Huawei shrugs off US sanctions with a bumper 2023 – Asia Times

Huawei shrugs off US sanctions with a bumper 2023 - Asia Times

Chinese technology company Huawei is recovering strongly from the earlier impact of US sanctions, with sales up 9.6% and net profit 144% in 2023, company figures released on March 29 show.

Year-on-year sales growth rocketed 26% in the fourth quarter, led by strong demand for the company’s Mate 60 Series smartphones, with the Mate 60 Pro showing strong uptake. Introduced at the end of August, the Mate 60 Pro defied US tech restrictions with its 5G capability and Kirin 9000S processor designed by Huawei subsidiary HiSilicon.

The Kirin 9000 chip is fabricated by Chinese IC foundry SMIC using a 7nm process. With SMIC also under US-led sanctions and unable to buy advanced EUV lithography systems from ASML of the Netherlands, the US Commerce Department had likely thought that would be impossible.

Huawei’s operating margin rose from 6.6% to 14.8%, primarily due to higher sales. The unusually high 19.1% operating margin reported in 2021 was supported by the disposal of the low-end Honor cell phone business and other items. If asset sales are not counted, the margin was less than 10%.

Source: Huawei data; Asia Times chart

Full-year 2023 sales growth was led by consumer products – cell phones, tablet PCs, watches, wearable fitness monitors – which were up 17.3%. Sales of ICT (information and communications technology) infrastructure, largely for 5G networks, were up 2.3%.

Huawei is diversifying but ICT infrastructure still accounted for more than half of total sales and consumer products for more than 35%.

Cloud computing revenues were up 21.9%. According to Canalys, Huawei Cloud had 19% of China’s cloud computing market in the fourth quarter of 2023, trailing Alibaba Clouds’s 39% but ahead of Tencent Cloud’s 16%. Huawei Cloud has customers around the world but most of its sales are in China.

Digital power sales rose 3.5% due to increasing demand for photovoltaic and energy storage infrastructure for utilities and on-site power supplies, commercial, industrial and residential users, WiFi networks and vehicle electrification. Saudi Arabia is a major customer, company statistics show.

Sales of what the company calls “intelligent automotive solutions” were up 2.3 times year on year from a very small base. Several customers, including Chang’an and Seres, use Huawei technology but its share of the Chinese market for assisted and autonomous driving computing solutions is still only 4%, according to Gaogong Industry Research Institute.

Source: Huawei data; Asia Times chart

Sales in China rose 16.7% to account for nearly 67% of Huawei’s total sales in 2023. Sales in EMEA (Europe, Middle East and Africa) declined by 2.6% to account for 20.6% of the total. A 14.6% decline in Asia-Pacific was largely offset by increases of 10.9% and 21.1% increases in the Americas and other regions.

According to Huawei’s management, regional sales declines were caused by slowdowns in ICT infrastructure investment, a problem shared by Ericsson and other makers of telecom equipment.

Last year, Huawei’s R&D spending amounted to 23.4% of sales, more than twice the figure for South Korea’s Samsung Electronics. It was the third year running in which the figure exceeded 20%. The high level of R&D spending supports Huawei’s efforts to develop its technologies, diversify its product line and work around US-led sanctions.

Huawei’s sales and profits could keep growing strongly in 2024 with a full year of Mate 60 smartphone sales and the launch of the Mate 70 later in the year.

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