Huawei 'out of crisis' mode

China’s Huawei Technologies said it was “out of crisis mode” as it posted a small increase in annual revenue, adding it was making headway with replacing components affected by sanctions thanks to the billions it is spending on research.

The tech conglomerate’s revenue climbed 0.9%, in line with a company forecast, suggesting it has reached some level of stability after successive rounds of U.S. export controls since 2019 hammered its once mighty smartphone business.

But it posted net profit of 35.6 billion yuan ($5.18 billion), down some two-thirds from 2021 when profit was helped by the sale of its Honor mid-range smartphone business. The decline was, however, still severe even when compared with 2020 – a drop of 44%.

Top executives of the major supplier of equipment used in 5G telecommunications networks spoke at a news conference about how they had been pushed to “a fatal impasse” and “fought their way out” after Washington restricted its supply of chips and chip-design tools from U.S. companies.

“2022 is the year that we pulled ourselves out of crisis mode. We’re back to business as normal,” said Chief Financial Officer Meng Wanzhou, daughter of the company’s founder.

The U.S. has said Huawei represents a security risk, which it denies. Tension with the U.S. saw Meng detained for three years in Canada over alleged efforts to cover up attempts by Huawei-linked companies to sell equipment to Iran in breach of U.S. sanctions.

Charges against Meng were dismissed and she returned to China in 2021. Huawei rotates its chairperson every six months and Meng is set to take up the position on Saturday.

INDUSTRY SUPPORT

R&D spending over the year rose 13.2% to 161.5 billion yuan ($23.50 billion), equivalent to a quarter of company revenue.

Such spending helped Huawei with replacing components in its products that were hit by U.S. trade sanctions, Meng said. Founder Ren Zhengfei told a university in February they had replaced more than 13,000 parts.

Chairman Eric Xu said they saw areas such as green development as opportunities and were investing in 5.5th and 6th generation technology, with the hope that they may be able to start rolling out 5.5G products by 2025.

Xu, asked about recent comments about breakthroughs in electronic design automation (EDA) tools for chips produced at and above 14-nanometre technology, said the company had achieved that with its partners and that meant that Huawei could use its own EDA tools to design chips.

Like Huawei, China’s semiconductor industry has been the target of U.S. export controls measures and the company will render support to industry efforts to become more self-reliant, he said, without providing details.

Revenue for 2022 came in at 642.3 billion yuan. While that represented mild growth over 2021, it was still far below the record 891.3 billion yuan logged in 2019 when it was the top Android smartphone vendor globally.

Revenue from the enterprise division soared 30%, that of its telecommunications business inched up 0.9% while sales for its consumer electronic business tumbled 11.9%.

Huawei’s asset-to-liability ratio was 58.9% and it had a net cash balance of 176.3 billion yuan.