ban on Huawei in the intelligent “core” of any network – would mitigate the risk and minimize disruption to service providers reliant on Huawei technology.
But security watch dogs are now worried the latest U.S. sanctions would heighten risks and potentially threaten Huawei’s ability to continue serving UK operators.
While other European governments and operators have similar concerns, Huawei has been able to rely on a 5G rollout in China for sales growth.
Victor Zhang, the company’s head of government affairs, told UK officials last week that Huawei will this year erect about half a million base stations for Mobile, Telecom and Unicom, China’s three national operators.
The company has referred to the scale of the Chinese deployment in refuting suggestions it may run out of components early next year. With the current 35% cap on its UK role, it needs components for only about 20,000 UK base stations, which it can easily supply through existing inventory, said a Huawei spokesperson.
A breakdown of the figures released today indicates growth in all three of Huawei’s business lines.
At the carrier division, which develops network products for communications service providers, sales were up 9%, to RMB159.6 billion ($22.8 billion), despite coronavirus-triggered lockdowns in some of Huawei’s most important markets.
While Huawei did not provide a regional breakdown of the numbers, a Chinese splurge on 5G equipment is likely to have fueled the increase given the pressure elsewhere.
Last year, the Chinese market accounted for nearly 60% of Huawei’s entire business, a figure that proves any European restrictions would have only a limited effect on the company.
Huawei’s relatively small enterprise business managed a 15% increase in sales, to RMB36.3 billion ($5.2 billion), while its device-making consumer business – which last year blamed U.S, sanctions for wiping about $10 billion off sales – said revenues were up 16%, to about RMB255.8 billion ($36.6 billion).
“Our business depends on delivering what our customers need,” said Zhang in a prepared statement about the latest numbers. “These results show that they continue to choose Huawei when they want reliability, security and value.”
Zhang said: “Our priority here is to build a better-connected UK where everyone can benefit from 5G and fiber broadband, no matter where they live.”
BT and Vodafone, the UK operators most heavily reliant on Huawei’s products, have told UK officials they need at least five years to phase out the Chinese vendor. Anything less and customers would face major disruption, including outages as equipment is replaced, said technology executives during a parliamentary committee last week.
Huawei’s rise in sales comes after more than a year of pressure from American officials on the company’s suppliers and customers. The company sells 5G networking equipment to carriers and smart phones and laptops to consumers.
American officials placed Huawei on a blacklist in May of last year, restricting sales to the company of U.S.-made goods such as semiconductors. Huawei built up inventories and also continued to design its own chips and have them manufactured by Taiwan Semiconductor Manufacturing Co Ltd and others.
“Huawei has promised to continue fulfilling its obligations to customers and suppliers, and to survive, forge ahead, and contribute to the global digital economy and technological development, no matter what future challenges the company faces,” the company said in a statement on Monday.
In May, U.S. officials announced new rules aimed at constricting Huawei’s ability to self-supply chips, an ability that is critical to its efforts to sell 5G networking gear.
The first half results showed faster growth than Huawei’s first quarter results released in April. For the first quarter, revenues rose by about 1% to 182.2 billion yuan, versus 39% growth posted a year previous. Net profit margin in the first quarter narrowed to 7.3% from about 8% a year earlier.
Huawei did not report unit shipments of phones. Research firm IDC reported Huawei was the second largest phone maker in the first quarter of 2020, with 17.8% market share, behind No. 1 Samsung Electronics Co Ltd and ahead of No.3 Apple Inc.