HONG KONG—China’s Huawei Technologies Co. reported a 38% fall in quarterly revenue Friday, as the damage U.S. sanctions have done to its sales of smartphones and telecommunications equipment worsened.
The drop marks the third straight decline in quarterly revenue for Huawei, the world’s largest maker of telecom equipment and formerly one of the world’s biggest smartphone sellers, and the declines have accelerated since the end of 2020.
Huawei’s smartphone sales, once a top revenue driver for the company, have fallen dramatically since the Trump administration imposed restrictions last year blocking the company from buying most advanced semiconductors. Revenue from telecommunications equipment sales have also dropped, although less dramatically, amid a U.S. campaign pressuring allied countries to drop the Chinese company as a supplier of 5G equipment.
Second-quarter revenue fell to 168.2 billion yuan, about $26 billion, from 271.8 billion yuan in the same quarter a year ago, according to calculations based on figures disclosed by the Shenzhen-based company on Friday. The decline marked a sharp acceleration from the 16.5% revenue drop in the first quarter and an 11.2% drop in the fourth quarter of 2020.
The privately held company provides a limited financial snapshot every three months. It didn’t report profits for the period, but said its net profit margin rose to 9.8% during the first half of the year from 9.2% a year earlier.
Eric Xu,
a Huawei deputy chairman, acknowledged the impact of Washington’s sanctions. “We’ve set our strategic goals for the next five years,” Mr. Xu said. “Our aim is to survive, and to do so sustainably.”
The company’s smartphone business has been damaged by “external factors,” he said, but predicted business lines aimed at telecom companies and big businesses will grow steadily.
Huawei has been hit by a number of U.S. actions in recent years, part of Washington’s efforts to curb the dominance of the Chinese telecom giant, which it regards as an espionage threat. Huawei has repeatedly denied its products pose national security risks.
Most damaging were last August’s restrictions by the Commerce Department barring Huawei from accessing any chips made using U.S. technology, barring it from critical components used widely across its products.
The Biden administration has kept the Trump administration’s sanctions on Huawei in place and has given little indication it will be more accommodative to the Chinese tech giant.
The policy has been a sore spot in the contentious U.S.-China relationship. During U.S. Deputy Secretary of State
Wendy Sherman’s
recent trip to China, Chinese officials presented her with a list of steps needed to improve relations, including a demand that the U.S. “stop suppressing Chinese companies,” a Chinese Foreign Ministry spokesman said.
Huawei has been forced to draw on stockpiled chips to continue building many of its products. Its smartphone business, which consumes huge volumes of advanced chips, has suffered the most out of its major business lines. Huawei said total revenue from consumer products, which include its smartphones, fell 47% in the first half from a year earlier.
Huawei was the world’s largest smartphone vendor in the second quarter of last year. But declining shipments dropped the company to No. 10 by the same quarter this year—a decline that in part is due to the sale of the company’s budget smartphone brand in November.
Last month, Huawei unveiled its latest flagship smartphone, the P50. But due to the chip restrictions, it won’t be able to take advantage of faster 5G networks.
Huawei is working on replacements for U.S. technology. Earlier this year it launched a self-developed operating system for smartphones to cope with the loss of Google’s Android services. Known as Harmony OS, the operating system is now running on 15 million of its own phones, according to the company.
Other Huawei business lines have been less affected by the chip restrictions. Its business that supplies telecom equipment to carriers suffered a revenue drop of 14.2% in the first half of the year. That business could recover later in the year, as the company has clinched more than 60% of a $6 billion 5G tender in China.
Huawei’s enterprise business unit reported a revenue jump of 18.2%. The business sells a variety of products to businesses and governments, including cloud services and software products.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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