US sanctions are cutting off Huawei’s wings. The Chinese giant seeks to survive

Huawei Technologies Co. reported its biggest drop in quarterly sales since the U.S. blacklisting of the Chinese tech giant’s third-party telecommunications equipment and smartphones companies hurt its business.

The Shenzhen-based company recorded a 38% drop in sales, to 168.2 billion yuan ($ 26 billion) in the three months ending in June, according to Bloomberg calculations based on figures from the first. semester provided by the company.

In the first half of the year, the company recorded sales of 320.4 billion yuan and a profit margin of 9.8%, which translates into net profit of 31.4 billion yuan. The second quarter profit was 14.5 billion yuan.

hard times

“It has been a difficult time … Our goal is to survive and do so in a sustainable manner,” Eric Xu, Huawei’s rotating chairman, said in a statement on Friday.

He added that although Huawei’s consumer business revenues have declined due to external factors, they are confident that the company’s other businesses, such as telecommunications and business services, will continue to grow steadily.

A series of bans under former US President Donald Trump cut Huawei off from its US partners and other major chip suppliers such as Taiwan Semiconductor Manufacturing Co., forcing the Chinese company to seek new sources of revenue in sectors such as electric cars, solar farms and Smart Cities.

The company also said earlier this year that it would start charging smartphone giants such as Apple.

Erosion from Huawei

Revenue from Huawei’s consumer business, which previously accounted for more than half of Huawei’s business, fell about 47% to 135.7 billion yuan in the first half. Last year, the company dismantled its Honor unit in a bid to free the low-budget smartphone maker from U.S. sanctions.

Local competitors such as Xiaomi Corp, Oppo and Vivo have also eroded Huawei’s market share in the phone market both locally and globally.

Canalys said in July that Beijing-based Xiaomi overtook Apple in the second quarter to become the world’s second-largest smartphone seller after South Korean Samsung.