Huawei Posts Sharp Profit Fall in Year Without Phone Cash Cow

(Bloomberg) -- Huawei Technologies Co.’s net income fell about 40% in the first three quarters of this year as the Chinese telecom giant couldn’t revive its cash cow smartphone business and spent heavily on research and development.

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The Shenzhen-based company, once the world’s biggest smartphone maker, generated 27.2 billion yuan ($3.8 billion) in net income between January and September with a profit margin of 6.1%, according to Bloomberg calculations. It marked a slump from 46.5 billion yuan net income in the same period a year ago, when Huawei reported a double-digit profit margin. Revenue for the September quarter rose 6% to 144.2 billion yuan, per Bloomberg calculations.

The company didn’t disclose detailed financial information.

A series of US sanctions that started during the Trump administration have smothered Huawei’s phone business, which used to be the key driver of growth for its consumer group and biggest source of revenue. Among those trade restrictions is a ban on contract chipmakers producing semiconductors designed by Huawei, effectively kneecapping its HiSilicon design business, which was keeping pace with Apple Inc.’s in-house Silicon group.

“Overall performance was in line with forecast,” said Rotating Chairman Eric Xu. “The decline in our device business continued to slow down, and our ICT infrastructure business maintained steady growth. Going forward, we will keep bringing in top-notch talent and investing in R&D to take the competitiveness of our products to a new level.”

2022 has been a transitional year for Huawei as it shifts from its prior emphasis on consumer electronics, originally underpinned by its smartphones. It grew sales of wireless communications products and base stations and is also exploring opportunities for collaboration with auto companies on cockpit communications and entertainment services for cars.

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