Huawei’s business continued to decline during the first three months of 2021 as U.S. sanctions narrow the Chinese juggernaut’s prospects.

Much of the pain, however, is hitting Huawei’s smartphone and consumer business segments. Huawei is still the market leader on radio access networks (RAN).

The company’s lack of access to software from U.S.-based companies is so far taking a bigger bite out of revenue than diminished access to components for telecom equipment. That could change if Huawei’s supply of stockpiled components runs out. 

The company didn’t share sales figures for its networking equipment business, but blamed a 16.5% year-over-year decrease in revenue on lagging smartphone sales and the recent sale of its lower-end smartphone business, Honor.

“2021 will be another challenging year for us, but it’s also the year that our future development strategy will begin to take shape,” Eric Xu, Huawei’s rotating chairman, said in a statement.

Huawei is increasingly turning to cloud computing and software to return to growth. It’s RAN equipment is banned in multiple countries and those measures appear to be holding firm. 

The company released a series of new cloud computing products earlier this week in a bid to challenge the country’s cloud leader, Alibaba, and improve its position against global leaders Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.

“No matter what challenges come our way, we will continue to maintain our business resilience. Not just to survive, but do so sustainably,” Xu said. “As always, we remain committed to technological innovation and investing heavily in R&D as we work to address supply continuity challenges caused by restrictions in the market.”

The company reported $23.5 billion in revenue during the first quarter of 2021, marking the second consecutive quarter of declining revenues. Revenues slid 11% in the previous quarter.

Huawei is also trying to regain some of its losses by charging device makers a royalty for using its 5G patents. It reported $600 million in patent royalties during the quarter.

The company didn’t disclose net income on a whole basis, but it’s net profit margin of 3.8% translates to net income of $2.6 billion during the quarter, according to Bloomberg. 

Huawei’s woes, fueled by tightening restrictions in many countries around the world, presents a $27 billion annual opportunity for networking equipment vendors that successfully displace the Chinese company, Rosenblatt Securities concluded in a recent report. 

That opportunity is evenly split between RAN equipment and other components, including the wireless core, optical, broadband access, routers and switches. Ericsson, Nokia, Samsung, Mavenir, and other unnamed vendors are in position to gain $8 billion in incremental RAN sales by 2024, according to the firm.