Huawei, despite `` sharp decline in sales '', the underlying strength of a large increase in profit Overcoming the major blow of the smartphone business by improving management efficiency

As US government sanctions continue, Huawei is fully committed to self-transformation to survive (photo from company website)

Huawei Technologies (Huawei), China's largest telecommunications equipment company, announced its financial results for the January-September 2021 period on October 29. Although the company does not disclose results for the third quarter (July-September) only, based on past performance data, sales for the July-September period were 135.4 billion yuan (approximately 2.4034 trillion yen) in the previous year. It also decreased by 37.7% compared to the same period.

In the first quarter (January-March), sales decreased 16.5% year-on-year to 152.2 billion yuan (about 2.7016 trillion yen), and in the second quarter (July-September) Sales decreased by 38.1% to 168.2 billion yuan (approximately 2.9856 trillion yen), marking the third consecutive quarter of significant decline.

What is worth noting, however, is that the net profit for the July-September period was 15.1 billion yuan (about 268 billion yen), a significant increase of 26.5% compared to the same period last year. Huawei's Rotating Chairman (equivalent to Chairman), Guo Ping, summarized the results announced this time as follows.

"Overall, it is within the expected range. Although the consumer business was hit hard, the enterprise business remained stable. Huawei will continue to increase R&D investment and recruit talented people." and improve management efficiency.”

The main reason for Huawei's sharp decline in sales was the rapid contraction of its core consumer business, the smartphone business. Since September 15, 2020, it has been difficult for Huawei to procure cutting-edge semiconductors for smartphones due to increased sanctions by the US government. As a result, sales of smartphones, which once accounted for around half of total sales, plummeted.

"Making state-of-the-art products with non-state-of-the-art parts"

Under such circumstances, Huawei has devoted all its efforts to self-transformation to survive. One of them is the challenge of developing cutting-edge products using parts that are not cutting-edge. In August 2021, Huawei founder and CEO Ren Zhengfei said, "After two years of U.S. sanctions, we are no longer obsessed with developing the best products using the best parts." Said. He continued:

"Balancing functions in a scientific and rational way and using reasonable (quality) parts to create high quality products can greatly increase profit margins."

This article is an article provided by "Caishin"

The results are shown in the results disclosed this time. Huawei posted a net profit margin of 10.2% in the January-September quarter, up more than two percentage points from 8.0% in the same period last year.

The next challenge is to turn around the depressed sales. Huawei is currently pushing forward with developing new businesses for corporations. We aim to increase sales by leveraging our unique solutions that combine 5G (5th generation mobile communication) and AI (artificial intelligence).

(Caishin Reporter: Zhang Jishu) *The original will be delivered on October 29.

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