Huawei’s revenue falls for second quarter in a row as sanctions bite

What just happened? Following its first-ever quarterly revenue decline in Q4 2020, Huawei has seen its sales figures fall for the second quarter in a row due to US sanctions. The Chinese giant said revenue declined following the sale of its Honor phone brand in November, but there was a bit of good news: profitability was up 3.8 percentage points to 11.1%.

It’s been two years since Donald Trump added Huawei and 70 affiliates to the Bureau of Industry and Security (BIS) Entity List, meaning US companies could no longer do business with these firms without a license. The result is that Google’s apps and services no longer appear on the Chinese giant’s new products, making them less appealing to western consumers.

Huawei has long been incredibly popular in China and other markets, which helped mitigate the sanctions’ effects on its bottom line—at least initially. But the final quarter of last year saw Huawei’s revenue decline—by 11%—for the first time in the company’s history.

The situation didn’t improve during the first quarter of this year. Huawei’s sales fell 17% compared to the same period last year to $23 billion, though its profit margin increased 11% for a net income of $2.61 billion, the result of a $600 million patent license fee and cost-cutting exercises.

“2021 remains a challenging year for Huawei, but it also marks the start of a clear strategy for the company’s future,” said rotating Chairman Eric Xu. “Huawei will continue to focus on technological innovation and investing in R&D to ensure supply continuity under sanctions.”

Huawei’s founder Ren Zhengfei has suggested to employees that one of its business units could join a stock exchange for the first time. He warned workers that faking accounts may become a legal problem in the future if one of Huawei’s businesses enters the capital market, reports the South China Morning Post.

Last year was one of the most challenging Huawei has ever faced. With the Biden administration showing no signs of easing the restrictions put in place by Trump, its fortunes are unlikely to improve anytime soon. As such, the company is expanding its revenue sources, including creating tech for healthcare, coal mining, and even pig farming. There are rumors that it may also enter the self-driving vehicle industry.