U.S. Restrictions Push Huawei’s Income Down by Almost a Third

Huawei disclosed the decline in income in a year-end letter to workers from its chairman,

Guo Ping.

Within the letter, Mr. Guo mentioned the corporate’s efforts to reshape its enterprise following U.S. sanctions have been on observe however that Huawei would face one other difficult 12 months.

The outcomes have been consistent with Huawei’s forecasts, Mr. Guo mentioned. Huawei executives had beforehand warned of a probable drop in income for the 12 months.

After years of booming progress, Huawei was battered this 12 months by far-reaching U.S. export controls, which blocked the corporate from acquiring vital chips and different elements. The results have been most pronounced on its smartphone enterprise, the world’s largest for a number of months in 2020 earlier than gross sales all however dried up this 12 months due to challenges in acquiring chips.

“Huawei’s smartphone enterprise, which made up round half of the corporate’s revenues in 2020, is collapsing,” mentioned

Dan Wang,

know-how analyst at Gavekal Dragonomics. “Even with heroic effort, Huawei gained’t be capable to maneuver shortly sufficient into new enterprise strains to cease this bleeding.”

Huawei’s 5G telecom enterprise was blocked in quite a lot of Western international locations following strain from the U.S., which regards Huawei gear as susceptible to espionage or disruption by the Chinese language authorities. Huawei has denied its gear is a menace and says it’s owned by workers and operates independently of the federal government.

Mr. Guo mentioned Huawei’s telecom provider enterprise was secure in 2021, whereas its enterprise enterprise, the corporate’s smallest enterprise unit, skilled stable progress. He mentioned the corporate’s client enterprise continued to develop into new areas.

Amongst them, he mentioned, was a wide range of new client gadgets targeted across the firm’s self-developed working system, known as HarmonyOS. He additionally mentioned the corporate was constructing a software program ecosystem for digital infrastructure, known as EulerOS.

Mr. Guo mentioned the corporate remained dedicated to attracting abroad expertise, saying it was providing prime compensation for many who joined.

Huawei has been concentrating on new areas which can be much less depending on international provide chains and high-end chips, together with software program, wearable devices and vehicles. Nonetheless, executives have mentioned that these new enterprise areas aren’t prone to make up for falling smartphone gross sales quickly.

This 12 months additionally noticed the discharge of Huawei’s chief monetary officer,

Meng Wanzhou,

who had been held in Canada for almost three years after being sought by the U.S. on financial institution fraud fees associated to the corporate’s alleged enterprise in Iran. Ms. Meng returned to China in September after reaching a deferred prosecution settlement with the U.S. in an obvious prisoner swap through which China launched two imprisoned Canadians.

Write to Dan Strumpf at daniel.strumpf@wsj.com