Huawei’s 2021 profit rose despite a 28 percent drop in sales

Huaweis 2021 profit rose despite a 28 percent drop in

The tech giant said its financial structure has become more resilient and flexible as it continues to deal with the impact of US sanctions.

Chinese tech giant Huawei reported a drop in sales today (March 28) as sales fell more than 28 percent in 2021. However, the company reported net profit of 113.7 billion Chinese yuan, up nearly 76 percent year-on-year.

According to CNBC, this is the first time Huawei has reported an annual sales decline. The company’s rotating chair Guo Ping said the tech giant’s performance for 2021 was “in line with expectations”.

He added that Huawei’s business continued to grow steadily while its consumer business expanded into new domains.

The tech giant’s business operations reported sales of more than 102 billion yuan, up 2.1 percent. However, consumer activities fell by nearly 50 percent to 243.4 billion yuan.

The company’s carrier business declined 7 percent, with reported sales of 281.5 billion yuan, making it the largest business segment for Huawei in 2021.

“Despite a revenue decline in 2021, our ability to generate profits and generate cash flows is increasing and we are better able to deal with uncertainty,” said Huawei CFO Meng Wanzhou.

Huawei has faced pressure from the US in recent years. In early 2019, the US launched multiple criminal charges against the Chinese telecom company.

A few months later, Huawei was placed on the list of US entities over security concerns, essentially preventing US companies from doing business with Huawei without government approval.

Despite this, Huawei reported that sales have increased to $122 billion in 2019. At the time, however, company chairman Eric Xu predicted that 2020 would be a “difficult year”.

In May 2020, the US Department of Commerce introduced further restrictions to prevent foreign semiconductor manufacturers using US technology in their operations from shipping their products to Huawei unless licensed by the US.

Later that year, Huawei was classified by the US Federal Communications Commission as a threat to national security. This banned US telecom companies from spending government money on equipment from the Chinese company.

Meanwhile, the Covid-19 pandemic and subsequent chip shortage also caused problems for smartphone makers, including Huawei.

Amid these issues, the Chinese company reported a 3.8 percent increase in sales for 2020. This marked slow growth compared to the previous two years, when the company delivered nearly 20 percent year-over-year sales growth.

Despite the sanctions and the loss of revenue for 2021, Huawei said its overall financial structure has become more resilient and flexible. The company said it has signed more than 3,000 commercial contracts for 5G industrial applications.

The tech giant also looked to prioritize R&D in 2021, with 107,000 employees – more than half of its global workforce – in this sector for the year. Huawei’s R&D expenditures amounted to more than 22 percent of its 2021 revenues.

“In the future, Huawei will continue its journey of digitalization, intelligent transformation and low-carbon development,” said Guo. “Relying on talent, scientific research and an innovative spirit, we will continually invest more to reshape our fundamental theory, architecture and software paradigms and build our long-term competitiveness.”

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