On Wednesday, the Chinese tech giant acknowledged that its smartphone business was suffering as US sanctions continue to stifle its growth, cutting off the company’s ability to obtain critical components for its devices.
“Because of the unfair sanctions placed on us by the US, our mobile phone business saw a revenue decline,” Huawei chairman Ken Hu said at a press conference in Shenzhen following the release of the company’s latest earnings report.
The private company declined to specify how much revenue the unit lost last year, but the admission came as little surprise. According to data from Gartner and Counterpoint, Huawei is no longer the market leader in China, let alone globally.
Sales of Huawei’s other consumer electronics — including laptops, tablets and wearable devices -— jumped 65% last year compared to 2019. Huawei has expanded its lineup of connected devices in recent years, and the latest results gives “us more confidence in our strategy,” Hu said.
Despite dismal results in the handset business, overall revenue rose to 891.4 billion yuan ($136 billion) in 2020. And the company posted 64.6 billion yuan ($9.9 billion) in net profit — the highest level it has ever seen, according to a Huawei spokesperson.
But revenue only ticked up 3.8%, while profits rose 3.2%, much weaker than the growth seen in previous years.
“It’s fair to say that in 2020, we saw a slowdown in the growth rate, and yes, life was not easy for us,” Hu told reporters. Huawei was able to maintain growth because of a range of measures it took to shore up its business, including diversifying its supply chain, he added.
An early upswing in mainland China, which led the global economic recovery, also helped. Revenue in Huawei’s home market jumped 15.4%, compared to declines in Europe, North America, the Middle East and Africa.
Given the continued uncertainty at the smartphone business, “it’s very difficult for us to make a forecast,” Hu noted.
And Huawei isn’t expected to make a roaring comeback anytime soon, according to Varun Mishra, an analyst of mobile devices and ecosystems at Counterpoint Research.
“Dynamics are changing within China, as well as overseas,” he told CNN Business.
It doesn’t help matters that Huawei recently sold off its budget brand, Honor, which had made up as much as 40% of its total shipments in 2020. Founder Ren Zhengfei said that the November sale “was a forced decision, made in response to the changes in the external environment.”
Looking ahead, improving the company’s standing in the United States will be crucial to its future in smartphones.
But the signs aren’t promising, despite the new US administration. The US Federal Communications Commission earlier this month echoed previous claims from Washington that Huawei poses “a threat to national security,” dashing hopes of a reset in relations anytime soon.
“If the sanctions are not lifted, I don’t see there’s any way they’re able to resurrect their smartphone [business],” said Mishra.