Huawei rotating chairman Eric Xu (pictured) acknowledged 2019 was the most difficult year the company had ever faced, but predicted 2020 would be even tougher as the impact of Covid-19 (coronavirus) makes it nearly impossible to accurately forecast its performance.
In an earnings briefing, Xu said this will be a crucial period as the company faces its first full year of US trade restrictions; tests to its supply chain due to dwindling component inventories; and the economic uncertainties caused by the pandemic.
Net profit in 2019 increased 5.6 per cent year-on-year to CNY62.7 billion ($8.8 billion) on revenue of CNY858.8 billion, up 19.1 per cent. The rise was led by a 34 per cent jump in sales in its Consumer Business Group to CNY467.3 billion, with smartphones shipments rising 16.5 per cent to 240 million units.
In 2018, its profit increased 25.1 per cent with revenue up 19.5 per cent.
During 2019, Carrier Business Group revenue grew 3.8 per cent to CNY296.7 billion, with Enterprise 8.6 per cent higher at CNY89.7 billion.
Xu said 5G revenue reached about $3 billion, representing a small percentage of its Carrier business, noting 2019 brought the introduction of 5G services in some markets, but large-scale rollouts are yet to happen.
Revenue from China increased 36.2 per cent to CNY506.7 billion, accounting for 59 per cent of Huawei’s total, with EMEA (24 per cent of the total) flat at CNY206 billion. Business in Asia Pacific (8.2 per cent) dropped 13.9 per cent to CNY70.5 billion, while Americas (6.1 per cent) increased 9.6 per cent to CNY52.5 billion.
Xu said strong growth in smartphone sales in China, where it expanded its market share, offset a sharp decline of at least $10 billion in overseas sales after it was put on the US entity list. He noted the Consumer Business didn’t start to bounce back until Q4.
R&D spending increased 30 per cent to CNY131.7 billion, or 15.3 per cent of total revenue. Xu said R&D spend in the ten years to end-2019 exceeded CNY600 billion.
In response to a question about the impact of an escalation in US trade restrictions, Xu said he believes China’s government could take countermeasures on any chip ban and domestic companies would react by investing in local semiconductor facilities.
“We can imagine the impact of the ripple effect on the global industry. Our hope is everyone can work together to focus on the challenges the industry faces and come up with solutions,” he stated.
In terms of additional initiatives to increase corporate transparency, Xu simply said it will maintain the same approach as in 2019.