Huawei Technologies reported a dramatic slowdown in the second half of 2019 on Tuesday, weighed down by U.S. restrictions on the Chinese telecom giant. While revenue grew 19.1% annually, topping $123 billion, the company’s overall growth declined 80% from Q1 to Q4, making for a “big challenge,” according to SVP Vincent Pang.
“The business environment didn’t change much globally for Huawei,” Pang told Yahoo Finance, attributing the slowdown to the Trump administration’s actions. “If you see the slowdown from the first quarter to the last quarter, I would say it’s directly impacted by the restriction from the U.S. entity list and also [pressures] placed on other countries. I don’t think there’s other reasons.”
Huawei’s annual profit also slowed down, coming in at $9 billion, a 5.6% growth year-on-year, compared to the 25% growth the company posted in 2018. Operating cash flow increased by 22% to $13.1 billion.
The company’s consumer business group proved to be the biggest growth driver, accounting for more than half the total revenue for the first time. Huawei shipped 240 million units globally, a 16.8% increase from the previous year. Yingying Li, head of marketing communications for unit, said Huawei achieved “record high shipment” globally in January of this year.
The annual report comes on the heels of a year the company characterized as its toughest, amid pressure from Washington. Last May, the Commerce Department placed Huawei on the entity list, banning American companies from selling parts and components directly to the Chinese company. That dramatically slowed operations at the world’s second largest smartphone maker, resulting in a revenue loss of more than $10 billion, according to Huawei.
President Trump has maintained the telecom equipment maker poses a national security risk because of its close ties to China’s Communist Party, citing founder Ren Zhengfei’s past with the People’s Liberation Army. Huawei has repeatedly denied any accusations of espionage, saying it would fight back against any government requests to create a “backdoor” in its infrastructure.
Huawei’s slowdown was most pronounced in its enterprise business, where growth dropped from more than 30% in 2018, to just 8.6% growth last year.
In addition to geopolitical pressures, Huawei executives said the company had also been hampered by the coronavirus outbreak globally. Pang said strict stay-at-home orders had delayed the buildout of 5G infrastructure in Europe and China, though he expected the domestic market to catch up quickly, given that China has already passed the peak of the outbreak.
Li said sales of mobile devices took an immediate hit after Huawei stores, like many retailers, were ordered to close, but huge demand online helped supplement some of the loss. Specifically, the company saw 110% growth in online demand for PCs, with many working from home.
“The fortunate thing is most of our factories are actually in the southern part of China and not in the area that's been most affected,” Li said. “Our production capacity has already reached nearly 100%, and we have enough stock, and there's no disruption of supply chain.”
Despite the broader slowdown, Huawei is committing $20 billion to R&D, over 10% of its total revenue.
Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita