Huawei blames Q1 revenue drop on Honor sale

Rotating chairman Eruc Xu described 2021 as “another challenging year” for Huawei

Huawei reported a 16.5% drop in revenue for the first quarter of 2021, which the company claims is a result of it selling its Honor smartphone business late last year.

Honor was sold in November 2020 to Shenzhen Zhixin New Information Technology, an enterprise owned by the government of Shenzhen. At the time, the company said the decision was due to a shortage of technical equipment caused by the trade restrictions imposed by the Trump administration.

Honor was a substantial contributor to the company’s consumer business revenue, and its sale has now resulted in a 16.5% decrease in year-on-year revenue for the first quarter of 2021, according to Huawei. 

However, the company managed to generate an income of $600 million (£432.5 million) in patent royalties and reported net profit margin growth of 3.8 percentage points, to 11.1% year-on-year.

Commenting on the Q1 financial results, Huawei's rotating chairman Eric Xu described 2021 as “another challenging year” for Huawei. 

“But it's also the year that our future development strategy will begin to take shape," he added.

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Despite Xu's high hopes for the future of Huawei, the news comes less than a day before Samsung is expected to announce its earnings. The results are highly anticipated because, according to CCS Insight senior analyst Fiona Vanier, the Korean tech giant has likely grabbed market share from Huawei.

Vanier said that Samsung’s boost can be attributed to “aggressively targeting existing Huawei smartphone owners looking to upgrade”. She also described Huawei as having “effectively been excluded from the market outside China”.

The news comes just days after it was reported that Huawei was launching six new cloud products in a bid to take on the likes of Alibaba, Amazon, and Google. The newly-announced cloud products, which include containers, artificial intelligence (AI) programming assistants, databases, computing services and infrastructure software, were revealed at the company's three-day developer conference in Shenzhen, which had cloud, AI and open source as its main theme. Huawei also announced a $200 million investment in its developer programme, which aims to boost its software ecosystem and cloud services. 

According to Canalys Research, Huawei's cloud efforts have paid off, with revenues jumping 168% year on year in 2020. However, the firm is still far behind the likes of Amazon and Alibaba in China. Huawei Cloud is currently the second-largest player in China with a 17.4% market share, compared to Alibaba's 40%.

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