Smartphone nightmare drives Huawei revenues down 16.5%

Chinese tech giant Huawei has continued its recent trend of relative transparency by revealing a steep decline in Q1 revenues due to the US-imposed struggles of its consumer business.

The company still managed to rake in CNY152.2 billion (~$23.5 billion), but that was 16.5% lower than the year-ago quarter. In its brief statement Huawei insisted the network business is still growing, but the consumer business decline, partly due to the Honor sale. How much of the overall decline is accounted for by that is unstated, but there are many signs that the rest of its smartphone business is having a nightmare.

“2021 will be another challenging year for us, but it’s also the year that our future development strategy will begin to take shape,” said Eric Xu, Huawei’s Rotating Chairman. “We thank our customers and partners for their ongoing trust. No matter what challenges come our way, we will continue to maintain our business resilience. Not just to survive, but do so sustainably. As always, we will remain focused on the needs of our customers and keep delivering practical business value.

“As always, we remain committed to technological innovation and investing heavily in R&D as we work to address supply continuity challenges caused by restrictions in the market. We will continue making breakthroughs in basic science and pushing the frontiers of technology.”

There was no mention of the enterprise business group, which did so well last year, so read into that what you will. Thanks to streamlining and patent royalty income of $600 million, Huawei’s net profit margin was up an impressive 3.8 percentage points to 11.1%, so there’s still plenty of money available for that R&D.

The announcement comes in the same week Huawei launched a bunch of cloud and AI stuff at its annual developer conference. They covered natural language processing, a cloud container engine, an intelligent programming assistant for developers and a database for migrating enterprise core data to the cloud.

“By 2025, 100% of enterprises around the globe will be utilizing cloud technology,” said Richard Yu, CEO of Huawei’s Cloud BU and Consumer Business Group. “Cloud is the future of the ICT industry and the foundation for enterprises’ digital transformation. Developers are the soul of the industry. Huawei will continue to open its technological innovation capabilities and work with developers and partners to accelerate the cloud and intelligent transformation of business.”

This is all consistent with Huawei’s cunning plan of pivoting towards B2B services focusing on software, cloud and AI, which makes its decision not to make any reference to it in its latest quarterly numbers even more baffling.