Huawei employees will be able to toast baijiu, Chinese rice wine. Because despite American sanctions which have deprived it of key components for years, the Chinese telecoms champion has taken off again in 2023, according to the annual results published this Friday. After falling sevenfold in 2022, its net profit increased almost threefold last year, to around 87 billion yuan, or more than $12 billion. The group is riding hard on its strategy of technological autonomy (it produces more components internally), its R&D efforts (23% of sales) and its diversification, into cars and energy.
Certainly, the group is no longer growing at double digits as in the past: in 2023, total sales increased by only 9.6%, to $99.4 billion. Huawei has still not regained its pre-Covid business volume, while China is struggling to revive its economy after three years of closure.
Its traditional and still majority activity, the sale of telecom equipment to operators, is progressing, although slowly, with +2.3% growth. Like its rivals Ericsson and Nokia, Huawei is not immune to the drop in operator spending in 5G, even if the enormous Chinese market (two thirds of total turnover) allows it to cushion the shock. China’s share continues to increase, while Europe-Middle East is falling (less than a third).
Apple in difficulty
“We have been through some challenges in recent years. But one challenge after another, we managed to grow,” summarizes Ken Hu, one of Huawei’s rotating presidents. The group notably had to design its own smartphone chips in-house, no longer being able to purchase them in the United States from Qualcomm or Intel due to Washington sanctions. However, in 2023, Huawei has reached a milestone, by developing a chip engraved in 7 nanometers, a level of finesse never before achieved by China.
Placed in its new Mate60 smartphones, the chip has allowed these models to sell like hot cakes in China, amid great patriotic winds. As a result, its smartphone activity grew by +17% in 2023, while it had collapsed by -12% in 2022. In China, Huawei even cut corners from Apple: at the beginning of January, the Chinese became the number 2 in the market behind Vivo, while it was number 5 a year ago, according to Counterpoint. Apple, for its part, fell to third place. The iPhone 15s have had difficulty finding buyers in the face of the premiumization of Chinese brands.
Turbulence at Alibaba
Huawei is also supported by its cloud activity, which jumped in the same proportions (+17%). In this business, the group has gained market share on Tencent and Alibaba, the market leader. Alibaba’s customers were undoubtedly cautious, at a time when Jack Ma’s group was going through a period of turbulence, between the departure of CEO Daniel Zhang and the end of the plan to list the cloud business, which the latter was supposed to direct.
Finally, Huawei is reaping the benefits of its diversification. The group has launched several electric car brands, including Aito, for which it supplies electronic components and AI (the cars themselves are assembled by Chinese automakers).
In 2023, this activity, although still marginal, has exploded (+128%). Huawei has great ambitions in the field. The group says it wants to become “the Android of the connected car”. And to show that it can succeed, Huawei often cites its resounding success in smartphones, a business where no one expected it and where Ericsson and Nokia failed, facing the former small antenna seller from Shenzhen.