Despite Imposed Limitations, Huawei Is Determined To Fight for Its Place Under the AI-Powered Sun

On Friday, Chinese tech giant Huawei Technologies reported modest growth of its consumer business amid U.S. sanctions and slower than expected recovery of the country’s economy. 

Highlights

During the second quarter, overall revenue rose 4.8% YoY to 178.8 billion yuan. But when looking at the bigger picture during the first half of the year, consumer business revenue grew only 2.2% YoY to 103.5 billion yuan which equated to $14.27 billion, which is twice as less compared to 2019 and 2020's comparable period. This is the only segment with YoY comparisons as Huawei started breaking down sales by segments late last year. However, overall revenue rose 3.1% to 310.9 billion yuan. The biggest revenue contributor was the ICT infrastructure business, which includes revenue from carrier and enterprise services, with sales amounting to 167.2 billion yuan. Cloud services brought in revenue of 24.1 billion yuan. Net profit margin rose 5% YoY to 15% over the first half of the year. 

The EV Business

Intelligent automotive solutions, a segment that covers tech for new energy vehicles brought in revenue of 1 billion yuan over the first half of the year. As for the company’s EV brand, Aito, whose sales are included in the consumer business, reportedly made 100,000 EVs during the last 15 months. 

Monetizing AI

In July, Huawei launched an AI model that enhances safety and improves the efficiency of mining operations. Despite U.S. sanctions that restricted its access to advanced process technologies, Huawei is determined to establish a strong presence in the AI-powered universe. At its Huawei Developer Conference in July, it unveiled its AI model that can be used for a wide range of industrial and scientific applications. 

Trouble On The Smartphone Front 

Huawei expects its flagship consumer products to return to normalcy this year despite a struggling smartphone market that reached maturity, with even Apple Inc AAPL suffering the consequences. Although Apple succeeded to beat estimates with its latest report, even the mighty Apple reported its sales fell for the third consecutive quarter. Apple got saved by all-time revenue record in services but it slightly missed iPhone sales estimates. Back in July, even Qualcomm Incorporated QCOM guiding for sales below estimates due to a slumping smartphone market. As Qualcomm reported that it does not have the license to sell 5G chips to companies, it warned of lower-than-expected sales for the undergoing quarter with consumer spending on smartphones and similar gadgets remaining weak amid a gloomy macroeconomic perspective. As Qualcomm only has a license to sell 4G chips to Huawei, it did not assume any material revenue going forward. Qualcomm also tried to diversify its business beyond smartphone chips and went into producing computer chips for the automotive sector. 

Challenges Remain For Huawei

Huawei reported that back in 2022, revenue barely grew and in 2021, it recorded its first revenue decline. Huawei got blacklisted by the Trump administration in 2019, as American companies got restricted to sell to the Chinese telecommunications giant, including licensed access to the latest versions of Alphabet Inc GOOG-owned Google’s Android operating system. In response, Huawei released Harmony OS, its own system. Earlier this month, it unveiled the latest version that was reportedly downloaded over one million times in three days. Huawei remains confident of meeting its annual targets and its relevancy in today’s business world.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.