Huawei raises 4b yuan through 3-year notes in another self-rescue effort
Move to fuel new efforts as challenges persist
Published: Jan 09, 2022 09:50 PM
Huawei Photo: VCG

Photo: VCG

Chinese telecom giant Huawei is taking actions ranging from issuing debts to a management overhaul, as the company continues to cope with lingering challenges such as the US' crackdown and the ongoing COVID-19 pandemic. 

However, such moves are not proof that the Chinese company is in serious financial trouble or face other problems, as its business has stabilized in general despite external blows, analysts said. 

Huawei disclosed recently that it would issue a three-year note of 4 billion yuan ($627 million), according to a statement on the Shanghai Clearing House.

With a debt rating of AAA, the proceeds will be used to support the development of Huawei's businesses as well as the implementation of the company's crucial strategies, the statement said. The money will also be used to replenish the working capital of Huawei and its subsidiaries. 

Huawei also pledged that it would not use the money for long-term investment, property investment or investment in any financial/equity products. 

It's the company's first debt issue this year and the 10th time that it issued bonds in the Chinese mainland market since October 2019. The 10 issues would raise a total of 38 billion yuan, assuming the latest issuance is successful, Securities Times said in a report on Saturday. 

Huawei also started a new round of changes to its management team. It recently appointed Ding Yun as the president of the enterprise group to replace Peng Zhongyang. 

The moves come as Huawei faces multiple challenges, including sanctions by the US government and the negative impact of the COVID-19 pandemic on domestic consumption, prompting some to conclude that the latest moves are part of its self-rescue effort. 

"Given the external situation and the impact of the COVID-19, the Chinese tech giant has to diversify its businesses and financing channels to survive and develop," Jiang Junmu, chief writer at Chinese telecom industry news website, told the Global Times on Sunday.

Guo Ping, rotating chairman of Huawei, acknowledged that the company experienced a tough year in 2021 in a New Year's message released on December 31. Guo said Huawei expects to report revenue of 634 billion yuan in 2021, down 28.9 percent from 2020.

To maintain a long-term competitive edge, Huawei will increase investment in HarmonyOS and EulerOS, which would help build a foundation for the digital world's basic software and provide the world with a second option, Guo said.

According to Jiang, the funds from the latest bond issuance may be used in the research and development of chips and other 5G technology to maintain its leading position in the world. 

Huawei founder and chief executive officer Ren Zhengfei said previously that one of the reasons for the bond program is that Huawei used to raise capital through Western banks, but now that financing channels in the West are not as accessible as before, Huawei has turned to domestic banks to raise money.

However, analysts stressed that although challenges are mounting for Huawei, the company's business performance has been quite positive so far, and the bond issuance should not be seen as proof that Huawei is having financial problems or is in urgent need of money.

"As Huawei has new projects, especially thorough collaboration with chip industry companies, it's very natural that it needs to replenish its capital. This is not to say that Huawei has any kind of existential problems," independent tech analyst Xiang Ligang told the Global Times. 

According to Xiang, the impact of the US sanctions is mainly on Huawei's business-to-consumer sector, while its operator-oriented and cloud businesses are relatively unaffected. 

"The impact of the US' crackdown is unlikely to deteriorate further for Huawei," Xiang said. He predicted that Huawei's revenue for 2022 will stabilize at a similar level to 2021, while technological breakthroughs, which are likely to happen in the next one or two years, will push Huawei's business to rebound.