As the cloud business expands, Huawei’s sales declines

Chinese tech group Huawei, which has been hit by heavy U.S. sanctions, has seen less sales relief as the company’s expansion in its domestic cloud business comes as smartphone sales decline.

Huawei said on Friday that its total revenue for the first half of the year fell 6 percent from a year earlier to Rmb301.6bn ($44.7bn), but sales including its enterprise cloud computing jumped 28 percent to Rmb54. 7 billion at the time.

Huawei’s revenue fell 29 percent in 2021, when Washington blocked access to critical technologies and components by sending the team out.

The measures mainly affected the group’s smartphone business by restricting the use of semiconductors needed to power the phones. Huawei was forced to sell Honor, one of its biggest smartphone brands, in 2020 to ensure its survival.

Smartphone sales are the main driver of the group’s consumer business, falling 25 percent in the first half of this year due to demand for consumer electronics.

“While our equipment business has had a significant impact, our [enterprise and carrier businesses] It has led to sustained growth,” Huawei chairman Ken Hu said in a statement.

Huawei said its net profit margin in the first half of 2022 was 5 percent, down from 9.8 percent in the same period last year.

Jack Ma’s ecommerce group, Huawei’s cloud computing arm, successfully beat competitors including Alibaba to win cloud contracts.

Alibaba and rival Tencent draw about half of its cloud sales from providing services to Chinese internet companies under the brunt of Beijing’s technology offensive.

“The Chinese market is entering a new era where the demand is not driven by Internet companies, but by state-owned enterprises from traditional industries,” said Zhang Yi, a cloud expert at Canalys.

“Huawei’s relationship with the government is very good, which helps them win business,” Zhang said.

Huawei is one of the top providers of private cloud services, often in the highly customized market segment favored by state-owned enterprises and local governments.

Huawei’s political favorability in China has helped buy the company, while the group’s ties to Beijing cause problems abroad.

In May, Canada became the latest country to ban Huawei and China’s ZTE from providing 5G services in the country. The Canadian government has instructed telecom companies to remove Huawei devices from existing 4G networks.