Chinese telecoms equipment and smartphone giant Huawei revealed a 14% drop in quarterly sales from a year ago, as the business continued to invest in research and development while dealing with US sanctions.
According to figures revealed by Huawei on Thursday, sales plummeted 14% in January-March compared to the same period last year. This comes as the business poured money into research and development while dealing with US sanctions.
In the first quarter of 2022, Huawei Technologies reported sales of 131 billion yuan ($19.8 billion), down from 152.2 billion yuan a year earlier.
For the quarter, its net profit margin was 4.3% down from 11.1% in the same quarter of 2021.
"Our consumer business was severely hit, while our ICT infrastructure business continued to grow steadily," said Ken Hu, Huawei's rotating chairman. "We still confront a hard and complicated business climate in 2022."
Huawei, situated in Shenzhen, was placed on a trade blacklist in 2019 that barred American companies from doing business with the major provider of network equipment and smartphones; the restrictions were particularly harsh because Huawei's devices rely on Google services and other critical technologies.
Dropping out of the top 5 manufacturers
Huawei, formerly the world's largest smartphone manufacturer, dropped out of the top five brands in 2020 as a result of the sanctions, and dropped out of China's top five in 2021 as a result of a chip shortage.
Since then, the corporation has poured money into research and development, spending 142.7 billion yuan ($21.6 billion) to create new technologies in order to carve out new business areas that are less susceptible to penalties. It spends 22.4 percent of sales on research and development, outperforming competitors like Samsung and US tech giants like Apple.
Hu emphasized Huawei's commitment to creating new business areas such as cloud computing and 5G at its annual analyst summit earlier this week.
Workaround for the lack of Google services
Huawei has developed its Huawei Mobile Service platform as a workaround for its absence of Google services after being placed on the US blacklist. Although Google apps like YouTube can only be accessible via shortcuts that lead users to the company's mobile site, the platform allows developers to create apps for Huawei smartphones.
In November 2020, the company also sold off its lower-cost Honor smartphone brand, intending to boost sales by shielding it from Huawei restrictions.
According to the survey, Huawei had the biggest decrease of the seven brands, ranking sixth in market share and experiencing a 64.2 percent drop in sales from a year before. In China, the company's smartphone sales plummeted by 12% from the previous quarter.
Under US sanctions, Huawei's smartphone business has struggled. The corporation has been placed on a blacklist by the Trump administration, which prevents it from purchasing crucial components such as advanced semiconductors from American vendors.
According to Counterpoint Research, smartphone sales in China declined 14%in the first quarter compared to a year ago.
According to Counterpoint, Apple was the only other company on the list to experience a 23% drop in quarterly sales in China. However, Apple's China sales increased by 4.4% year over year in the first quarter.
Looking at other ventures
To combat the impact of declining smartphone sales, Huawei has prioritized hiring talent and growing other business lines.
Huawei has joined the hot electric car industry by putting its HarmonyOS operating system and other technology into cars built by conventional Chinese auto makers, although saying it will not construct its own automobiles.
Hu, the company's rotating chairman, said earlier this week that at least two additional automobile models based on Huawei technology will be released this year. The Aito M5, which began sales earlier this year, was the first automobile to employ HarmonyOS.
Huawei announced that its smart automobiles research and development team has grown to 5,000 workers, with the company investing $1 billion in the sector last year.