Chinese telecoms giant Huawei Technologies reported a nearly 70 percent drop in its annual profit on Friday, a setback that encapsulated economic scars caused by escalating US sanctions, higher commodity prices and persistent pandemic restrictions.
Net profit in 2022 fell 69 percent from a year earlier to 35.6 billion yuan, or just over $5 billion, Huawei said Friday at an annual conference in Shenzhen, China. But the company was able to post a 0.9 percent rise in revenue to 642.3 billion yuan.
The company blamed the decline on pandemic lockdowns and US sanctions; growing raw material prices caused by interruptions in the supply chain; an increase in investment in research and development; and a one-time increase in prior-year profit from the sale of its mobile phone branch.
Huawei has served as a symbol for the technology competition between Washington and Beijing, becoming a benchmark for how Chinese technology companies adapted to those of the United States. world campaign to cut off China’s access to critical technologies.
US officials have long suspected Huawei had close ties to the Chinese government, concerned that its technologies, such as 5G telecommunications equipment, could be used as surveillance tools. Huawei, a private company, denies any state ties.
The global race for computer chips
The Trump administration began restricting semiconductor sales to Huawei in 2019. Last year, the Biden administration expanded those controls, cutting Huawei’s access to both US consumers and providers and issuing a punishing freeze in chip manufacturing equipment to large sections of China’s semiconductor industry.
Those moves amounted to a “nearly complete embargo of US technology and products” on Huawei, said Daniel B. Pickard, a lawyer at Buchanan Ingersoll & Rooney and an expert on US export controls. 1950s and 1960s simply as a result of a unilateral US embargo.”
The sharp drop in profits, as well as Huawei’s acknowledgment of its economic challenges, were emblematic of the new economic reality for some Chinese companies. last week, the CEO of Tik Tokwhich is owned by the Chinese company ByteDanceresisted five hours of hostile questioning in a hearing before US lawmakers.
On Friday, Huawei executives acknowledged the growing geopolitical challenges, while striking a tone of defiance. China’s semiconductor industry has been through a “continuous stream of sanctions,” said Eric Xu, Huawei’s rotating chairman, adding that “China’s semiconductor industry will not stand idly by, but will strive to save itself, get stronger and stronger.” dependence.”
In recent years, Huawei has diversified its businesses in an effort to move away from American parts. After selling its smartphone business, the company said it had moved to cloud computing and accelerated the integration of software and hardware used in manufacturing systems and smart cars.
Huawei said it had also invested heavily in research and development, including a semiconductor investment fund launched in 2019 when Washington stepped up sanctions. The fund has backed more than 80 Chinese companies.
Mr. Xu said that Huawei, along with several Chinese companies, had developed chip design tools to enable Chinese companies to make more advanced semiconductors. He heralded it as a boon for China’s chip sector.
But analysts were skeptical of Mr. Xu’s claim, pointing to the challenges of doing it without US parts or US-sponsored machinery.
“There are a lot of questions,” said Douglas Fuller, an associate professor at Copenhagen Business School and an expert on US export controls. “Is it an exception for any specific chip involving tools from dubious IP origins?”
Joining Mr. Xu was Huawei’s CFO, meng wanzhouwho had returned 18 months earlier from an almost three-year extradition battle for fraud charges related to Huawei.
Ms Meng, the daughter of Huawei founder Ren Zhengfei, will take up a six-month rotation as chief executive on Saturday, a sign of her growing role in China’s efforts to achieve tech stardom.
At the conference, he spoke bluntly about the company’s situation. Asked by a reporter how Huawei could square its claim for financial stability with a huge decline in profits, he replied: “In general, we still exist and will continue to exist. That is the best embodiment of financial strength.”
