Revenue fell in fiscal 2021 and profits rose sharply.
Author | Zhao Jinjie
Edited by | Wang Jing
Source | Box Lunch Finance (ID:daxiongfan)
The 1242nd in-depth article | 9 min read
Meng Wanzhou, HUAWEI's CFO who returned to China for half a year after a gap of four years, once again stood on the stage of the earnings conference. Huawei has undergone drastic changes in the past four years, causing Meng Wanzhou to constantly sigh: "One day in the cave, the world has been a thousand years." ”
According to the 2021 financial report, Huawei's annual revenue was 636.8 billion yuan, down 28.6% year-on-year, and its net profit was 113.7 billion yuan, up 75.9% year-on-year. Among them, the operator's business revenue was 281.5 billion yuan, accounting for 44.2%, down 7% year-on-year; the consumer business revenue was 243.4 billion yuan, accounting for 38.2%, down 49.6% year-on-year; and the enterprise business revenue was 102.4 billion yuan, up 2.1% year-on-year.
This is also the first time that Huawei's consumer business has seen a year-on-year decline since it surpassed the operator business to become the company's largest revenue pillar in 2018. Meng Wanzhou explained that the sharp decline in consumer business revenue is mainly due to the limited business development of the three major products such as mobile phones, tablets and PCs.
Huawei's revenue in the world's four major regions is also declining year-on-year, the most serious is the Chinese market, 2021 revenue of 413.3 billion yuan, down 30.9% year-on-year, in addition to the Revenue of the Middle East of Europe and the Middle East of 131.5 billion yuan, down 27.3% year-on-year, the Revenue of the Americas region of 29.2 billion yuan, down 26.3% year-on-year, and the Revenue of the Asia-Pacific region of 53.7 billion yuan, down 16.7% year-on-year.
Despite this, Huawei has maintained a high level of investment in research and development. According to the 2021 financial report, Huawei's total R&D investment was 142.7 billion yuan, accounting for 22.4%, the highest position in the past decade.
As for the reasons for the sharp decline in revenue in 2021, Meng Wanzhou summarized three aspects in an interview with the media after the meeting:
First, Huawei continues to be under pressure on supply continuity, and multiple rounds of US sanctions have had a significant impact on Huawei's mobile phones, tablets, PCs, etc.;
Second, the peak period of China's 5G deployment is passing, and the market demand is decreasing, leaving Huawei with limited room for business expansion;
Third, Huawei is facing the same pressure as all enterprises under the epidemic.
The reason why there can still be a decline in revenue but a sharp rise in net profit, Huawei explained in the financial report, mainly due to the income from the sale of some businesses, the improvement of operating quality and the optimization of product structure.
On November 17, 2020, Huawei sold Honor, which was taken over by suppliers, and the external sales price was rumored to be nearly 100 billion yuan. Huawei is also further reducing costs, and Guo Ping, Huawei's rotating chairman who attended the earnings conference with Meng Wanzhou, said that Huawei's sales and management expenses will be reduced by 9.3 billion yuan year-on-year in 2021.
Looking forward to the new fiscal year of 2022, Huawei said that its terminal business will focus on whole-house intelligence to support the development of new businesses, such as selling cars in offline stores. For Yu Chengdong, who is also the CEO of Huawei's consumer business and the CEO of Huawei's smart car solution BU, the pressure may be even greater in 2022.
According to Meng Wanzhou, the main reason why Huawei's consumer business revenue is close to the waist is that the development of three major products from mobile phones, tablets, and PCs is limited.
The decline in the performance of the consumer business has actually been manifested since 2020. Canalys data show that in 2019, Huawei accounted for about 1/3 of the Chinese smartphone market, and by the fourth quarter of 2020, this figure has dropped to 22%, and mobile phone shipments have dropped by 44% year-on-year, which directly caused Huawei's consumer business growth rate to fall from 34% in 2019 to 3.3% in 2020, the lowest in the calendar year, and Huawei's annual sales revenue growth in 2020 also fell into a ten-year low.
The inability to obtain the continuous guarantee of advanced processes such as chips is the main difficulty of Huawei's development of the above three major products. Starting from last year's Huawei P50, although Huawei is still insisting on updating the mobile phone production line, it is equipped with a customized version of the 4G chip from Qualcomm.
Yu Chengdong said helplessly at the P50 press conference: "Because the four rounds of sanctions by the United States have restricted our use of 5G, we can only use 4G chips." ”
At last year's Huawei analyst conference, Xu Zhijun, then Huawei's rotating chairman, denied rumors of complete abandonment of the mobile phone business and said that Huawei was still trying to get consumers to buy Huawei-branded 5G mobile phones as soon as possible.
However, compared with meng Wanzhou's nearly three years of efforts to win the victory and return to China, Huawei's dream is destined to be more difficult.
Under the resistance of hand opportunities, Huawei also tried to dig deep into the value of the computer production line last year, and since entering the commercial PC field in December 2020, Huawei has come to a full-coverage update from desktops and laptops to tablet computers and commercial PCs.
However, zooming in to the global scope, Huawei PCs that have only been in the market for six years are far from being able to compete with traditional PC giants. The 2021 annual financial report also reflects Huawei's breakthrough in the direction of computers.
However, Huawei still insists on constantly updating hardware products, in addition to maintaining some loyal users, the other layer is intended to maximize the protection of offline channel traffic. In the mature IoT market, Huawei, which has a huge offline sales channel, will have a first-mover competitive advantage.
According to the financial report, by the end of 2021, Huawei has more than 56,000 stores and counters worldwide, of which more than 5,500 experience stores.
These stores will also become a major channel advantage for Huawei to develop its smart car business.
The current development focus of Huawei's consumer business is on wearable devices, TWS headsets, smart screens and other products, which Meng Wanzhou said will grow by more than 30% in revenue in 2021.
Huawei's financial report shows that in the third quarter of 2021, Huawei's watches and bracelet shipments ranked first in the world, and by the end of 2021, Huawei's cumulative global shipments of smart wearable devices have exceeded 100 million.
However, from the specific performance of the consumer business, smart wearable devices with an increase of more than 30% are still difficult to take on the burden of filling the deficit of mobile phones, and headphones and bracelets with an average price of 100 yuan cannot save Huawei's consumer business from falling by nearly 50% year-on-year compared with mobile phones with an average price of thousands of yuan.
In order to increase revenue, Huawei has focused on the whole house intelligent solution with high unit price. According to the official introduction, based on the "1-2-N" (1 smart host, 2 core solutions, and N subsystems) solution, Huawei Whole House Intelligence will comprehensively enhance the smart experience of the home.
At the Huawei Whole House Smart New Product Launch Conference in March, Yu Chengdong launched a cheap version of the whole house smart solution for small and medium-sized apartments, with a typical 80㎡ apartment (2 bedrooms and 1 hall) priced at 39,999, compared with the previous generation of 100,000 yuan, the consumption threshold was further reduced.
Yu Chengdong said that Huawei Whole House Intelligence has completed the construction of 50 stores in 50 cities in 2021, and the goal is to complete the coverage of 500 stores in 2022.
Yu Chengdong
Smart home is a promising track. The IDC report pointed out that the annual shipment volume of China's smart home market is expected to be 230 million units in 2021, an increase of 14.6% year-on-year, and the market shipments are expected to continue to grow to nearly 540 million units at a compound growth rate of 21.4% in the next five years.
According to Ai Media data, the scale of China's smart home market increased from 260.85 billion yuan to 514.47 billion yuan in 2016-2020, with an average annual compound growth rate of 18.51%, and the scale is expected to reach 651.56 billion yuan in 2022.
In this market, not only Huawei, but also mobile phone manufacturers such as Xiaomi and OPPO are also betting heavily. They all have a wide range of hardware products, and they also have a wealth of ecological partners behind them, as well as offline stores and online traffic throughout the country.
The biggest difference in competition is the struggle for control of the IoT operating system.
From the current point of view, the Hongmeng system has become Huawei's killer tool in the IoT market.
Guotai Junan analyzed in a report that the cultivation of Hongmeng ecology needs to first cut into other IoT hardware equipment markets and help Hongmeng systems achieve full-scenario coverage by encircling cities with rural areas. When enough devices are integrated and cooperated on the Hongmeng system, it will also become a competitive moat for Huawei's own terminal products.
At that time, with a richer and more diversified cross-device integration experience, Huawei's IoT will have a significant differentiation advantage from Apple, Xiaomi and other products.
But the premise for achieving this beautiful expectation is that the number of users of Huawei's Hongmeng system should be large enough.
According to the 2021 financial report, the number of Huawei devices equipped with HarmonyOS exceeded 220 million, and in the face of more than 1 billion iOS users such as Apple, Huawei will continue to look for new Hongmeng partners after the growth of its own mobile phone business has been pressed the pause button.
The car is an expected new market for the Hongmeng system.
In December last year, Huawei and Xiaokang cooperated to build the AITO Q&I M5, becoming the first new energy vehicle equipped with Hongmeng system.
According to the financial report, among the solutions provided for car companies through HI (Huawei Inside) and smart selection mode, the new HI version of BAIC Jihu Alpha S, the 11HI version of Changan Avita and the AITO M5 (Smart Selection) will be mass-produced and delivered in 2022.
In 2021, Huawei has developed more than 300 upstream and downstream partners in the automotive industry chain, its intelligent cockpit platform has established cooperation with more than 150 software and hardware manufacturers, HUAWEI HiCar has established in-depth cooperation with more than 30 mainstream car brands, and supports more than 100 models of HUAWEI HiCar.
In Yu Chengdong's view, Huawei has more than 5,500 high-end experience stores, covering almost every important city in China, which will be a huge advantage for Huawei to help car companies sell good cars.
At the financial report meeting, Guo Ping deliberately stressed that Huawei does not build cars, but only uses Huawei's integrated ICT capabilities for more than 30 years to help car companies build good cars and sell good cars.
Guo Ping
However, with the poor sales of Huawei's first smart model, the Cyris SF5, and the participation in the M5 of the Q&C is too prominent, the outside world has been questioning Huawei's car manufacturing.
There is both distrust from the host vendor. For example, former Huawei BU employees who participated in the BAIC Jihu project mentioned to 36Kr that "traditional car companies still have a wary mentality towards Huawei, which leads to many of Huawei's advantages cannot be played", and there are also more car companies choosing the competitive trend of self-developed in-vehicle operating systems, including Tesla, Xiaopeng, Ideal, Weilai and other head new energy vehicle brands, are increasing investment in self-developed resources.
The executive of the head new energy vehicle company who was interviewed by the alphabet list previously said that Huawei's cooperation with the object may not be as much as imagined. "Huawei is actually facing car companies that are difficult to achieve in self-research, but they want this thing."
After Huawei helped some car companies build new energy vehicles in 2021, the bigger challenge left for Yu Chengdong in 2022 is how to prove to the outside world that Huawei can help these car companies build a blockbuster car that is recognized by the market.