Huawei released its 2021 Annual Report on Monday, reporting a decline in revenue as it dealt with impacts from U.S. sanctions, but managed to improve profitability.
The Chinese tech giant recorded annual revenue of CNY 636.8 billion ($99.88 billion), down 28.6% from CNY 891.36 billion ($139.89 billion) in 2020.
Still, Huawei reported that net income rose a whopping 75.9% year over year, according to the company, to CNY 113.7 billion ($17.84 billion), with operating margin of 19.1% and cash flow from operating activities at CNY 59.67 billion.
Huawei CFO Meng Wanzhou, who last year returned to China after being detained in Canada for nearly three years and is the daughter of Huawei founder Ren Zhengfei, in a statement touted the profit rise and ability to operate in the face of doubts.
“Despite a revenue decline in 2021, our ability to make a profit and generate cash flows is increasing, and we are more capable of dealing with uncertainty," said Meng, as the company released its first set of earnings since the end of her extradition fight involving accusations of attempts to cover up efforts of Huawei-linked companies to sell equipment to Iran in breach of U.S. sanctions. An agreement was reached in September with the U.S. to end a bank fraud case against her.
Huawei said enhanced profitability of its main businesses led to a dramatic increase in the company’s cash flow from operating activities, while its liability ratio dropped to 57.8% “and its overall financial structure has become more resilient and flexible.”
Huawei’s Rotating Chairman Guo Ping at a press conference said that overall, the company’s performance was in line with forecasts.
Still, Huawei’s two largest businesses – it’s carrier business and consumer business – each saw revenue declines. The consumer business saw annual revenues drop by nearly 50% to CNY 243.4 billion, with the unit now bringing in less than the carrier networks business and accounting for 38.2% of overall revenue. Meng said during the press conference that revenue for smartphones and tablets were impacted by restrictions.
The consumer business includes smartphone sales, a unit that was hit particularly hard as the U.S. clamped down on its access to chipsets and other tech, including Google’s proprietary Android operating system, with the company launching its own Harmony OS. The HarmonyOS was used in over 220 million Huawei devices as of 2021, according to Huawei.
Towards the end of 2021, Apple overtook the top smartphone maker spot in China, a position which had been changing hands since Huawei’s decline, according to Counterpoint Research.
Huawei’s 2021 carrier business revenue, meanwhile, declined 7% year over year to CNY 281.46 billion, and accounted for 44.2% of Huawei’s overall revenues. During a press conference, Meng said that more than half of its carrier business revenues came from sales outside of China.
In a press release the company said its carrier business maintained steady operations in the Chinese market due to continued 5G rollouts.
The U.S. Commerce Department blacklisted Huawei in 2019, and it was also deemed a national security risk, which Huawei has denied, as the FCC barred use of federal funds for Huawei gear and Congress directed service providers to rip and replace insecure network equipment. The U.S. in the last few years has campaigned for countries around the world to exclude Huawei from 5G networks, while imposing further sanctions on the tech giant.
One sector that saw growth in 2021 was the company's emerging enterprise business, up 2.1% in 2021 to CNY 102.4 billion, which also includes digital cloud.
Huawei saw double digit declines year over year across regions of Europe, the Middle East and Africa (EMEA), Asia Pacific, and the Americas. Even in its domestic market of China, which accounted for 64.9% of the company’s revenue in 2021, revenues were down 30.9% year over year to CNY 413.29 billion.
During its financial performance press conference, the CFO emphasized its future-oriented long-term investments as something that “can better reflect the real value of the company.”
“The real value of Huawei lies in the capabilities, teams and platforms we have built with our long-term R&D investment, and they are the real key to Huawei’s long-term sustainability and competitiveness,” Meng said.
Huawei’s R&D expenditure reached CNY 142.7 billion in 2021, representing a revenue ratio of 22.4%. According to Huawei, its financial statements in the 2021 Annual Report were independently audited by KPMG.