Huawei. Photo: VCG

Chinese tech company Huawei reported a plunge in revenue and a jump in profit in the first quarter, mirroring a faltering smartphone business under the US blockade and a robust growth in business targeting enterprises clients that have cushioned against its revenue losses to some extent.

Analysts said the first-quarter financial report reflected that Huawei has managed to “survive” the US malicious crackdown and its liquidity has remained stable, but the company now still faces an uphill mission of how to “bottom out and emerge from the darkest moments.” 

As the Biden administration shows no sign of relaxing the chip ban, Huawei needs to solve the “bottleneck issue” of ensuring chip supply this year. And it is not clear how its new businesses could make up for the drop in consumer business, analysts said, with some anticipating a 20-percent reduction in revenue in 2021. 

Huawei's revenue in the first quarter was 150 billion yuan ($23.13 billion), down 17 percent year-on-year. Its profit in the first three months grew 26 percent to 16.9 billion yuan, according to the Global Times’ calculation based on the first-quarter financial report Huawei Investment&Holding Co sent to  the Shanghai Clearing House on Wednesday.

The report did not disclose details of earning in specific business divisions. 

Ma Jihua, a senior tech industry analyst based in Beijing, told the Global Times on Wednesday that the revenue shrink is “within expectation” and was mostly due to Huawei’s sliding smartphone business, which generally accounted for about half of its total revenue.

Huawei was put onto a US chip export blacklist in May 2019, with the malicious aim to cripple China’s tech rise. The company had been rushing to stockpile chips and components in the first quarter and second quarter of 2020, ahead of the trade restriction. 

“Huawei spent a lot to build up the stockpile last year. Such spending has diminished in the first quarter, and that’s partly why the firm sees profit expansion,” Ma explained. He added that the profit jump also indicated that its to-business divisions such as providing service for telecom carriers, maintained high growth.

Analysts said the first-quarter financial performance underscores that Huawei’s “forced strategic adjustment” from a hardware provider to a software supplier, has worked out at the initial stage and the company’s business is operating as usual despite US crackdown. 

“But the company needs to pin the hope on itself to address the chip shortage,” Ma noted. 

He predicted that Huawei’s waning smartphone business will continue to drag down its revenue by about 20 percent this year, while its business diversification strategy, if successful, will underpin the company’s profit to achieve a single-digit growth as last year’s.

In mid-April, Huawei started to sell smart vehicles in its flagship stores across China, as part of the efforts to generate new revenue. The firm has also looked to scale up investment in other business lines, such as cloud services and providing technologies for mines, ports and photovoltaic industries. 

In 2020, Huawei’s revenue stood at 891.4 billion yuan ($135.93 billion), up 3.8 percent year-on-year, while net profits rose 3.2 percent to 64.6 billion yuan.