Huawei announces slower sales growth amid US sanctions

Huawei announces slower sales growth amid US sanctions
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Chinese tech firm Huawei said its sales growth has slowed down after US sanctions kicked in and further blocked its access to key technology.

The Shenzhen-based firm reported a 10% growth in revenue, generating $101 billion for the first three quarters of 2020. However, this was a slower sales growth amid US sanctions for Huawei, who posted 24% increase in revenue for the first nine months of 2019.

While the company did not disclose detailed earnings, it mentioned that its net profit margin was 8%, which was slightly lower from the 8.7% it recorded last year.

US restrictions on Huawei

The US government has increased pressure on Huawei by further restricting its access to advanced computer chips essential in its telecommunications equipment and smartphones.

The most recent sanction requires global semiconductor firms that use US software and machinery to obtain a license from the US government first before they can supply to Huawei.

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In a statement, the Chinese tech company said: “As the world grapples with Covid-19, global supply chain was put under intense pressure and its production and operations saw increasing difficulties.”

It added that it will “do its best to find solutions, to survive … and to fulfill its obligations to customers and suppliers.”

Mate 40 launch and struggles

The earnings report follows the launch of Huawei’s latest flagship smartphone, the Mate 40. Similar to its recent releases, the phone does not have access to Google services due to restrictions introduced by the US last year.

The latest sanctions will be challenging to the company as difficulty obtaining cutting edge chips to power high-end smartphones will make it hard for Huawei to stay competitive with its rivals, including Apple and Samsung.

In August, Samsung said it expects to make an operating profit of almost 12.3 trillion won or $10.6 billion for the July to September quarter, representing a 58% increase from the same period last year.

This surge in profit may suggest that Samsung can retake its position as the top smartphone seller globally from its embattled Chinese rival Huawei.

Earlier this year, Huawei overtook Samsung as the world’s top smartphone seller amidst the impact of the coronavirus pandemic on the world’s economies. Most of Huawei’s sales were from China, whose recovery from the pandemic was faster than other nations.

During the Mate 40 launch, Richard Yu, chief executive of Huawei’s consumer business group, mentioned that the firm is in an “extremely difficult” situation and is “suffering” from the US government’s latest restrictions.

5G business problems

Aside from its smartphone business, Huawei is also taking hits on its 5G business.

In July, the UK government decided to ban Chinese tech giant Huawei from its 5G network, doing a turnabout on its January decision to grant it a limited role. It instructed operators, including BT and Vodafone, to remove existing Huawei equipment from their 5G networks until 2027.

Digital and Culture Minister Oliver Dowden explained that the new US sanctions imposed on the company in May had “significantly changed” the landscape.

Dowden said: “Given the uncertainty this creates around Huawei’s supply chain, the UK can no longer be confident it will be able to guarantee the security of future Huawei 5G equipment.”

An official report from the UK’s Huawei Cyber Security Evaluation Centre (HCSEC) has also indicated that Huawei failed to adequately address security flaws in telecoms equipment used in the UK despite previous complaints.

In the report, the intelligence and security organization pointed out that while some improvements had been made, the oversight board does not believe these were sustainable.

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