* Text/Spades with long sword
"Huawei should strive to survive in 2020 and strive to make financial reports in 2021."
At the 2019 annual report press conference, Xu Zhijun, who was the rotating chairman at the time, sighed. That year, the cloud of the supply outage storm had swirled above Huawei's head, and the withdrawal of Google's GMS service also made its overseas mobile phone business dangerous. When the situation of all enemies is approaching, not only Xu Zhijun, I am afraid that anyone will be worried about Huawei's survival problems.
But Huawei survived after all. Following the release of its last eye-catching financial report in 2020, its 2021 financial report also appeared as scheduled.
On the afternoon of March 28, Huawei's annual report press conference was held at its headquarters in Shenzhen as usual, and Huawei CFO Meng Wanzhou, who had been absent for several years, was responsible for the conference – her first public appearance since she was released and returned to China last September. However, Meng Wanzhou did not talk about his life after returning to China, but quickly shifted his focus to Huawei's performance in the past year.
Is there still a world war?
The first is a few basic financial figures.
For reasons that are well known, the overall decline in Huawei's revenue is already expected, but no one can expect such a large decline in its performance in 2021. From the financial report, Huawei's revenue in 2021 was 636.807 billion yuan, down 28.6% from 891.368 billion yuan in 2020, almost returning to the level of 2017 (when Huawei's revenue just exceeded 600 billion).
Surprisingly, Huawei's net profit performance does not seem to be dragged down by revenue, but has achieved good growth. In 2021, Huawei's net profit reached 113.7 billion yuan, an increase of 75.9% year-on-year, and the net profit margin also reached 17.9%, while cash flow achieved a full-year increase of 69.4%, and the asset-liability ratio fell from 62.3% to 57.8%.
Revenue declines at the same time as net profit rises, which is not a common situation in many listed companies. Although Huawei did not elaborate on this point, if you carefully observe the financial report, you can still find a hint.
In 2021, Huawei's "other net income and expenditure" increased dramatically - from 692 million yuan in 2020 to 60.8 billion yuan; and a detailed breakdown of "other net income and expenditure" in the financial report shows that the "net income from the disposal of subsidiaries and businesses" accounted for the majority of the revenue, at 57.431 billion yuan. Given that Huawei has not sold much of its business in the past two years, it can be basically concluded that this revenue is the relevant income from the sale of Glory in 2020.
It is worth noting that Huawei has previously mentioned the sale of Glory in the 2020 financial report, saying that the acquirer "Shenzhen Zhixin New Information Technology Co., Ltd." will pay the acquisition consideration in installments after 2021. Judging from the previous acquisition price of 100 billion yuan (about $15.2 billion) exposed by Reuters and other media, this revenue may continue to support Huawei's net profit next year.
Putting this aside, Huawei's various businesses do not have much positive feedback on numbers in 2021.
In terms of carrier business, Huawei's revenue in 2020 was 302.621 billion yuan, while its revenue in 2021 was 281.469 billion yuan, down 7.0% year-on-year. This can be expected, after all, Huawei's carrier business has been in a low-growth quagmire for several years, although the domestic 5G network has been in a state of high-speed construction for two years, but the impact of the overseas market environment and the negative impact of the epidemic have offset this dividend, which eventually led to a year-on-year decline in revenue.
Then there is the consumer business that includes products such as mobile phones, PCs, tablets, and smart wearables. Due to the shrinkage of Huawei's "1" mobile phone business in the "1+8+N" strategy, the consumer business also suffered a huge impact in 2021, with revenue falling 49.6% year-on-year to 243.431 billion yuan, retreating to Huawei's second largest business with a proportion of 38.2%.
Judging from the "2021 China Market 5G Mobile Phone Report" released by daily interaction in March this year, as of the end of last year, Huawei's 5G mobile phone market share in the domestic market is still as much as 28.0%, but it is not difficult to find that the old models such as Nova 7, P40 Pro, and Mate 30 Pro are the keys to maintaining its market share. With other manufacturers catching up on new models and sanctions continuing, it is probably only a matter of time before Huawei completely fades out of the domestic 5G mobile phone market.
Of course, Huawei, which has a weak terminal business, can still rely on other means to obtain revenue, such as sitting on patent fees. By the end of 2021, Huawei held more than 110,000 valid authorized patents worldwide, of which 5G and other patents were in the leading position in related fields, and in this year, Huawei's book value, including patent rights and royalties, reached 5.6 billion yuan.
Huawei's third largest business is the enterprise business, which includes products and solutions such as smart cities, cloud services, AI, and 5GtoB. In 2020, this business grew by an unprecedented 23%, which is much more than the 8.6% data in 2019, and is hailed by many as one of the engines of Huawei's transformation. However, in 2021, the growth rate of this revenue sector was much worse than before, increasing by only 2.1% year-on-year to 102.444 billion yuan.
In fact, Huawei still has to face many opponents in this field, such as Tencent and Ping An of China in the field of smart cities; in terms of cloud services, Alibaba Cloud and Tencent Cloud are also strong competitors in front of HUAWEI CLOUD, and the latecomers such as Amazon AWS and Microsoft Azure Cloud Services are also not to be underestimated; on the data center side, the Internet brigade composed of Baidu, ByteDance, and Kuaishou is taking advantage of the wind of the East and West to try to grab food from Huawei. In this case, whether Huawei can reverse the situation and return to the high growth in 2020, I am afraid that there will be several question marks.
In 2022, can Huawei still survive with "high quality"?
At present, Huawei's most concerned direction of force is not only "core building", which is the automotive business that emerged in early 2021. In these two aspects, Huawei also disclosed some relevant progress.
First of all, Huawei has made drastic adjustments to the company's business architecture, and the most intuitive change is that the consumer business and the ICT infrastructure business are no longer separate, but develop in parallel. Among them, in addition to the consumer BG renamed the terminal BG, HiSilicon, who is responsible for chip research and development, has also become one of Huawei's eight departments from the "2012 Lab", one of the previous functional platforms.
Second, Huawei still attaches great importance to research and development. In 2021, Huawei's R&D investment reached 142.7 billion yuan, accounting for 22.4% of total sales revenue, and the amount of R&D expenses and expense ratios were at the highest level in the past decade. According to Huawei's own account, its R&D investment currently ranks second among global enterprises.
In terms of automobile business, Guo Ping, huawei's rotating chairman, once again emphasized the phrase "do not build cars, help car companies build good cars". Of course, Huawei did prove the weight of this sentence with actions in 2021 - from the Xilis SF5 created in cooperation with Xiaokang to the Avita 11 jointly launched with Chang'an, Huawei is like a "sweeping monk" in the new energy automobile industry, seemingly absent, but everywhere.
However, it is worth noting that the new energy market's doubts about Huawei's strong position in cooperation are also getting higher and higher. In July last year, CHEN Hong, chairman of SAIC Motor, named Huawei, saying that SAIC would never cooperate with such a third-party company to drive autonomously.
"If a company provides us with a complete solution, it becomes the soul, and SAIC can only be the body." Such a result, SAIC is unacceptable, must take the soul into their own hands. Chen Hong said.
Chen Hong's words actually speak to the heart of most car companies - if they are not in a weak position in the new energy market, who is willing to hand over their "soul" to an intelligent full-stack supplier that is so strong that it is disgusting?
At present, whether it is traditional car companies such as Volkswagen and SAIC, or new forces such as Xiaopeng and Ideal, they are trying to develop themselves and reduce their dependence on suppliers. After all, for car companies, letting the core technology in the hands of others, the growth brought about by it is certainly not as good as independent research and development; and for Huawei, to establish a huge business group of more than 5,000 people, invest nearly $1 billion a year, and only try to be a supplier for others. I'm afraid that this still has to be left to time to answer.
On the whole, Huawei's financial report has both joys and sorrows - the good news is that the company can also guarantee a slightly good-looking income under the blessing of various temporary Buffs, and its vigorous promotion in research and development, as well as the emphasis on chips, smart cars and other businesses, are also worthy of our joy.
However, we can also see that most of Huawei's other businesses except consumer business have experienced stagnation or even regression in growth, and at the same time, the automotive business with high hopes is still facing many uncertainties, which also casts a cloud on Huawei's future. In 2022, can the tribulation company break through the predicament with a single blow? Youniu Finance will continue to pay attention.
*Image courtesy of Yandex and corporate earnings