In a significant financial development, Huawei Technologies (HWT.UL) announced on Friday that its net profit for the first half of the year more than halved. The challenging economic landscape, coupled with the impact of U.S. technology restrictions, contributed to a 5.9% year-on-year drop in revenue to 301.6 billion yuan ($44.73 billion), with a steeper decline observed in January-March.
Economic Headwinds Hit Device Business, ICT Infrastructure Remains Resilient
Ken Hu, Huawei’s rotating chairman, acknowledged the substantial impact on the device business while highlighting the steady growth of the Information and Communication Technology (ICT) infrastructure business, particularly the business-to-business enterprise unit.
The profit margin of the Chinese tech giant narrowed to 5%, resulting in a net profit of 15.08 billion yuan, a stark decline from the 31.39 billion yuan reported in the first half of 2021.
Diversification Efforts Amid Economic Challenges
The device business, encompassing smartphones and laptops, faced significant challenges due to a weak economy, COVID-19 disruptions, and supply chain issues. Revenue from this segment plummeted by over a quarter to 101.3 billion yuan. In contrast, the carrier and enterprise businesses experienced growth.
To counter the impact, Huawei increased investments in new technologies and business ventures, albeit at the cost of its profit margins.
Industry Trends and Global Setbacks
Counterpoint Research reported a 14.2% year-on-year decline in second-quarter sales in the broader Chinese smartphone industry, reaching a decade-low volume. This downturn compounded Huawei’s challenges in the handset business.
The United States imposed export restrictions on Huawei in 2019, blocking access to critical U.S. technology. This prohibition severely hampered the company’s ability to design chips and source components, dealing a substantial blow to its once-dominant handset business.
Diversification Strategies and Future Outlook
In response to the setbacks, Huawei is strategically diversifying its business lines. The company is venturing into smart car components and energy efficiency systems. Additionally, its cloud services business has captured 18% of China’s expanding market, as reported by consultancy Canalys.
Huawei has introduced its proprietary Harmony operating system, now deployed on 300 million Huawei devices. Despite the challenges, the company remains optimistic about leveraging digitalization and decarbonization trends to create value for customers and partners, ensuring quality development in the future.
“We will harness trends in digitalization and decarbonization to keep creating value for our customers and partners, and secure quality development,” affirmed Hu, expressing confidence in Huawei’s ability to adapt to evolving industry dynamics.
Content Source – Reuters.com