Huawei’s growth slows sharply as U.S. sanctions bite

Huawei headquarters building is pictured in Reading, Britain July 14, 2020.

Matthew Childs | Reuters

GUANGZHOU, China — Huawei’s revenue growth slowed sharply in the third quarter while its margin dipped as U.S. sanctions disrupt its business.

Revenue for the September quarter came in at 217.3 billion yuan ($31.91 billion), up just 3.7% from the 209.5 billion yuan recorded in the same period last year.

For the first nine months of the year, revenue totaled 671.3 billion yuan ($98.57 billion), up 9.9% from the 610.8 billion yuan reported in the same period last year. That is a significant slowdown in growth. In the first nine months of 2019, Huawei’s revenue growth was 24.4%

Meanwhile, Huawei’s net profit margin was 8% for the first nine months of the year, down from 8.7% in the same period last year.

Washington’s sanctions are clearly hurting the Chinese technology giant. Last year, Huawei was put on a U.S. export blacklist known as the Entity List. Google cut ties with Huawei meaning the Chinese firm’s smartphones could no longer use licensed Android mobile operating system software. That has hurt Huawei’s smartphone sales outside of China, while its domestic market has thrived.

Huawei did not release a breakdown of what parts of its business contributed to revenue growth. Earlier this year, Huawei said that its consumer business, which includes its smartphones, was responsible for nearly all of the $12 billion shortfall in revenue it saw in 2019 versus its own targets.

For the first three quarters of 2020, Huawei said the results “basically met expectations.”

“As the world grapples with COVID-19, Huawei’s global supply chain was put under intense pressure and its production and operations saw increasing difficulties,” the company said in a press release.

“During the release, the company stated it would do its best to find solutions, to survive and forge forward, and to fulfill its obligations to customers and suppliers.”

Huawei is now facing even greater challenges. Earlier this year, Washington slapped further sanctions on Huawei which has threatened to cut off supplies of semiconductors from its main supplier TSMC. This could cripple its smartphone business, analysts previously told CNBC. Huawei has very few options to get around these sanctions.

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