Huawei records higher sales and profit in 2020 despite US sanctions

The company has 'held strong in the face of adversity', chairman Ken Hu said

Huawei's rotating chairman Ken Hu speaks at a news conference on the company's 2020 annual results at its headquarters in Shenzhen on Wednesday. Reuters

Huawei continued to grow revenue and net profit in 2020 despite operational difficulties brought about by Covid-19 and ongoing sanctions imposed on the company by the US government.

The Shenzhen-based company's annual revenue grew 3.8 per cent to $136.7 billion, while net profit increased 3.2 per cent to $9.9bn. Revenue in the fourth quarter declined for the first time on record, however, dropping 11 per cent on the same period a year earlier to $33.5bn.

Year-on-year growth slowed, but the company's business performance was largely in line with its forecast, Huawei said.

"Over the past year we have held strong in the face of adversity," Ken Hu, the company’s current chairman, said.

“We have kept innovating to create value for our customers, to help fight the pandemic … and to support both economic recovery and social progress around the world,” he added.

Huawei is now the world's sixth-biggest smartphone maker with an 8 per cent market share, according to Counterpoint Research.

The company, which employs more than 197,000 people, has been engaged in a trade dispute with the US administration, which considers the company to be a national security threat.

The White House has also pushed its allies to exclude Huawei from 5G network deals. The telecoms firm has repeatedly refuted claims that its products could be used for spying.

“No matter the circumstances, we will continue to embrace transparency by disclosing operational data to governments, customers, suppliers, employees and partners,” Huawei said in a statement on Wednesday.

The company said US-led sanctions had created supply chain disruptions, with Mr Hu adding that "both upstream and downstream players are the victims”.

“The US suppliers are suffering … on average, Huawei purchased $10bn to $20bn from them every year.

“If a political decision is damaging different players, in the whole value chain, shouldn’t it be reviewed and corrected? It is a losing situation … this is very unfair situation to Huawei and it has caused a lot of damage to us,” he said.

Huawei said it is working with carriers worldwide to verify and test 5G networks. Thus far, it has delivered over 100 5G networks globally.

The company said it has had to burn through cash to build stockpiles of chips to use in its smartphones and 5G equipment. Cash flow from operations fell 61 per cent to $5.4bn.

“In response to the restrictions around chip supplies and unfair trade sanctions, we have purchased stockpiles with a lot of cash to satisfy the needs of our customers,” said Mr Hu.

“As global digital transformation moves further, there will be more reliance on chips and their shortage is affecting various fields, not just the areas that Huawei is engaged in. It has led to consequences around the world.”

The company, which has more than 1 billion connected devices and 730 million Huawei smartphone users worldwide, earned more than 50 per cent of its revenue – $74.1bn – from its consumer business. Its enterprise and carrier businesses contributed $15.4bn and $46.4bn, respectively.

Huawei's carrier business, which includes its 5G networks, currently deals with more than 1,500 operators in over 170 countries. It is delivering more than 3,000 5G projects in over 20 industries such as coal mining, steel production, ports, and manufacturing, the company said.

According to the company's 2019 annual report, Huawei derived more than 65 per cent of its revenue from China ($89.7bn). Its Europe, Middle East and Africa unit generated 20.2 per cent of sales, Asia Pacific 7.2 per cent and the Americas 4.5 per cent.

Huawei considers the Middle East as one of its fastest-growing markets.

“We are very satisfied with our performance in the Middle East. [The region] contributed a very important share to our overall revenues,” said Mr Hu.

“We are keen to support key events such as Expo 2020 in Dubai and 2022 FIFA World Cup in Qatar,” he added.

The company is one of the world’s largest investors in research and development. It spent 15.9 per cent of its revenues on R&D in 2020 and employs 105,000 people – 53.4 per cent of its total workforce – in the division.