Huawei Reports 16.5% Drop in Revenue with Smartphone Business Hit Hard by US Sanctions

(Source: Huawei)

Chinese telecom giant Huawei announced on Wednesday that its revenue fell 16.5% year-on-year to 152.2 billion yuan ($23.38 billion) in the first quarter of 2021, as US sanctions continued to cause damage to the company’s consumer business, which includes smartphones and other electronic devices.

Huawei, once the world’s biggest smartphone maker, blamed the decline in revenue in part on the sale of its youth-focused budget smartphone brand Honor last November.

This was the second consecutive quarter in which Huawei’s revenues dropped, following an 11.2% decline in the fourth quarter of 2020.

The company published its unaudited financial results every three months. This time it did not report quarterly income figures, but it said that its net profit margin was up 3.8 percentage points year-on-year to 11.1%. It attributed the increase to a patent royalty income of $600 million and efforts to improve its operations and management efficiency.

Last month, Huawei announced plans to charge royalties from smartphone makers – including Apple and Samsung – for access to its patented 5G technology. The firm said it expects to generate about $1.2 billion to $1.3 billion in revenue from patent licensing between 2019 and 2021.

“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.”

Former US President Donald Trump cut off Huawei’s access to processor chips and other technology needed to make smartphones, claiming that its telecom networking equipment could be used by the Chinese government for spying, an accusation both the Chinese authorities and the company strongly denied.

Popular Google apps such as Gmail, YouTube and even Play Store cannot be accessed on Huawei phones since the US government restricted American companies from selling products and services to the company in May 2019. As a result, Huawei’s smartphone sales plummeted 42% in the last quarter of 2020.

SEE ALSO: President Biden Reviews US-China Relations and Huawei Dispute

According to research firm Canalys, Huawei shipped a total of 14.9 million phones within China in the first quarter. This compares to 30.1 million in the same period last year, as reported by Reuters. Its market share plunged to 16% from 41% a year ago, falling behind its rivals Vivo and Oppo as China’s third-largest smartphone maker.

Earlier this month, Huawei unveiled its first new energy car – the SF5, a hybrid SUV equipped with the company’s self-developed 5G autonomous system, joining a growing list of tech giants trying to tap into the burgeoning electric vehicle market. Huawei is also looking for other growth areas such as health care and smart agriculture to cushion the impact of being blacklisted by the US.