Huawei 2021 net profits surge 75.9% amid US government sanctions, firm now ‘more capable in dealing with uncertainties’
Tech giant proves to be ‘more capable in dealing with uncertainties’
Published: Mar 28, 2022 09:57 PM
Huawei's Chief Financial Officer Meng Wanzhou showed up at a press conference Monday. Photo: courtesy of Huawei

Huawei's Chief Financial Officer Meng Wanzhou showed up at a press conference Monday. Photo: courtesy of Huawei

Huawei on Monday reported a net profit surge of 75.9 percent in 2021, a better-than-expected result indicating that the Chinese technology giant is more capable of dealing with uncertainties, senior executives said, while forecasting continued challenges in 2022 amid theUS government sanctions.

The company, which has been under a US crackdown for three years, said survival remains a top priority, and talent and strengthened investment in research and development will be the key to addressing its difficulties.

Chief Financial Officer Meng Wanzhousaid during a press conference Monday that Huawei's 2021 revenue reached 636.8 billion yuan ($99.97 billion), down 28.6 percent year-on-year. Net profit was 113.7 billion yuan, up 75.9 percent. 

It was the first high-profile public appearance of Meng after returning to China. Meng, also daughter of Huawei founder and chief executive Ren Zhengfei, was detained in Canada for more than 1,000 days and returned in September last year.

"Overall, our performance was in line with forecasts ... our ability to make a profit and generate cash flows is strengthening, and we are more capable of dealing with uncertainty," Meng said. 

In the annual report, Huawei explained that "net profits grew mainly due to the sale of parts of our business, improvements in operational quality, and the optimization of our product mix."
Net gains on disposal of subsidiaries and operations was about 57.4 billion yuan, according to the report. Huawei last year sold its Honor smartphone brand.

Thanks to the enhanced profitability of its major businesses, cash flow from operating activities dramatically increased in 2021, amounting to 59.7 billion yuan. Its liability ratio dropped to 57.8 percent, indicating itsoverall financial structure has become "more resilient and flexible", Meng said.

Meng said during aquestion-and-answer session that the company's revenue decline was mainly due to three reasons: multiple rounds of US sanctions put pressure on the PC and smartphone sectors; 5G services fell due to completion of China's 5G networks rollout in 2020, and the pandemic weighed on its businesses. 

"2021 was a year when adverse impacts, such as the challenges of the globalized supply chain and the geopolitical impact of overseas markets, started to impact the firm's operating performance," Jiang Junmu, a veteran industry analyst who's been closely following the firm, told the Global Times on Monday.

In 2019, the Trump administrationimposed a trade ban on Huaweiwhich barred the company from using Alphabet Inc's Android operating system for its new smartphones, among other critical US-origin technology, resulting in a major setback for what was then the world's second-largest smartphone vendor.

US sanctions have caused "great difficulties" for the firm's consumer business, the firm's key source of revenues, rotating chairman Guo Ping said during the press conference held in Shenzhen, Guangdong Province. 

To address problems ranging from semiconductors to other technologies, Huawei is exploring ways to help "make its products competitive even using less-advanced processes," Guo said.

Huawei's mobile phone shipments in 2021 fell to 35 million units, down 81.6 percent from 2020, and its global market share dropped to 3 percent in 2021 from 15 percent in 2020, data released by Omdia showed.

Revenues from its shrinking consumer business, such as smartphones, declined 50 percent to 243.4 billion yuan in 2021.Consumer business only accounted for 38.2 percent of company revenues in 2021, compared with 54 percent in 2019.

Observers said that the financial report also indicated that Huawei had phased success in developing new growth points in the past year. 

Huawei Cloud, one of its emerging businesses, posted revenue of 20.1 billion yuan 2021, a year-on-year increase of 34 percent, and it ranked fifth in the global IaaS market. 

Over the past year, pursuing initiatives to diversify its operations, Huawei launched 11 scenario-based solutions for key sectors such as government, transportation, finance, energy and manufacturing. The company also established multiple teams, including a Coal Mine Team, a Smart Road Team, and a Customs and Port Team to expand its businesses.

Moving forward, Guo said the company will rely on talent, scientific research and an innovative spirit. 

Over the past two years, Huawei recruited about 26,000 graduates, of whom more than 300 were of "genius" level, as defined by Huawei. In 2022, Huawei plans to recruit more than 10,000 fresh graduates. 

Research and development (R&D) investment last year reached142.7 billion yuan, accounting for 22.4 percent of the annual revenues, and the company'scumulative R&D expenditure over 10 years reached 845 billion yuan.

"Last year was a difficult year for Huawei, just as the poster of the press conference showed. It displayed a ship sailing forward and breaking ice," Xiang Ligang, director-general of the Information Consumption Alliance, an industry association, told the Global Times on Monday.

"2022 will still be difficult, but maybe we can expect a 'glorious return' in 2023," Xiang said.