Huawei's profit dives 67% after US sanctions wallop phone arm

HUAWEI Technologies profit fell about 67 per cent in the first quarter as the Chinese telecom-equipment giant continued to battle crippling US trade and investment sanctions.

Revenue declined 14 per cent to 131 billion yuan (S$27.4 billion) in the 3 months through March, the closely held company said Thursday (Apr 28) in a statement. Net profit margin narrowed to 4.3 per cent, which translates to 5.6 billion yuan in net income. That compares with a margin of 11.1 per cent and net income of 16.9 billion yuan a year earlier.

While Huawei didn't give a reason for the earnings slump, its profit was hit by waning sales and growing research and development expenses, according to a person familiar with the financials. The company has allocated 22.4 per cent of its 2021 sales to develop chips, telecom gear and smartphones that could stand free from sanctions imposed by the US That dwarfs the proportional spending by the world's biggest tech mammoths from Meta Platforms to Apple.

"We have yet again increased our investment in R&D to harness the momentum of our innovation and create new value for customers," rotating chairman Ken Hu said in the statement. "In 2022, we still face a challenging and complicated business environment."

Huawei has battled for survival since the US barred it from buying an array of imported components from Qualcomm's most advanced chips to Alphabet's Android system 2 years ago. It is looking for growth in emerging businesses such as wireless communication products used in coal mines and smart cockpit solutions for electric vehicles.

Unit disposals and patent licencing fees received from competitors have helped Huawei's earnings in recent years. The company's 2021 profit surged 76 per cent despite falling sales. It gained 61 billion yuan in additional net income last year after selling the smartphone sub-brand Honor and a x86 server unit to government-backed consortiums. BLOOMBERG