Huawei issues caution on UK sales due to harsh restrictions affecting business
In a recent development, Huawei, the Chinese tech giant, is grappling with a downward trend in its turnover and profit in the UK market. This decline is primarily due to the UK government's restrictions on its activities, which have limited Huawei's access to the UK telecom infrastructure market, particularly 5G network construction.
These restrictions, part of broader Western concerns over national security, have led to Huawei being effectively excluded from supplying critical 5G equipment to UK carriers, cutting off a major revenue stream in this key market.
The UK government's policy has had several implications for Huawei. Firstly, it has reduced sales opportunities in telecommunications infrastructure, historically a major segment for Huawei. Secondly, it has resulted in the loss of strategic market presence and brand influence in the UK tech ecosystem. Thirdly, it has increased costs related to equipment replacement and transitional measures for carriers, which reduces Huawei’s profitability.
Furthermore, Huawei faces strong competition in the UK smartphone and consumer electronics market from dominant players like Apple, Samsung, Google, and other Chinese brands that have not been restricted, limiting Huawei's market share growth among UK consumers.
Despite these challenges, Huawei remains confident it will continue to execute its business plan and remain profitable. The underlying technical, operating, and financial strength of the company and the group is a factor in Huawei's confidence.
In 2022, Huawei's pre-tax profit was £17.5m, a decline from £38m in 2019. The company's turnover in 2022 was £359m, down from £1.26bn in 2019. The firm's pre-tax profit declined from £11.4m in 2023 to £8.8m in 2024, with the turnover in 2024 being £188.2m, down from £229.6m in 2023.
To navigate the challenges posed by US and UK restrictions, Huawei has set financial targets for 2025 and 2026 Q1, taking into account risks and opportunities in the telecommunications sector and challenging economic conditions. The company is focusing on the sale of products and services not impacted by UK or US restrictions, such as sales in its consumer business, other hardware supplies, and support activities.
The restrictions have led to a decrease in Huawei's headcount in the UK, from almost 900 in 2019 to 176 in 2024. Huawei's UK arm is proposing a dividend of approximately £6.6m for 2024, down from £8.6m in 2024, which was itself a significant decrease from £25.8m in 2019.
In October 2022, the UK government announced that Huawei technology must be removed from the UK's 5G public networks by the end of 2027. Sales are expected to continue in Huawei's consumer business, other hardware supplies, and support activities, but the company expects revenue in 2025 to fall further from the 2024 level.
In conclusion, the UK government's restrictions on Huawei’s participation in the UK's 5G network and related telecom infrastructure markets, combined with intense competition and limited consumer market penetration, are the key market reasons behind Huawei's declining turnover and profit in the UK. Despite these challenges, Huawei is confident it will continue to execute its business plan and remain profitable, with a focus on the sale of products and services not impacted by UK or US restrictions.
In an attempt to diversify its revenue streams and counteract the fallout from UK restrictions, Huawei is concentrating on expanding sales in areas unaffected by the restrictions, such as consumer business, other hardware supplies, and support services.
Conversely, the UK government's restrictions on Huawei's technology usage and access to the UK's 5G network have resulted in significant financial losses for the tech giant, as evidenced by their declining turnover and pre-tax profit since 2019.
