Chinese telecommunications giant Huawei Technologies saw its revenue drop by almost a third in the first half of 2021, with US sanctions hobbling its once-dominant handset business and new business areas still in their early stages.

The company generated revenue of C¥320.4-billion (US$49.6-billion), it said on Friday. The biggest drop came from Huawei’s Consumer Business Group, which includes handsets, where revenue fell 47% to C¥135.7-billion.

It eked out a 0.6 percentage point rise in its net profit margin to 9.8%, largely due to efficiency improvements, a company spokesman said.

In 2019, former US President Donald Trump put Huawei on an export blacklist and barred it from accessing critical technology of US origin, affecting its ability to design its own chips and source components from outside vendors.

The sanctions hobbled Huawei’s handset business, with the company dropping out the top five vendors in China for the first time in more than seven years this year, shipping 6.4 million units, according to consultancy Canalys.

That compares to 27.4 million handsets shipped in China in the second quarter of 2020, excluding shipments of Honor budget handsets. Huawei sold the Honor brand in November.

Pivot

Huawei is trying to pivot towards software and business areas not at risk of US pressure, according to an internal memo from founder and CEO Ren Zhengfei in May.

“We’ve set our strategic goals for the next five years,” said Eric Xu, Huawei’s rotating chairman, in a statement announcing the results. “Our aim is to survive, and to do so sustainably.”

The company started rolling out its Harmony operating system in June, meaning it is no longer wholly reliant on Google’s Android platform. US sanctions banned Google from providing technical support to new phone models.

First-half revenue from Huawei’s enterprise business group grew 18% to C¥42.9-billion, as the Covid-19 outbreak spurred industry demand for ICT connectivity, a spokesman said.

Huawei is also seeing strong growth in its cloud services business, more than doubling in size in the first quarter to take a 20% market share in China, according to Canalys. — Reported by David Kirton, (c) 2021 Reuters