The free fall in sales for Huawei, the Chinese technology group hit by heavy US sanctions, has started to ease as the expansion of the company’s domestic cloud business offsets the decline in smartphone sales.
Huawei said on Friday its total revenue in the first half of the year fell 6 percent from a year earlier to 301.6 billion Rmb ($44.7 billion), but sales in its enterprise segment, which includes cloud computing, increased 28 percent to 54 Rmb. 7 billion during the period.
The decline marks an improvement from 2021 when Huawei’s revenue shrank 29 percent after Washington hit the group with export controls denying access to key technology and components.
The measures have mainly affected the group’s smartphone business by limiting its access to the semiconductors needed to power the phones. Huawei was forced to sell Honor, one of the top smartphone brands in 2020, to ensure its survival.
Smartphone sales were the main driver of the group’s consumer business, which fell 25 percent in the first half of this year as a result of weak demand for consumer electronics.
“While our hardware business was greatly affected, our [enterprise and carrier businesses] maintained steady growth,” said Ken Hu, chairman of Huawei, in a statement.
Huawei said its net profit margin stood at 5 percent in the first half of 2022, up from 9.8 percent in the same period last year.
Huawei’s cloud computing arm has successfully beaten competitors including Jack Ma’s e-commerce group Alibaba to win cloud contracts.
Alibaba and rival Tencent draw about half of their cloud sales from providing services to China’s Internet companies, which are struggling under the weight of Beijing’s tech crackdown.
“China’s market is entering a new era where the customers driving demand are no longer other Internet companies, but those from traditional industries, including state-owned enterprises,” said Zhang Yi, a cloud expert at Canalys.
“Huawei’s relationship with the government is really good, which helps them win business,” Zhang said.
Huawei is also one of the leading vendors offering private cloud services, a more customized segment of the market that is often preferred by state-owned enterprises and the country’s local governments.
While Huawei’s political favorability in China has helped boost the company, the group’s ties to Beijing pose problems abroad.
Canada in May became the latest country to ban Huawei and its Chinese counterpart ZTE from offering 5G services in the country. The Canadian government also instructed telecom companies to remove Huawei devices from existing 4G networks.