Tuesday, 21 April 2020

Huawei’s Revenue Growth Slowed Sharply by Coronavirus, U.S. Blacklisting

Revenue rose 1.4%, a slowdown from the 39% growth it reported in the same quarter a year ago

Huawei’s revenue and profit have been squeezed since the Commerce Department added the company to its “entity list.”

PHOTO: NICOLAS ASFOURI/AGENCE FRANCE-PRESSE/GETTY IMAGES
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HONG KONG—Huawei Technologies Co.’s revenue growth slowed sharply in the first quarter, the Chinese telecom giant said, as it contended with the effects of the coronavirus pandemic and a U.S. supplier blacklisting.
Revenue rose 1.4% to 182.2 billion yuan, or about $25.8 billion, from the same quarter a year ago, the company said. The climb was a slowdown from the 39% growth it reported in the same quarter a year ago.
Huawei’s revenue and profit have been squeezed since the Commerce Department added the company to its “entity list” on national security grounds in May. The move barred Huawei from obtaining large amounts of U.S. technology, forcing it to reroute supply chains and curbing sales of its smartphones in overseas markets.
Sales SqueezeThe coronavirus pandemic and a U.S.blacklisting curbed Huawei's first-quarterrevenue growth.Source: the company*Figures derived from WSJ calculations based onprior Huawei disclosures. 1 billion yuan = $141 million.
.billion yuanQ12019Q2*Q3*Q4*Q12020050100150200250Q1 2020x182.2 billion yuan
At the same time, the economic freeze from the pandemic has further damaged sales and delayed 5G network rollouts.
The Shenzhen-based company is privately owned and self-selects the financial figures it discloses. For the first quarter, Huawei didn’t release a net-profit figure and declined to offer details of its sales of smartphones or telecom equipment, its biggest business lines. Net profit margin fell to 7.3% from 8% in the first quarter last year, the company said.
“While the rate of growth has slowed, it was a resilient performance in the face of the entity list and the coronavirus,” said Victor Zhang, a Huawei vice president based in London.
Washington officials have long regarded Huawei as a security threat and have leaned on allies to shun the Chinese company’s 5G equipment. Huawei says it would never spy for any government. The company faces the prospect of further limits from Washington, including a proposal to block access to a Taiwanese chip manufacturer.
Huawei released last month a more detailed audited annual report for 2019, saying its profit grew at 6%, the slowest pace in three years, with a 19% rise in revenue offset by large increases in research and development costs to cope with its entity listing. 
Analysts predict that industrywide smartphone sales have fallen sharply this year because of the upheaval caused by the coronavirus pandemic. A recent report from research firm Strategy Analytics said smartphone shipments plunged 38% in February, with China seeing an especially large drop as it weathered effects of the first outbreak.
That decline likely took a toll on Huawei, China’s top smartphone vendor. Huawei smartphones are all but unavailable in the U.S., but the company is the second-biggest vendor globally, behind Samsung Electronics Co. It is also the largest supplier of telecom equipment in the world, competing mainly with Ericsson AB, Nokia Corp. and ZTECorp.

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