Huawei reports slowing growth as its operations
Huawei announced earnings results today showing that its growth has slowed significantly this year as the Chinese telecom equipment and smartphone giant said its “production and operations face significant challenges.”
While Huawei did not specify trade restrictions in its brief
announcement, the company has been hit with a series of commercial trade
restrictions by the U.S. government. The full impact of those policies haven’t
been realized yet, because U.S. government has granted Huawei several waivers,
including one that will delay the implementation of a ban on commercial trade
with Huawei and ZTE until May 2021.
During the first three quarters of 2020, the Chinese
telecoms and smartphone giant reported revenue of 671.3 billion yuan (about USD
$100.7 billion), an increase of 9.9% year-over-year, with a profit margin of
8%. The company said those results “basically met expectations,” but it
represents a huge drop from its performance during the same period last year,
when Huawei reported 24.4% growth with a profit margin of 8.7%.
Huawei is a privately-held company and its announcement did
not break down its results in terms of smartphone or telecoms equipment sales,
or other detail.
The company wrote that “as the world grapples with COVID-19,
Huawei’s global supply chain is being put under pressure and its production and
operations face significant challenges. The company continues to do its best to
find solutions, survive and forge forward, and fulfill its obligations to
customers and suppliers.”
Other U.S. restrictions include one that would ban Huawei from
using U.S. software and hardware in certain semiconductor processes, forcing it
to find other sources for chips.
In addition to the U.S., Huawei is also facing scrutiny by
other countries, including the United Kingdom, which is planning to implement a
new poicy that will bar telecoms from buying new 5G equipment from Huawei to
ZTE and require them to remove any parts from those companies that’s already
been installed in UK 5G networks by 2027.
Replacing Huawei equipment also presents costly challenges
for telecoms, because Huawei is one of the biggest suppliers in the world. Last
month, the U.S. Federal Communications Commission said it would cost $1.837
billion to replace Huawei and ZTE networking equipment, with rural telecom
networks facing the most financial pressure.
But 2020 has had a few bright spots for Huawei. In July, a
report from Canalys found that Huawei overtook Samsung as the leader in global
smartphone shipments during the second quarter of 2020, a major milestone
because it marked the the first time in nine years that Apple and Samsung
didn’t take the top spot on Canalys’ charts. This was partly because smartphone
shipments in general have been hurt during the COVID-19 pandemic, but Huawei
was helped by sales within China, its domestic market.
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