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Huawei

Huawei Telecommunications India Private Limited
Huawei once looked unstoppable. Having gained share in the Indian telecom gear market since 2017, the vendor’s revenue in India increased from ₹6430.20 crore in FY17, to ₹8282.10 crore in FY18, peaking to ₹12884.10 crore in FY19, it dropped drastically to ₹6658.90 crore in FY20, further dipping to ₹3703.60 crore in FY21. The vendor has not yet filed its annual results for FY22 with the Ministry of Corporate Affairs, Government of India.

Huawei continues to face massive headwinds in India, with no new network contracts likely to come its way. The Chinese multinational so far has not been granted the mandatory trusted sources tag, thus excluding it from any further possibility of 4G expansions and 5G network rollout.

At present, Vodafone Idea has the maximum number of Huawei network sites, followed by Airtel, which has Huawei networks in Karnataka. In February 2022, Bharti Airtel awarded a ₹300-crore order to Huawei to upgrade and expand its national long-distance (NLD) network, which is currently run by the Chinese vendor. This is part of an ongoing Airtel process; the telco had in 2021 awarded a similar contract to Huawei worth ₹300 crore.

On February 15, 2022, the income tax department accused Huawei of irregularities in declarations made. Search and seizure operations were conducted on Huawei India offices spread across Delhi, Gurugram, and Bengaluru, and the residential premises of the key office bearers. Investigations are in progress.

The vendor has also been facing challenges to continue R&D activities in particular, as several ministries including home ministry, education ministry, and others have informally placed restrictions on any collaborations with the company. Huawei’s troubles are further exacerbated by the denial of visas to its product and technology experts from China.

Regardless, Huawei has displayed a positive stance. “India market is very complex with many challenges. Recent developments in India have undoubtedly been a test for Huawei. Just as our customers in India have overcome their many challenges to find solutions, we are confident that issues here will also be addressed similarly. Our relationship with our customers across enterprise and telecom has been built over decades, powered by our core value of customer-centricity. We will continue to be rooted in India and serve our customers well,” said a Huawei senior spokesperson.

Huawei Investment & Holding Co., Ltd.
On the global front too, Huawei continues to wrestle with US regulator claims about fears the Chinese government would be able to monitor communications and spy on customers, and it has been forced to exit the US market in recent years. While US regulators do not have any proof about this claim, Huawei has not been successful countering it either. This has been holding up the company’s activities over the last decade.

Huawei Investment & Holding Co., Ltd.

Consolidated income statement (CNY million)

Particulars 2021 2020 YoY
Revenue 636,807 891,368 (28.6)%
Gross profit 307,442 327,132 (6)%
           Gross profit margin (%) 48.3 36.7 11.6%
Total operating expenses (246,827) (255,323) (3.3)%
           as % of revenue 38.8 28.6 10.2%
Other net income 60,797 692 8685.7%
Operating profit 121,412 72,501 67.5%
           as % of revenue 19.1 8.1 11.1%
Net finance income 493 (367) (234.3)%
Income tax (8227) (7655) 7.5%
Net profit 1,113,718 64,649 75.9%

Most cripplingly, USA it used export controls to starve the company of American technology and products, including computer chips, on which many manufacturers rely.

Consolidated balance sheet (CNY million)

Particulars 2021 2020
Current assets 769,378 691,394
Non-current assets 213,593 185,460
Total assets 982,971 876,854
Total equity 414,652 330,408
Non-current liabilities 175,864 154,114
Current liabilities 392,455 392,332
Total equity and liabilities 982,971 876,854

Xu Zhijun
Rotating Chairman,
Huawei

“The overall operating results are in line with the expectations. The downward trend of the terminal business continues to slow down and the ICT infrastructure business maintains a stable growth. Huawei will continue to attract outstanding talents, constantly invest in research and development, continuously improve product competitiveness for customers, and create value for society”

In October 2022, US Department of Justice (DoJ) arrested two Chinese citizens who work for the company in the US, and filed 13 charges in three separate cases. DoJ maintained that the Chinese intelligence agents, put together a scheme to steal files and other information from the US attorney’s office for the Eastern District of New York, which is also conducting the ongoing investigation into Huawei.

Huawei Investment & Holding Co., Ltd.

Revenue (CNY million)

By segment

Particulars 2021 2020
Carrier business 281,469 302,621
Enterprise business 102,444 100,339
Consumer business 243,431 482,916
Others 9463 5492
Total 636,807 891,368

In the latest blow, on December 1, 2022 the Biden administration banned the sale or import of new telecommunications equipment from China’s Huawei Technologies (and ZTE). “China will adopt necessary measures to safeguard the legitimate rights of domestic firms,” responded Chinese commerce ministry spokesperson, Shu Jueting, urging the United States to correct the wrongdoing and stop politicizing and weaponizing economic and trade issues.

As the US urged allies to drop the vendor from their 5G mobile networks, Canada, UK, Sweden, France, Australia, and New Zealand banned the Chinese vendor. The constant risk of fresh restrictions has led many customers in places without bans to steer clear of Huawei. This has already happened in Italy and Portugal. However, it has not always been a win-win for the US in the war against Huawei. The company is involved in 5G networks in NATO members, Hungary, Iceland, the Netherlands, and Turkey. Likewise, some of the US’ closest partners in the Middle East, including Saudi Arabia and the United Arab Emirates, are also using Huawei. Some countries as Vietnam and Japan have taken a cautious approach. Huawei executives boast of more than 5000 commercial 5G contracts globally, ranging from full deployment of 5G networks for national carriers to upgrading networks at ports.

Overall, outside China, Huawei is in a survival mode. Founder Ren Zhengfei has said that Huawei would be shutting down marginal business units.

Huawei Investment and Holding Co. Ltd. revealed a deepening decline in earnings since 2021. If only three vendors, Ericsson, Nokia, and Huawei are considered, the global market share of the Chinese MNC in 2017 was 64 percent, 68 percent in 2018, 70.9 percent in 2019, 71.3 percent in 2020, and 66.2 percent in 2021. However, Huawei continues to retain its top position worldwide by a wide margin.

Huawei Investment & Holding Co., Ltd.

(CNY mn)

Region 2021 2020
China 413,299 597,983
EMEA 131,467 180,819
Asia Pacific 53,675 64,466
Americas 29,225 39,664
Others 9141 8436
Total 636,807 891,368

In the first three quarters of 2022, the vendor gained a total revenue of 441.141 billion yuan (USD 60.41 billion), resulting in a net profit of 23.927 billion yuan (USD 3.15 billion). While Huawei’s device business was heavily impacted, the ICT infrastructure business maintained steady growth.

Xu Zhijun, Rotating Chairman, acknowledged in a couple of interviews that Huawei faced challenging times, but stated it continues “to believe deeply in the power of digital technology to provide fresh solutions to the problems the world is facing right now.”

Ren Zhengfei, founder and CEO, Huawei Technologies, is hell-bent on transforming the company from one laser-focused on a few core telecoms products to a provider of tech and services to a variety of industries, from car making to agri business.

He wants Huawei to become a purveyor of technology to a wide spectrum of industries. It has already sold 300 million devices running on Harmony, including laptops and wearables, such as smart watches and app-controlled home appliances. It is now attempting to re-launch the production of 5G phones, using less advanced chips.

It is also expanding its enterprise division. The unit is building data centers and cloud-computing businesses around the world. Its prospects look strong in China, where the chief source of demand over the next decade will be the government and state-owned firms.

Huawei does not enjoy a technical advantage in such infrastructure-as-a-service (IaaS) over giant local rivals like Alibaba and Tencent.

But it has the government connections needed to win the juiciest contracts, says Yi Zhang of Canalys. In just a few years, this has helped Huawei become the second-largest cloud provider in China, behind Alibaba. Many Chinese firms are tossing out Oracle databases and asking Chinese companies to build local ones. Huawei is scooping up this business. As revenues from devices tumbled in the first half of 2022, its overall sales from the enterprise division surged by 28 percent to 55 bn yuan (USD 7.6 bn), or about 18 percent of total revenues. Gartner reckons that Huawei has become the world’s fifth-largest IaaS provider. However, barriers to entry in such businesses are high even in places that welcome Huawei.

Taken together, the changes amount to a revolution in how Huawei functions as a business. Its one-way end-to-end system is being replaced by a more open, two-way model, where Huawei develops products in partnership with its growing array of client industries.

With his company’s 100,000 engineers having an enviable record of inventiveness, Ren could yet pull off the transformation!

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