Chinese telecom provider Huawei Technologies’ 2021 annual report, released in March, shows the company remains profitable despite a massive drop in revenue from 2020. In total, Huawei reported revenue of 636.8 billion yuan, or $99.9 billion, in 2021, down 29% from the previous year. The steep drop ends a 35-year period of near-continuous growth since the company was founded in 1987.
The company’s revenue decline was felt hardest in its consumer business, where Huawei’s inability to access US-based technologies – and in particular the Android operating system – led to reduced sales. revenues by nearly 50% year over year. Huawei has been forced in recent years to develop its own operating system, Harmony OS, and the company has expanded its reach far beyond smartphones to include wearables, tablets and in-car video consoles. .
Huawei’s Carrier business has struggled, but not as much as its Consumer business. Huawei reported a 7% year-on-year drop in carrier revenue, citing continued activity in supporting mobile carriers’ construction of 5G networks in its domestic market. Huawei managed to maintain a modest growth of 2.1% in its Enterprise business.
Huawei reported a somewhat counterintuitive 68% increase in year-over-year operating profit to 121.4 billion yuan (or $19 billion). However, most of this increase was due to one-off asset sales in response to restrictions imposed by the United States. Most notably, Huawei sold its budget smartphone brand Honor to a Chinese government-backed consortium of more than 30 agents after it was denied access to US-supplied chipsets. Huawei also sold its xFusion server business after it was denied access to x86 chipsets due to US sanctions.
Even after taking into account these ad hoc elements, there are signs that Huawei Technologies could deal effectively with the impacts of geopolitical struggles. Even without the asset sales, Huawei would have posted an operating margin of 9.5%, up slightly from 8.1% in 2020. So while Huawei’s future remains cloudy, a few rays of sunshine are still shining. .