Huawei's Revenue Falls in Wake of Global 5G Restrictions
Huawei's Revenue Falls in Wake of Global 5G Restrictions
Chinese telecom Huawei and its 5G equipment were at the center of global tech and security debates. Here's how Huawei's faring in the aftermath.
Chinese telecommunications firm Huawei was, a few years ago, at the center of global technology and security debates — particularly concerning its 5G equipment. Then-US President Trump’s White House led a multinational diplomatic campaign trying to convince other countries to ban Huawei 5G equipment entirely. In the wake of that campaign and several, subsequent restrictions on Huawei equipment around the world, we analyzed data on Huawei’s revenue and profits from 2015 to the present, including with breakdowns by business segments and regional markets. Brought to you by Global Cyber Strategies.
The One-Liner (x5)
Huawei’s revenue increased each year from 2015 to 2020 but declined notably from 2020 to 2021 — and, reportedly, stagnated from 2021 to 2022.
Huawei’s Consumer Business segment had strong growth from 2018 to 2020 but suffered major losses from 2020 to 2021.
Huawei’s Enterprise Business segment generated more revenue each year from 2018 to 2021, while its Carrier Business revenue somewhat stagnated from 2018 to 2020 before declining in 2021.
Its revenue in Europe, the Middle East, and Africa and the Asia-Pacific has mostly fallen from 2018 to 2021, and its revenue in China and the Americas had some growth during the beginning of that period but fell by the end of 2021.
Huawei is making a push into areas like cloud services, expanding more in Latin America and the Middle East, and investing more in growth across the African content, despite continued restrictions in Europe and some countries elsewhere.
Huawei’s Global Revenue: Rising, Falling, Stagnating
Huawei’s global revenue increased each year from 2015 to 2020 but declined notably from 2020 to 2021 — and, reportedly, stagnated from 2021 to 2022.
Huawei made approximately $58.53 billion in global revenue in 2015. In 2020, it made approximately $132.38 billion in revenue, a roughly 2.5 multiple of its 2015 figure. However, from 2020 to 2021, its global revenue declined from approximately $132.38 billion to approximately $94.57 billion (about a 28.6% decrease). This is not entirely surprising. Despite the Trump administration’s many difficulties in convincing other countries to ban Huawei 5G equipment — including because of the administration’s botched diplomatic messaging campaign — many countries began shifting towards the end of the administration to banning Huawei from their markets or effectively sidelining Huawei, even without an official ban.
Example — Total and Explicit Ban: The UK has required all broadband and mobile operators to remove Huawei technology from public networks by the end of 2027 and to stop using Huawei equipment in 5G networks if it was procured after December 31, 2020. (Specifically, it did this by issuing a Designated Vendor Direction, drawing on Section 105Z1 of the UK’s Communications Act of 2003, to several British public communications providers.)
Example — Effectively Sidelining: India has not formally issued a ban on Huawei telecommunications equipment specifically. However, it has taken a number of steps to effectively sideline Huawei in India and to limit the use of Huawei 5G technology, such as issuing new rules in 2022 that limit telecommunications operators to using suppliers only with a “trusted source” stamp of approval from the government. The government has not issued one to Huawei.
Notably, though, Huawei’s net profits increased from 2020 to 2021 despite its revenue declining. It made approximately $9.59 billion in net profits in 2020 and approximately $16.89 billion in net profits in 2021.
This is reflected in the above graph, displaying Huawei’s global net profit for each year as a percentage of its global revenue for that year. In 2021, Huawei’s profit margin clearly increased, because it suffered about a 28.6% decrease in revenue from 2020 to 2021 — but in that same time, the company’s net profits went from 7.24% of its revenue (2020) to 17.86% of its revenue (2021).
Huawei’s CFO Meng Wanzhou said at the time:
Despite a revenue decline in 2021, our ability to make a profit and generate cash flows is increasing, and we are more capable of dealing with uncertainty.
Huawei’s 2022 global revenue and net profit figures have not been formally released. However, executives have provided some indications of these numbers. In October 2022, Huawei announced that its revenue was down 2.2% year on year in the first three quarters of 2022. Its rotating chairman Eric Xu said that “the decline in our device business continued to slow down, and our ICT [information and communication technology] infrastructure business maintained steady growth.” Bloomberg reported that Huawei’s expected revenue is defined by its “transitional year,” moving away from an emphasis on smartphones and other consumer electronics and towards an emphasis on wireless base stations, automobile technology, and other areas. Indeed, Huawei sold away its Honor smartphone business in November 2020.
In the wake of global 5G restrictions and some recent, major losses of revenue, it appears Huawei is shifting gears to increase its profit margin and emphasize different business verticals (discussed more next).
Huawei’s Core Business Segments
While Huawei’s total revenue continuously increased from 2015 to 2020 and then decreased from 2020 to 2021, with likely stagnation from 2021 to 2022, its business segments’ annual revenue was more volatile. This subsection focuses on 2018 to 2021 — starting around when the Trump administration began its campaign against Huawei 5G equipment and ending in 2021, because 2022 data is not yet available.
Consumer Business: Revenue increased from approximately $51.69 billion in 2018 to approximately $71.56 billion in 2020 (about a 38.4% increase over the two years) and then decreased in 2021 to approximately $36.07 billion (about a 49.6% decrease from 2020). This roughly tracks with Huawei’s overall revenue during that period, although the 2020-2021 Consumer Business losses clearly account for the greatest portion of Huawei’s overall 2020-2021 revenue decline. Huawei’s consumer business vertical encompasses smartphones, PCs, tablets, wearables, mobile broadband devices, family devices, and other consumer-facing devices and technologies. The company’s losses here are likely due to the Trump administration’s sanctions catching up a year and a half later — and Huawei’s related decisions to sell off its Honor smartphone brand and, per the aforementioned Bloomberg analysis, move away from consumer business.
Enterprise Business: Revenue had relatively steady growth from 2018 to 2021, going from approximately $11.03 billion in 2018 to approximately $15.17 billion in 2021 (about a 37.5% increase over the three years). This business vertical encompasses enterprise offerings such as enterprise networking, data storage, and Huawei Ascend Computing, a cloud service that uses Huawei’s new series of Ascend artificial intelligence chips. (The company launched its first of these chips, the Ascend 910, in 2019 as a competitor to chips offered by companies like Qualcomm and Nvidia — and in defiance of US sanctions.) For all the US government worked to restrict Huawei’s 5G market share, there is clearly demand in many parts of the world for Huawei’s enterprise technology offerings.
Carrier Business: Revenue more or less stagnated from 2018 to 2020, going from approximately $43.57 billion in 2018 to approximately $44.84 billion in 2020 (about a 2.9% increase over the two years). In 2021, revenue declined to approximately $41.71 billion (about a 6.9% decrease from 2020). Huawei’s carrier business vertical encompasses its wireless network (e.g., 5G, SingleRAN), fixed network, cloud core network, and autonomous driving network technology offerings, among others. The data on stagnating and then declining revenue in the Carrier Business suggests that even if the US government’s restrictions on Huawei may not have hit immediately — then causing further revenue loss — the global attention to Huawei’s 5G technology may have given some buyers pause in the interim period.
Huawei’s Core Market Regions
Year-to-year revenue changes were varied across Huawei’s core business segments, and revenue trends similarly varied across Huawei’s core regional markets. Some regions, like China, experienced revenue growth during most of the period; others, like the Asia-Pacific, experienced continuous revenue loss. This subsection focuses on the 2018 to 2021 time period for the same reason as the previous subsection.
China: Revenue was approximately $55.15 billion in 2018 and approximately $86.67 billion in 2020. There was a steep drop to approximately $61.24 billion in 2021 (about a 29.3% decrease). Given that Huawei sold its Honor smartphone business in November 2020, its revenue decline from 2020 to 2021 in China likely stems significantly from that sale (although Honor is currently doing well in the Chinese smartphone market, alongside vivo, Xiaomi, Apple, and others).
Europe, the Middle East, and Africa (EMEA): Revenue was approximately $30.31 billion in 2018 and approximately $30.53 billion in 2019. Then, revenue fell to approximately $26.79 billion in 2020 and to approximately $19.49 billion in 2021. Restrictions on Huawei 5G equipment in France, Sweden, Romania, the Baltic states, Belgium, Denmark, and elsewhere in EMEA have likely contributed to this revenue loss. However, other parts of EMEA are very much using Huawei equipment — such as telecoms in the United Arab Emirates, Saudi Arabia, Kuwait, Oman, and Bahrain — and Huawei is expanding further through new digital infrastructure, as with a cloud memorandum of understanding in Saudi Arabia signed with the government in December 2022. Huawei’s growing push to expand across the African continent will be a key factor in the EMEA market.
Asia-Pacific: Revenue was approximately $12.14 billion in 2018 and then steadily declined through to 2021, when it was approximately $7.96 billion (about a 34.4% decrease over the three years). S&P identified this problem for Huawei in 2020, highlighting in a report that there were billions of dollars at risk for Asian companies with direct and indirect exposure to Huawei and its US restrictions (e.g., entity list, licensing rule), incentivizing them to cut or limit ties. Huawei has invested in cloud services in Asia to make up for some of these losses, but the data shows that said efforts are not making up for overall losses in the short-term.
Americas: Revenue was approximately $7.1 billion in 2018 and rose to approximately $7.78 billion in 2019 before declining the following two years. It hit approximately $4.33 billion in 2021. Yet, Huawei has invested greatly in and continues to operate across Latin America, from Brazil to Mexico to Chile to Guatemala, in widespread divergence from the position some US and European governments have taken on its technology and the risks. The revenue declines each year from 2019 to 2021 may therefore have more to do with Huawei restrictions in the US and Canada — as well as US restrictions catching up with the company — than with Huawei’s growth prospects elsewhere in the Americas.
Where’s Huawei Going Now?
Huawei’s revenue loss may have slowed in 2022 compared to 2021, though final numbers have yet to be released. Even if the Trump administration’s campaign against Huawei was not the most immediately successful, many restrictions on Huawei 5G equipment since have clearly dented the company’s revenue in many countries. Simultaneously, Huawei appears to be shifting away from an emphasis on consumer technology (e.g., with the sale of Honor) and towards an emphasis on enterprise and other offerings. It is also expanding across Latin America and the Middle East and investing more in market expansion across the African continent.
Further, in 2022, there are several examples of Huawei closing down or scaling down business operations in different countries around the world. For instance:
India: In 2020, Huawei reportedly had approximately 1,500 employees in the country. By November 2022, according to an Economic Times source, Huawei’s workforce had shrunk to about 150 employees (a 90% decrease). India is the second-most populous country on earth and home to an enormous technology market, which makes this diminished presence majorly significant. The Indian government’s sidelining of Huawei in the 5G market fits into broader Indian government actions to restrict the reach of certain Chinese tech firms in India.
Russia: On December 20, 2022, Huawei announced it was closing its enterprise business unit in Russia and disbanding it as of January 1, 2023, with around 2,000 employees affected. According to Kommersant, which reported on the announcement, Huawei would be laying off the workers or transferring them to offices in other countries in the Commonwealth of Independent States (Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, and Uzbekistan) — but keeping its Moscow office in the event, in a source’s words, “active hostilities in Ukraine stop.” It will also keep open several of its technology development centers. This is a major pivot, as the Chinese telecom had been playing into the Kremlin’s fears of Western technology to develop business partnerships and sell 5G and other technology offerings.
Huawei’s 2022 numbers will provide an illuminating look into the company’s success as it works to expand in different markets and continues dealing with the costs of cybersecurity-driven restrictions on its technology, especially its telecom equipment.
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