Caixin
Jul 14, 2020 07:50 PM
BUSINESS & TECH

Huawei Beats the Odds With First-Half Revenue Up 13%

Huawei's flagship Shanghai store on June 24.
Huawei's flagship Shanghai store on June 24.

Embattled Chinese tech giant Huawei Technologies Corp. Ltd. has reported surprisingly strong results for the first half of this year, despite challenges from U.S. sanctions and the global Covid-19 pandemic.

But it is expected to face more headwinds in coming months as it grapples with a further U.S. technology export restriction that will fully cut it off from suppliers, starting in September.

For the six months through June, revenues grew by 13.1% to 454 billion yuan ($64.8 billion) with a net profit margin of 9.2%, Huawei said in a statement Monday.

About 56% of that revenue – or 255.8 billion yuan – came from selling smartphones. Roughly 35% was derived from telecom equipment sales while the rest was attributed to other business.

The company did not announce how much of the full half-year revenue was earned in the second quarter. But based on its previous report for the first quarter, the second quarter’s sales would amount to 271.8 billion yuan. This would equate to a sales increase of 23% on the same quarter for 2019.

Huawei’s strong results were earned despite U.S. sanctions, in force since last May when the U.S. government placed the Chinese company on a blacklist for the first time. The results also defied an economic downturn caused by the global pandemic which started late last year.

However, the company could face a more uncertain future in the months ahead. In May, the U.S. government announced it would expand the 2019 decision that had already cut off Huawei from its U.S. suppliers unless they got permission from Washington.

It said that rule not only applied to Huawei’s U.S. suppliers and other business partners, but also to any of its foreign chip-making partners whose production lines include U.S.-made equipment.

Huawei had previously managed to bypass the U.S. government’s 2019 sanction by turning to self-designed chips, for which it then outsourced manufacturing to contractors like Taiwan Semiconductor Manufacturing Company (TSMC).

However, the May amendment to the rule forbids non-U.S. companies like TSMC from supplying chips for Huawei.

According to the U.S. government’s statement announcing the decision in May, the decision included a 120-day grace period, in which chips from orders placed before May 15 could still be shipped to Huawei before the end of the period. That means the ban on new deliveries will fully take effect by mid-September.

Given the uncertainty surrounding the ramp-up of U.S. sanctions, some governments have said they will reassess their countries’ relationship with the Chinese company.

The most striking of these is the U.K., which is reportedly set to announce a complete ban on the Chinese company. If that happened, it would mark a U-turn on the British’s government’s earlier decision in January to give a green light to Huawei’s involvement, albeit limited, in the country’s next generation mobile networks.

Earlier this month, amid doubt about Huawei’s capabilities to continue supplying in the U.K., locally based Vice President Victor Zhang said the U.S. sanctions had no “immediate impact” on UK 5G supplies.

Still, Zhang admitted the company would only be able to calculate the scope of the impact later this month after the U.S. government announced specific details of its upgrade to the May sanctions.

In the Monday statement, Huawei did not address how the latest U.S. sanctions would affect the company.

“Huawei has promised to continue fulfilling its obligations to customers and suppliers, and to survive, forge ahead, and contribute to the global digital economy and technological development, no matter what future challenges the company faces,” the statement said.

Contact reporter Mo Yelin (yelinmo@caixin.com)

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code