- Huawei reported 2022 net profit of 35.6 billion yuan ($5.18 billion), down 69% year on year. This is the largest annual drop since 2011, according to CNBC’s calculations.
- Huawei blamed soaring commodity prices, China’s strict epidemic controls last year, and one-off gains related to the sale of Honor last year as reasons for the profit decline.
- Huawei has sought to diversify its business into new areas including cloud computing and automobiles after a rough few years during which US sanctions hampered the company.
Huawei’s revenues were flat in 2022 as the company diversified into new areas such as cloud computing and automotive technology. But its earnings have fallen under pressure from US sanctions and China’s pandemic controls on the Chinese tech giant.
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Huawei on Friday reported the largest annual drop in its profit on record as US sanctions continue to weigh on its business and strict controls over epidemics in China take a toll on the company.
The Chinese telecoms giant said 2022 net profit was 35.6 billion yuan ($5.18 billion), down 69% year on year. That’s the largest annual drop of 54% in 2011, according to CNBC’s calculations.
However, in 2021, the company saw a significant increase in profits after it sold its Honor smartphone brand to a group of buyers, which makes the comparison to 2022 very significant. Huawei also listed rising commodity prices, strict epidemic control in China last year, and increased spending on research and development as reasons for lower profits.
“In 2022, the challenging external environment and non-market factors continue to affect Huawei’s operations,” Eric Xu, Rotational Chairman of Huawei, said in a press release.
Huawei said revenue rose 0.9% to 642.3 billion yuan in 2022, as the company stabilized its business after sales fell more than 28% in 2021. The Shenzhen company, headquartered in China, sought to diversify its business into new areas including Including cloud computing. And cars after a tough few years during which US sanctions hampered the company.
“In the midst of this storm, we have continued to race forward, doing everything we can to maintain business continuity and serve our customers,” Xu said.
During 2019 and 2020, the Chinese tech giant cut itself off from key American technology, such as Google’s Android operating system, and the components it requires such as semiconductors. This crippled Huawei’s smartphone business, which was once one of the first in the world. Huawei’s consumer business, which includes its smartphone unit, fell more than 11% to 214.5 billion yuan in 2022, a much less severe drop than in 2021.
Huawei has continued to release devices from smartphones to smartwatches. But the company has struggled to sell devices outside of China because it is unable to use Android, which is a very well-used operating system abroad. Huawei launched its own operating system, HarmonyOS, which it says was installed on 330 million devices at the end of 2022, up 113% year-on-year. But this OS failed to gain traction outside of China.
Huawei’s carrier business, which includes equipment it sells to telecom companies, brought in 284 billion yuan in revenue, up 0.9% year-on-year, compared to a decline in 2021. The United States has been urging countries for the past few years to ban Huawei from their 5G networks. Countries like the UK have already done so, while Germany is considering banning some Huawei equipment in its 5G networks.
With challenges at both carriers and consumers, Huawei has sought to diversify the company into new areas. Huawei’s enterprise business, which includes some of its cloud computing revenue, rose 30% year-on-year to 133.2 billion yuan.
Huawei has sought to move its products, including cloud computing, into specific industries such as finance and mining in a bid to help companies digitalize their businesses. The company disclosed its cloud computing business figures alone for the first time and said it generated 45.3 billion yuan in revenue in 2022.
Huawei has also jumped on the electric car boom in China and launched vehicles in partnership with automaker Seres. Huawei said its new unit, “Intelligent Auto Solutions,” brought in 2.1 billion yuan in 2022. The company said it has invested $3 billion in the unit since its establishment in 2019 and now has 7,000 research and development employees.
The company’s results are “in line with expectations,” said Meng Wanzhou, chief financial officer of Huawei, who returned to China in 2021 after being detained in Canada in 2018 at the request of the United States, adding that the tech giant’s financial position “remains strong.” “
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