China’s Huawei reported Tuesday sharply slower revenue growth in the first quarter of 2020 as the company faces both trade restrictions from the US and the global coronavirus outbreak.
Why it matters: The dismal revenue numbers for Q1 provide a picture of how the Covid-19 outbreak has affected China’s electronics manufacturing sector and smartphone market.
- The country reported last week that its first-quarter GDP contracted by 6.8% from a year ago—the first quarterly revenue decline of the country since at least 1992.
- Huawei, however, is expected to gain from China’s massive “new infrastructure” initiative that aims to stimulate the country’s virus-hit economy by pouring trillions of RMB into 5G networks, data centers, and artificial intelligence.
Details: Huawei’s revenue for the first quarter grew only 1.4% year-on-year to RMB 182.2 billion (around $25.8 billion), according to a company statement published Tuesday.
- The growth rate for Q1 2019 was 39% year-on-year.
- “Huawei’s business is continuing as usual and its overall business results in Q1 2020 are in line with expectations,” said the company in the statement.
- Its net profit margin in the quarter was 7.3%, slightly lower than the 8% margin reported in the same period last year.
Context: Huawei reported 23.2% year-on-year revenue growth in the first half of 2019. This was shown by the company as proof that the US sanctions had a limited impact on its business.
- The Trump administration added Huawei on a trade blacklist in May, barring US companies from exporting to Huawei without government approvals.
- Huawei said in October its revenue growth for the first three quarters of 2019 was 24% year on year.
- The company said earlier this month its revenues for the full year 2019 rose 19.1% to RMB 858.8 billion.
- In an interview with the Wall Street Journal in March, Huawei founder and CEO Ren Zhengfei said the company had lower expectations for its first-quarter revenue but the company’s revenue for the whole year would keep moving ahead.