On March 28, Huawei released its 2021 annual report, which shows that Huawei's overall operation is stable, achieving global sales revenue of 636.8 billion yuan and net profit of 113.7 billion yuan, an increase of 75.9% year-on-year. Facing the future, Huawei will continue to increase its R&D investment, reaching RMB142.7 billion in R&D in 2021, accounting for 22.4% of its annual revenue, and its cumulative R&D investment in the past decade will exceed RMB845 billion.
At the press conference, Huawei's rotating chairman Guo Ping and Huawei's chief financial officer Meng Wanzhou were interviewed by the media, and the following is the interview transcript:
1. Xinhua News Agency: In September last year, I greeted you back at Bao'an Airport, and I was very happy to see you release your annual report at this venue after a few years. My question is: I just heard you and Mr. Guo mention the development of last year, last year should be a very difficult year for Huawei to survive, after last year, what are your expectations for this year? What do you think this year has been? Do you think Huawei has passed its darkest phase? Thank you.
Meng Wanzhou: Thank you for your question. For Huawei in 2021, we may have passed through the black barrier of this disaster, which is inseparable from the efforts of all our employees, our team has become more united in the continuous pressure of these three years, and our strategy has become clearer at the end of these three years. Facing the future, we will continue to increase investment in talents and research and development. We will ensure our continuous innovation ability through "technical intensity + talent concentration", and we also firmly believe that along these two directions, we can provide our customers and partners with higher value products and services for a long time, continuous and quality. Thank you!
2. Bloomberg: Thank you. Ask the two presidents a question, how does Huawei solve the problem of chip supply chain continuity? Have chip factories been set up to deal with chip supply chain continuity? In the long run, what does Huawei think about chip supply security? Thank you.
Guo Ping: From sand to chips, solving the problem of the entire semiconductor should be said to be a very complex and lengthy project that requires patience. Originally, in the global environment, the repeated development of these technologies does not necessarily have commercial value. But in the case of market patterns and technological blockades, new demand will arise, and investments in this area will become commercially valuable. We believe and would love to see more and more companies participate in this market, and we would love to see their success.
Just now in the introduction, I mentioned that in the case of today's unavailable process and difficulties in single-point technology, we are actively looking for a breakthrough in the system. The future chip layout, our main communication products use a multi-core structure, supporting the reconstruction of the software architecture and the multiplication of performance, it should be said that it is equivalent to injecting new vitality into the chip, which can enhance our continuous supply capacity.
3. "China Central Radio and Television Station": Welcome Mr. Meng home. Just now in the annual report, Huawei's profit data in 2021 is very good, but the revenue is declining compared with the previous year, why is this happening? In what directions is Huawei going to make key adjustments next? Thank you.
Meng Wanzhou: Thank you. For the decline in Huawei's overall revenue scale, there are mainly several reasons, one is that Huawei has been under continuous pressure in terms of supply continuity in the past three years, which I think is the reason that everyone knows. In my report just mentioned that the various sanctions imposed by the United States are actually under great pressure on Huawei's mobile phone and PC business. On the other hand, operator business is closely related to the global 5G construction cycle, and China has slowed down in 2021 after the peak of 5G construction in 2020, which is the second reason. The third reason is that Huawei, like all enterprises in the world, has been under certain pressure under the epidemic. In any case, for Huawei, serving customers is our goal. Therefore, we will continue to maintain our investment in research and development. In my report just now, you should be able to see that in the past decade, Huawei's cumulative R&D investment has exceeded 845 billion yuan, and our R&D investment in 2021 alone is 142.7 billion yuan, so in the future business outlook, we will continue to maintain investment in talent and R&D.
4. CGTN reporter: Hello Mr. Meng, it has been 6 months since you successfully returned home, during this time, what are your feelings about your work and your personal feelings?
Meng Wanzhou: Thank you for your question. I would like to answer your question with the simplest Chinese saying: "One day in the cave, the world has been a thousand years." In the six months since I returned home, I could only catch up with the changes in my motherland by studying hard. Thank you so much!
5. "First Finance" reporter: If the past two years have been Huawei's survival stage, then how to evaluate Huawei's current survival status? In addition, in the financial report, we mentioned a number of businesses such as HUAWEI CLOUD, new energy, digital, enterprise business, and automotive, which of these new businesses will become the locomotive of Huawei's future growth? What about the overall target growth this year? Thank you.
Meng Wanzhou: Just now you mentioned Huawei's new business, and I want to share some data with you about one of the new businesses. HUAWEI CLOUD achieved an increase of more than 30% over the same period last year. For HUAWEI CLOUD, AT present, HUAWEI CLOUD is already the second largest enterprise in The global IaaS market in China and the fifth in the world. HUAWEI CLOUD officially proposed the "everything is a service" strategy last year, in 2021, so in 2022 we will closely focus on this strategy to accelerate the deployment of our data centers and networks around the world, so that our customers can get a consistent experience.
6. South China Morning Post: I would like to know whether the Western economic sanctions against Russia have had an impact since the conflict between Ukraine and Russia began. Are there any new changes in the development of Huawei's business in Russia, including mobile phones and Hongmeng systems? Want to know about some of the plans for the Russian market next. Thank you.
Guo Ping: Huawei is deeply concerned about the suffering of the people. We also see that all countries are actively trying to find ways, and Huawei, like everyone else, also hopes to see peace and ceasefire as soon as possible. We also believe that the wisdom of our leaders can resolve this crisis and restore a normal business environment as soon as possible. As for what you mentioned, we have also noticed that some countries and regions have introduced some policies, and these policies and measures are very complex and constantly changing. Huawei is also cautiously evaluating. As for HarmonyOS you mentioned, there are no plans to launch a mobile phone equipped with HarmonyOS overseas.
7. Caijing Magazine: In the case of declining revenue, how does Huawei ensure that it has sufficient funds to continue to implement high R&D investment? Can you share the specific areas where R&D funds will be invested in the future? Will the proportion of R&D investment be so high in the future? Thank you.
Meng Wanzhou: In my report just now, you should be able to see the relevant data. Our operating cash flow was $59.7 billion, an increase of nearly 70% over the previous year. As you can see, we maintain a very good income-to-cash ratio. On the other hand, I also highlighted the concept of net cash, Huawei's current net cash is 241.2 billion, which is the guarantee of our R&D investment in the future. For the future, we will continue to invest heavily in research and development. These investments are mainly for several aspects, one is to optimize the system architecture, and the other is to improve software performance and explore basic theories. These three areas should also be able to be seen in Guo's report just now. We hope to solve the problems of technology and supply to provide our customers with highly reliable and reliable products. Thank you!
Guo Ping: Specifically, I would like to add that our investment will continue to focus on building a reliable and credible supply chain to ensure the continuity and competitiveness of Huawei's products. On the other hand, we have also noticed that Huawei has established several "legions" that combine the demands of digitalization, artificial intelligence, intelligence, and low carbon, combining Huawei's technology and customer demands to create value and create more revenue and profits for Huawei.
8. The Wall Street Journal: This question is also about chips. Does Huawei have plans to build its own chip manufacturing capabilities? Given that Huawei faces some restrictions on chip procurement, will this affect Huawei's ability to serve telecom customers or build 5G networks?
Guo Ping: Let me first give you a concept, in 2019, Huawei's 5G mobile phone shipments are about 120 million, if it is a mobile phone and a baseband chip, it will take about 120 million mobile phone chips. Huawei's delivery of base stations in 2019 is about 1 million, if each base station needs 1 piece, it is 1 million chips. So their orders of magnitude are completely different. You see that our To C business, especially the mobile phone business, has suffered a very big decline in 2020, but we should say that the To B business continuity is still guaranteed, which is on the one hand. In the second aspect, I have just introduced three reconstructions of Huawei's R&D investment, including the reconstruction of theory and the reconstruction of the system architecture, such as exchanging area for performance and stacking for performance, so that the less advanced process can also continue to be competitive in Future products. Huawei will continue to work in this direction.
9. Phoenix TV reporter: Huawei's consumer business is facing a major decline, I would like to ask where the biggest difficulty is? Are there any solutions? Thank you.
Guo Ping: Yes, the US sanctions for many years have caused Huawei very difficulties. Among them, especially in the mobile phone business among consumers, because the chip of mobile phones needs to have strong computing power, low power consumption and small volume requirements, we still have difficulties in obtaining it. While we are actively discussing sustainable solutions for mobile phones with all parties concerned, we are also expanding some new areas such as wearables, sports health, whole house intelligence, etc., and it should be said that I am also very happy that our sound products and wearable products have achieved very rapid development. As I mentioned in the report just now, our wearable watches and bracelets have more than 100 million users, so we are also looking for new development opportunities in these new scenarios.
10. Shenzhen Special Economic Zone Daily: I have a few questions about talent, how many employees did Huawei recruit last year? Are there layoffs? Are there layoffs this year? Do we have new plans to bring in talent? And how do we play to the strengths and roles of top talent? Thank you.
Guo Ping: Thank you for your question, you may have noticed that talent, scientific research investment and innovative spirit are the foundation on which Huawei can survive and develop. In any case, Huawei will increase its attraction to talents, especially top talents. To solve the problem of Huawei's long-term survival and development, we rely on talents and our breakthroughs. Therefore, we will continue to increase the absorption and attraction of talents. In the past two years, we have recruited about 26,000 fresh graduates, of whom more than 300 are "talented teenagers" as we define them. In 2022, we plan to recruit more than 10,000 new graduates. I think only excellent talents can solve Huawei's current situation and enable Huawei to further develop.
11. Reporter: The UAE has put forward a strategy to achieve net zero by 2050, and Saudi Arabia has also proposed a goal of achieving net zero by 2060. These are just two examples of the future sustainable development of the Middle East. Given that the Middle East has the world's longest sunshine hours and ultra-large-scale data center projects, and Huawei's recent focus on digital energy and cloud business, in 2022 and the future, is it more strategic for companies in the Middle East, especially the Gulf countries, to increase Huawei's revenue?
Guo Ping: The Middle East is a very important strategic market for Huawei. In the foreseeable future, we will continue to pay attention to and increase cooperation with corresponding customers and partners in the Middle East. I was very impressed that a few years ago I met with the top leader of a country in the Middle East, and he mentioned the idea of electricity in the entire Middle East country, he said that 10-15% is nuclear energy, 7080% is solar energy, and then use natural gas as a supplementary energy source, which is a very grand idea, and he also mentioned that he wants to have a full cooperation with Huawei. I also noticed that you just said that the UAE and Saudi Arabia have very ambitious plans for carbon neutrality. Huawei has digital technology, power electronics technology and thermal management technology, which should be said to have a solid foundation for the early realization of their grand vision and carbon neutrality in the Middle East, and we will further strengthen our investment to help customers in the Middle East realize their vision.
In 2021, we reorganized our business and established Huawei Digital Energy Company, which includes smart photovoltaic, data center energy, smart electric, site power and integrated smart energy business, in these areas, we have a high degree of matching with the World's unique lighting conditions and data center energy demand in the Middle East, and believe that we can create the best model point opportunities in the world together, and have very broad prospects for cooperation.
12. Sohu Technology: Regarding the issue of cloud ecology, we see that the cloud is growing rapidly, can you share what is the overall goal and strategy of HUAWEI CLOUD this year, and what is the plan for the key business markets and performance this year? Thank you.
Guo Ping: A few years ago we announced that we entered the public cloud market, and we want to be committed to becoming one of the five clouds in the world, and it should be said that in 2021 we achieved the fifth place in the world. However, we are still a long way from the global top, so we need to further develop and reduce the gap. But bridging the gap is only one aspect, and more importantly, delivering value to customers as you grow cloud services. In 2022, growth is one aspect, but we emphasize the core competitiveness of HUAWEI CLOUD.
In China, HUAWEI CLOUD has served more than 600 government clouds and helped 35 cities upgrade to cloud native. In the financial sector, we have served China's six major banks, all 12 joint-stock commercial banks and TOP5 insurance institutions, and we also serve about 70-80% of the Internet users of the TOP50. In the Asia-Pacific region, HUAWEI CLOUD is also one of the fastest growing providers of public cloud. In Latin America, HUAWEI CLOUD is already the provider of cloud services with the largest number of nodes. We will continue to work hard along the expansion of our business.
On the other hand, I just mentioned in the report that we proposed a "everything is a service" strategy, and we will focus on this strategy in 2022 to increase the layout of our data centers and networks, provide a globally consistent experience of the network, and make the business high-speed accessible around the world. We have accumulated more than 100,000 Huawei engineers and strong R&D investment to continuously precipitate and open up, becoming the service of our HUAWEI CLOUD customers, and we will further enhance our core competitiveness in this direction to create value for our customers, especially those who choose HUAWEI CLOUD.
13. The Paper: I would like to ask the question of Huawei's "Legion", because you have set up several "Legions", how is the business development of the "Legion" at present? What was the purpose of the "Legion" in the first place? Is it a more militarized management organization? Will this model be rolled out to all businesses in the future? Thank you.
Guo Ping: The source of the legion is the "Google Legion" introduced by the New York Times in 2004, and we are referring to this model and forming an organizational form within Huawei. Through the pilot of the legion, the chain of management is shortened, and the needs of customers are quickly met, thus creating commercial value and social value. Simply put, in Huawei, the Legion represents the industry to find the right technology in the company; for customers, the Legion represents Huawei and our partners to find solutions. We hope to leave the complexity to Huawei itself by simply leaving it to the customer. It should be said that Huawei's product line is relatively long, the technology is also more numerous, more complicated, we through the "legion" such a short chain of operation and management authorization, making it easier for our customers to do business with Huawei, we hope that this pilot can create a new win-win business model for customers, but also for Huawei.
14. Jakarta Globe: My question is, how does Huawei view the digital transformation in Southeast Asia, especially Indonesia? How will Huawei contribute to the trend of digital transformation?
Guo Ping: The digital transformation in Southeast Asia is developing very rapidly, and according to the 2021 Southeast Asia Digital Economy Report, the digital economy market size is expected to reach $1 trillion by 2030. Southeast Asia is a strategic market that Huawei attaches great importance to and is willing to continue to invest in. We hope that Southeast Asian countries will use 5G, AI, cloud computing, and other technologies to seize the opportunities of digital industry development, and Huawei also hopes to become a key contributor to southeast Asian digital transformation.
Indonesia is the largest economy in ASEAN, and at the end of last year, Indonesia's Coordinating Minister Luhut visited Huawei in the context of the pandemic and discussed with us extensively opportunities for cooperation in ICT infrastructure and digital transformation, especially in 5G networks, cloud infrastructure and the construction of Indonesia's new capital. Huawei will also provide 4G services to remote areas of Indonesia in 2021, enabling more people to connect to the Internet. At the same time, Huawei also regards the cultivation of digital talents for Indonesia and Southeast Asian countries as a very important cooperation, and in the Asia-Pacific region, we will invest 50 million US dollars to cultivate 500,000 digital talents in the future. In Indonesia, we are committed to training 100,000 local talents and 1,000 ICT instructors for Indonesia within five years. We hope to achieve a richer number of digital talent programs in ASEAN countries through these talent training mechanisms such as the ASEAN Academy.
15. IDC: Huawei's 2021 annual report shows that 16% of the company's revenue comes from enterprise business. We understand that enterprise users are more concerned about how ICT applications can meet their business needs, and they are not very concerned about the underlying technology. So in what way will Huawei provide solutions to enterprise users?
Guo Ping: You're right, for enterprise customers, they focus on the value that Huawei can bring to them in the end, so Huawei has set up several legions to combine Huawei's 5G, computing, cloud, and scenario-based applications, get closer to customers, and create scenario-based solutions for customers. Of course, the difference between thousands of industries is very huge, and Huawei cannot cover the world. We are better at math-related technologies, so we also need a wide range of partners, ecological cooperation, close to the needs of our customers, and work with our partners to create scenario-based solutions, so that customers can benefit from Huawei's advanced technology. I think your question is also a reason for Huawei's legionnaire pilot.
I would also like to add that Huawei Technologies Co., Ltd. is limited in technology, so we don't need to serve all the regions and all the customers in the world. What we have to do is to give full play to the advantages of Huawei's multi-product portfolio, create value for customers who choose Huawei, and do huawei's best efforts to help our customers achieve commercial success. Thank you!