Huawei's revenue growth slows sharply as US blacklisting and coronavirus outbreak bite

Key Points
  • Huawei's revenues came in at 182.2 billion yuan in the first quarter, up just 1.4% from the previous year.
  • The firm said growth remained "resilient" despite headwinds related to Covid-19 and U.S. political pressure.
  • A trade blacklist has prevented U.S. firms from doing business with Huawei without a special license.
A Huawei store in Shanghai, China.
Costfoto | Barcroft Media via Getty Images

Huawei reported sharply slower revenue growth in the first three months of 2020, as the impact of a U.S. trade blacklist and the coronavirus outbreak weighed on the company's results.

The Chinese tech giant's revenues came in at 182.2 billion yuan ($25.8 billion) in the first quarter, up around 1.4% from the 179.7 billion it reported a year ago. By contrast, in 2019, Huawei reported a 39% increase in first-quarter sales.

The company also reported net profit margin of 7.3%, down from 8% in the first quarter of 2019.

Despite headwinds related to Covid-19 and U.S. political pressure, Huawei said growth remained "resilient." It attributed this to its employee share-ownership structure, business continuity planning and investment in research and development.

Last year, Huawei was placed on the U.S. Entity List, a government blacklist that prevents U.S. companies from doing business with the firm without a special license. Washington alleges Huawei equipment could enable Chinese spying, but the company has repeatedly denied such claims.

In response, the company has diversified its supply chain and designed some key components, such as chips, in-house. But the trade restrictions have hurt its smartphone business, as Google was forced to cut ties with the firm.

That's meant that new Huawei smartphones — including the recently-launched P40 — aren't able to include the full version of Android and Google apps.

Huawei didn't break out sales growth for individual units, such as telecommunications gear and smartphones.

And, unlike in last year's first-quarter report, Huawei didn't state how many smartphones it shipped in the first quarter. Smartphone sales have plummeted amid the pandemic, particularly in China where Huawei is the dominant player.

It comes after the company's annual 2019 financials, published late last month, showed a 19% rise in revenue but slower profit growth. Weakness in Huawei's smartphone division had contributed heavily to a $12 billion shortfall in the firm's initial projections for annual sales.

Political rumblings in the UK

Huawei reported its first-quarter results Tuesday from London, rather than its headquarters in Shenzhen, China. It comes as the company faces fresh questions over its role in the U.K.'s rollout of 5G mobile networks.

Prime Minister Boris Johnson's government earlier this year decided to allow Huawei access to "non-core" elements of Britain's 5G network infrastructure like antennas and base stations, but not the core parts where data is processed. Its share of non-core networks was capped at 35%

The move drew the ire of U.S. President Donald Trump, whose administration has been urging allies to ban the company outright. More recently, lawmakers in the U.K.'s ruling Conservative Party took a harder line, threatening to the decision. Some think that U.K. network providers should reduce reliance on the Chinese firm's tech altogether. 

Asked about the political situation in the U.K., Huawei Vice President Victor Zhang said he believed the government would continue to invest in wireless infrastructure and innovation.

"What we want to do is help the U.K. bring the best possible technology for achieving their digital objectives in the next couple of years," he told reporters in a conference call on Monday.