Huawei reports biggest-ever profit drop as US sanctions and pandemic controls hit Chinese giant

Huawei’s revenue stabilized in 2022 as the company diversified into new areas such as cloud computing and automotive technology. But its profit plummeted as pressure from US sanctions and China’s pandemic controls weighed on the Chinese tech giant.

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Huawei on Friday reported its biggest annual profit drop on record, as US sanctions continue to hit the business and tight pandemic controls in China weigh on the company.

The Chinese telecom giant said net income for 2022 totaled 35.6 billion yuan ($5.18 billion), down 69% from a year earlier. That’s larger than the 54% annual drop in 2011, according to CNBC calculations.

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In 2021, however, the company got a big profit boost after selling its Honor smartphone brand to a consortium of buyers, making the comparison to 2022 pretty big. But Huawei also blamed rising commodity prices and China’s strict pandemic controls over the past year as reasons for the profit decline.

“In 2022, a challenging external environment and non-market factors continued to take a toll on Huawei’s operations,” said Eric Xu, rotating chairman at Huawei, in a press release.

According to Huawei, revenue rose 0.9% to 642.3 billion yuan in 2022 as the company stabilized its business after a revenue slump of more than 28% in 2021. Headquartered in Shenzhen, China, the company has sought to diversify its business into new areas including cloud computing and automotive after a tough few years when US sanctions stalled the company.

“In the midst of this storm, we kept racing and doing everything in our power to maintain business continuity and serve our customers,” Xu said.

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In 2019 and 2020, the Chinese tech giant was cut off from key American technology like Google’s Android operating system and the components it needed, like semiconductors. That crippled Huawei’s smartphone business, which was once the world’s number one. Huawei’s consumer business, which houses its smartphone division, fell more than 11% to 214.5 billion yuan in 2022, a much smaller decline than in 2021.

Huawei has continued to launch devices ranging from smartphones to smartwatches. However, the company has had trouble selling devices outside of China because it cannot use Android, an operating system widely used overseas. Huawei has launched its own operating system, HarmonyOS, which it says was installed on 330 million devices at the end of 2022, up 113% year-on-year. But this operating system has not caught on outside of China.

Huawei’s carrier business, which includes the equipment it sells to telecom companies, generated revenue of 284 billion yuan, up 0.9% year on year, compared with a decline in 2021. The US has countries have been pushed in recent years to ban Huawei from their next-generation 5G networks. Countries like the UK have already done so, while Germany is reportedly considering banning some Huawei devices on its 5G networks.

Faced with challenges in both the carrier and consumer businesses, Huawei has sought to diversify the company into new areas. Huawei’s enterprise business, which includes part of its cloud computing revenue, rose 30% year-on-year to 133.2 billion yuan.

Huawei has tried to bring its products, including cloud computing, to specific industries such as finance and mining to help companies digitize their business. The company released figures for the cloud computing business for the first time and said it achieved 45.3 billion yuan in revenue in 2022.

Huawei has also jumped on China’s electric car boom, launching vehicles in partnership with automaker Seres. Huawei said its budding Intelligent Automotive Solutions unit brought in 2.1 billion yuan in 2022. The company said it has invested $3 billion in the unit since its inception in 2019 and now has 7,000 research and development staff.

Huawei CFO Meng Wanzhou, who returned to China in 2021 after being jailed in Canada in 2018 at the request of the US, said the company’s results were “in line with forecasts,” adding the tech giant’s financial position “remains.” solid. “

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