Richard Ginika Izuora
Chinese telecommunications giant Huawei has recorded its largest annual decline in profit citing China’s strict pandemic restrictions and rising commodity prices for its drop in sales.
The company pegged last year’s profit at 35.6 billion yuan ($5.18 billion), marking a staggering 69 per cent year-on-year decline.
It is the second straight annual dip in profit following a 28.5 per cent decline in 2021 and the largest decline in profit since 2011, when Huawei announced a 54 per cent decline in sales.
“In 2022, a challenging external environment and non-market factors continued to take a toll on Huawei’s operations,” Eric Xu, rotating chairman at Huawei, said in a press statement. “In the midst of this storm, we kept racing ahead, doing everything in our power to maintain business continuity and serve our customers.”
The decline is somewhat skewed by Huawei’s 2021 sale of the Honor smartphone brand for 100 billion yuan ($15.2 billion). The massive one-time bump in profits inflates 2021’s year-over-year comparison.
Conspicuously missing from Huawei’s shareholder report was how American trade policies affected the company’s bottom line, but the aggressive US controls on how Chinese firms can use American technology have certainly hampered the company’s attempts to expand globally.
In 2019, the tech giant was prevented from using Android Google’s mega-popular mobile operating system—in smartphones, forcing the company to develop its own operating system, HarmonyOS.
The US also banned Huawei from its 5G networks after alleging the equipment could be used by China for spying. Australia, Japan and the United Kingdom have also banned Huawei from accessing their 5G networks.
Additionally, Huawei’s smartphone production has been stymied by a new American policy, passed in May 2020, requiring foreign chip manufacturers using American technology to acquire a permit before they can sell to Chinese companies like Huawei.
The US Commerce Department said that the new rule was meant to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”