U.S. Restrictions Push Huawei’s Revenue Down by Nearly a Third

Huawei disclosed the decline in revenue in a year-end letter to employees from its chairman, Guo Ping. In the letter, Mr. Guo said the company’s efforts to reshape its business following U.S. sanctions were on track but that Huawei would face another challenging year.

The results were in line with Huawei’s forecasts, Mr. Guo said. Huawei executives had previously warned of a likely drop in revenue for the year.

After years of booming growth, Huawei was battered this year by far-reaching U.S. export controls, which blocked the company from obtaining critical chips and other components. The effects have been most pronounced on its smartphone business, the world’s largest for several months in 2020 before sales all but dried up this year because of challenges in obtaining chips.

“Huawei’s smartphone business, which made up around half of the company’s revenues in 2020, is collapsing,” said Dan Wang, technology analyst at Gavekal Dragonomics. “Even with heroic effort, Huawei won’t be able to maneuver quickly enough into new business lines to stop this bleeding.”

Huawei’s 5G telecom business was blocked in a number of Western countries following pressure from the U.S., which regards Huawei equipment as vulnerable to espionage or disruption by the Chinese government. Huawei has denied its equipment is a threat and says it is owned by employees and operates independently of the government.

Mr. Guo said Huawei’s telecom carrier business was stable in 2021, while its enterprise business, the company’s smallest business unit, experienced solid growth. He said the company’s consumer business continued to expand into new areas.

Among them, he said, was a variety of new consumer devices focused around the company’s self-developed operating system, called HarmonyOS. He also said the company was building a software ecosystem for digital infrastructure, called EulerOS.

Mr. Guo said the company remained committed to attracting overseas talent, saying it was offering top compensation for those who joined.

Huawei has been concentrating on new areas that are less dependent on foreign supply chains and high-end chips, including software, wearable gadgets and automobiles. Still, executives have said that these new business areas aren’t likely to make up for falling smartphone sales soon.

This year also saw the release of Huawei’s chief financial officer, Meng Wanzhou, who had been held in Canada for nearly three years after being sought by the U.S. on bank fraud charges related to the company’s alleged business in Iran. Ms. Meng returned to China in September after reaching a deferred prosecution agreement with the U.S. in an apparent prisoner swap in which China released two imprisoned Canadians.

Write to Dan Strumpf at [email protected]