Business of Chinese technology group Huawei remains sluggish amid tough US sanctions. After a major slump in 2021, the company from Shenzhen in southern China increased its turnover by 0.9 percent to 642.3 billion yuan (almost 86 billion euros) last year.
This is evident from the annual report presented on Friday. Profits fell by more than two-thirds to 35.6 billion yuan compared to the previous year.
Presenting the company figures, current CEO Eric Xu was combative: this year will be crucial for Huawei’s survival and development. “While it is true that we are under a lot of pressure, we have what it takes to come out the other side,” Xu said.
According to the annual report, Huawei invested about 161.5 billion yuan in research and development last year – an amount equivalent to about 25 percent of sales.
US accuses Huawei of espionage
The US government imposed sanctions on Huawei in 2019 under then-President Donald Trump. Concerns about national security were cited as the reason, because the supplier of network equipment and smartphone provider may be cooperating with the Chinese authorities and the military. Huawei has always denied the allegations.
According to press reports, US President Joe Biden is considering tightening sanctions against the company. Huawei could be denied access to semiconductors from major US suppliers such as Qualcomm or Intel. Beijing sees the sanctions as an attempt by rival US to slow China’s technological and political rise in the world.
In response to the US measures, the group has replaced thousands of Western components and opened new business areas in recent years. Around the turn of the year, Huawei declared that “crisis mode” was over. The US sanctions were part of the new reality, Xu stressed at the time.
“In 2022, a challenging external environment and non-market factors further weighed Huawei’s business,” said Xu. “During this storm, we did everything we could to maintain business continuity.”
“Continuous Income Stream”
Major efforts have been made “to generate a steady stream of revenue to ensure our survival and lay the foundations for future development,” Xu said.
Before the US government intervened, Huawei was the second largest supplier of smartphones and wanted to overtake market leader Samsung from South Korea. As a result of the sanctions, the group is no longer allowed to sell devices with fast 5G data transmission and Google services, practically throwing it out of the smartphone market internationally.
Difficult personnel change
At the head of the Chinese telecommunications giant, a politically sensitive personnel change is underway, which could affect its already strained relationship with the US. The daughter of the company’s founder, CFO Meng Wanzhou, who was once targeted by US justice, will take over the group’s rotating presidency for the first time (tomorrow) on Saturday.
The German government has also become more cautious and is now taking very seriously the concerns of the Office for the Protection of the Constitution and other security authorities against Chinese telecommunications equipment suppliers Huawei and ZTE.
For example, in the second week of March, the German Ministry of the Interior wrote to several companies in the industry that in the future it would not only be a matter of testing critical Huawei components used for the first time, but also of further utility. In other words, these should be replaced if necessary.
It’s about government influence
Vice President for the Protection of the Constitution, Sinan Selen, recently emphasized that he was pleased that the new law on the Federal Office of Information Security (BSI) made it clear that it was not only about technical issues, but also about how strong the state influence was on the relevant company.
When asked specifically about Huawei, he said, “I don’t want to prejudge the BSI’s decision-making processes; they look at critical components and come to decisions by X certain time.”
Against the background of political tensions between Beijing and Washington, China is currently trying to build a chip industry that functions largely independently of supplies from the West.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
