On Thursday, Aug. 11, Chinese telecoms equipment and smartphone maker Huawei’s sales declined 14% from January to March from a year earlier as it pumped money into research and development while grappling with US sanctions.
Huawei’s Affected Sales
According to Wall Street Journal, Huawei Technologies said that its revenue was 131 billion yuan or $19.8 billion in the first three months of 2022, compared to 152,2 billion yuan or $22 billion in 2021.
The net profit margin of Huawei for the quarter was 4.3%, down from 11.1% in the same quarter of 2021. The company’s rotating chairman, Ken Hu, said that the figures were in line with forecasts.
Hu said their consumer business was heavily impacted, and their ICT infrastructure business experienced steady growth.
In 2019, the Shenzhen-based company was placed on a trade blacklist that restricted American companies from doing business with the major network equipment and smartphones provider.
The sanctions have hit the company hard since it relied on Google services and other essential technologies for its handset.
The Decline of Huawei
Once the largest smartphone maker in the world, Huawei fell out of the top five brands in 2020 because of the sanctions. In 2021, the company also fell from China’s top five as it struggled with the chip shortage.
The company has since invested heavily in research and development, spending 142.7 billion yuan or $21.6 billion to develop new technologies as it sought to carve out new business areas less vulnerable to sanctions.
Huawei’s research and development spending is 22.4% of its sales, outpacing rivals such as Samsung and Apple, according to The Associated Press.
In early August, at the annual analyst summit, Hu said that Huawei’s commitment to developing new business areas like cloud computing and 5G is on the way.
Since it was added to the US blacklist, Huawei has also developed its own Mobile Service platform as a workaround for its lack of Google services.
The platform allows developers to launch apps for several Huawei devices, although apps like YouTube can only be opened through shortcuts that take users to the mobile site.
Huawei also sold off its lower-priced Honor smartphone brand in 2020, hoping to revive its sales by insulating it from the sanctions on Huawei.
Huawei’s Success in Indonesia
Despite struggling with the sanctions that the US had imposed on it, Huawei found success elsewhere. Indonesia have embraced the Chinese company and its products.
Huawei provides the tech and the training for much of the workforce and the government officials charged with Indonesia’s cybersecurity, according to Foreign Policy.
The Chinese tech success in the country offers sobering lessons for the US, its allies, and its partners, not just in Indonesia, with a population of more than 270 million, but in other Indo-Pacific countries as well.
Unless US policymakers take some pages from the Huawei playbook, the Chinese tech giant will not face any serious competition as they maneuver to train vast swaths of the new digital workforce.
After all, the US and its allies and partners have been in the business of walling themselves off from the vulnerabilities of dependence on Chinese technology.
Written by Sophie Webster