Huawei’s First-Half Net Profit Rose on Strong Smartphone Sales, Car Business
Huawei Technologies Co.’s revenue grew for the sixth straight quarter as its smartphones gained significant market share in China. Net profit climbed 18% in the first half of the year, thanks to strong smartphone sales and robust growth in its car business. Huawei reports a handful of unaudited financial figures throughout the year and releases a more detailed audited annual report each spring. It didn’t provide data broken down by business segment for the first half.
The Chinese networking and electronics behemoth posted revenue of 239 billion yuan ($33.6 billion) in the June quarter, up 33.7% from a year earlier, according to calculations based on the company’s six-month financial figures. Implied net profit was 35.5 billion yuan, a drop of 18.6% from a year ago when Huawei recorded one-time gains from divestments. The company sold mobile maker Honor Device Co. to a consortium in 2020 and parts of its server business in 2021, with proceeds from both paid out in installments.
The Shenzhen-based company’s smartphone shipments rose by 50% last quarter as it and other local players like Vivo and Xiaomi Corp. beat out Apple, which dropped to sixth place among handset makers in China, according to market tracker IDC. Apple’s sales in China fell 6.5% in the June quarter, missing Wall Street projections, even as overall shipments in China grew.
Huawei’s next flagship Mate 70 will be closely watched for any processor upgrades when the device is introduced later this year. The Mate 60 roiled US policymakers when it debuted a China-made 7-nanometer chip a year ago, despite US-imposed sanctions and export controls geared to stem advances in China’s chip technologies.
Last year, Huawei more than doubled its net profit as it rebuilt the market share of its core businesses in consumer electronics and cloud computing, which were severely eroded by several years of U.S. sanctions that limited its access to advanced semiconductors.
In the second quarter, Huawei was the No. 2 smartphone seller in China, the world’s largest smartphone market, with an 18.1% market share, according to market-research firm International Data Corp. Counterpoint Research said Huawei’s sales jumped 44.5% in the quarter from a year earlier, the fastest growth among Chinese original equipment manufacturers, thanks to the Pura 70 and Nova 12 series. The company launched its Pura 70 series in April.
Huawei and other local smartphone makers like Vivo and Xiaomi Corp. beat out Apple, which dropped to sixth place among handset makers in China, according to market tracker IDC.
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Huawei has invested in its car business as Beijing ramps up support for high-tech industries as part of efforts to reduce the economy’s reliance on the property sector for growth.
The company’s automotive unit, which offers self-driving technology to electric vehicle makers, earned a revenue of 10 billion yuan as of early July, according to a report by a Chinese media outlet, more than the combined revenue in the previous two years. Huawei didn’t provide a breakdown of its sales.
Changan Automobile-backed Avatr Technology said in an exchange filing last week that it will acquire a 10% stake in Yinwang Smart Technology, Huawei’s car unit that provides autonomous-driving technology to automakers, valuing the company at 115 billion yuan. Seres on Monday said it will acquire a 10% stake in Yinwang.
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References:
Despite U.S. sanctions, Huawei has come “roaring back,” due to massive China government support and policies
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Huawei stopped breaking out carrier sales last year, instead reporting sales for ICT infrastructure. This new division strips out the smallish but fast-growing cloud unit, along with several other assets, but combines the rest of enterprise sales with the former carrier business. On a like-for-like basis, its revenues grew 2.3% in 2023, while Ericsson’s dipped 3% and Nokia’s were down 11%.
Unlike the smartphone business, which stumbled and then recovered, Huawei’s carrier unit never suffered a big loss of market share, either. In the market for radio access network (RAN) products, the biggest equipment sector and a focus of the US anti-Huawei campaign, it remained the leader last year, with a 31.3% share globally, the same it held in 2022, according to data from Omdia, a Light Reading sister company. For comparison, Ericsson’s share dipped 1.4 percentage points last year, to 24.3%, while Nokia’s was up 1.7 points, to 19.5%. Nobody viewing these figures would think Huawei a victim of sanctions.
Headline figures, however, may have obscured what is happening at a country level. A possible clue is in the sales number for China. At more than RMB471 billion ($60 billion), it grew nearly 17% last year and accounted for 67% of the total, up from 52% in 2018. Recent growth is only partly explained by the smartphone recovery. Chinese companies have spent more on Huawei’s ICT products just as telcos in certain other countries have cut back.
But they have not cut back as much as the US would have wanted. And where it has happened, it has been largely for geopolitical reasons rather than concern about Huawei’s technology competitiveness. The UK is perhaps the only country that has drawn a direct link between US chip moves and its decision to order the removal of Huawei’s 5G network products by the end of 2027. Even there, the worry seems to be that authorities can no longer guarantee the security of Huawei’s network products.
Only a minority of European Union (EU) countries have imposed restrictions on Huawei, and as few as nine of the 30 NATO countries outside North America, according to Earl Lum, the president of analyst company EJL Wireless Research. In the biggest European economy of Germany, where Huawei’s products feature at about half of 5G sites, there has been fierce resistance to a ban.
Under pressure from EU officials, Germany’s government has ordered the removal of Huawei’s core network software, which must be gone by 2026, and told operators to replace its management software in their radio access networks by 2029. The first is moot – operators having already taken that step – and the second is controversial because it allows Huawei to continue providing radios and baseband products, including the software for them. “The baseband unit is a security issue,” said Lum. Such rules will also do little on the financial side to upset Huawei. Service management and orchestration accounts for only about 1% of RAN spending, said one telco source.
To the likely dismay of Huawei’s opponents, Deutsche Telekom is now reportedly positioning this German solution to the Huawei problem as a template for other countries to follow. In mid-August, it was lobbying government officials in the Czech Republic to adopt the German approach, according to Lupa, a local publication. EU officials, meanwhile, have said nothing in public about the desirability of the scheme.
https://www.lightreading.com/5g/huawei-is-starting-to-look-unstoppable