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Commentary Is Huawei Carrier Business Losing Growth Momentum
Sep 13, 2017

Commentary Is Huawei carrier business losing growth momentum

Huawei has reported revenues of CNY283.1 billion (US$42.439 billion) for the first half of 2017. The figures were not so bad as they represented an increase of 15% from a year earlier. 


But the growth rate was considered insignificant as compared to Huawei's records of being able to deliver extraordinary high revenue growth to overtake well-established telecom giants outside China over the past few years.


While separating its organization into carrier, enterprise and consumer business groups, Huawei failed to detail the revenues for each group for the first half. Although the first-half 2017 results of the consumer business group were available, the figures were announced by the unit itself rather than the parent company.


The consumer business group had an impressive operating results for the first half of 2017, seeing its revenues increase 36.2% on year to CNY105.4 billion, which accounted for 37.2% of Huawei's total sales for the six-month period compared to 34.5% in 2016 and 31.04% in 2015.


Taking out the revenues contributed by the consumer business group, the carrier and enterprise business groups together generated revenues of CNY177.7 billion in the first half of 2017. The figures represented a mere 5% increase over the combined sales of the two business groups recorded a year earlier.


But in 2016 alone, the carrier business group saw its revenues expand 23.6% on year to CNY290 billion. The enterprise business group, which currently accounts for less than 10% of Huawei's total revenues, saw its sales rally 47.6% in 2016.


The rather lackluster first-half sales performance of the carrier business group came after local media in China reported that Huawei has become the world's largest network equipment provider in the first quarter of 2017 after it outraced Cisco Systems in the router and Ethernet switch device segments for the first time in the quarter, citing data from Dell'Oro.


However, the main reason for Huawei being able to outperform Cisco in the first quarter was due to weak equipment procurement by telecom operators in Europe and the US where Cisco has been focusing its marketing efforts. On the other hand, Huawei has been benefiting from the telecom market in China.


However, the newly acclaimed title appeared to have failed to jack up significantly the revenues at Huawei's carrier business unit, raising concerns whether the China-based telecom giant is facing a growth bottleneck, or is shifting its strategy to be more conservative along with unfavorable market conditions.


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