Huawei's consumer business is under pressure How does Hongmeng System break through the "life and death line"?

On March 29, Ping An Securities released a research report saying that from the data of Huawei's annual report, the expansion of Huawei's Hongmeng operating system met expectations and laid the foundation for the subsequent construction of operating system and software ecology.

In 2021, Huawei's mobile phone-based consumer business has plummeted, making the market worried about the prospects of its Harmony OS system, is there enough hardware soil to nourish Hongmeng? On March 28, at Huawei's 2021 performance report, Huawei revealed that it has set its sights on more smart devices beyond mobile phones, including the automotive intelligent cockpit platform, to expand the application scope of The Hongmeng system. Industry insiders believe that the Hongmeng system can not compete with the Android system for a period of time, but in the next two years, if it can break through the "life and death line" of the system, the future prospects can be expected.

Worries about the future

On March 28, at Huawei's 2021 performance report meeting, some insiders used "mixed feelings" to describe it. On the one hand, Huawei has survived years of continuous sanctions in the United States and stood firm in the predicament of chip tension, reaching the highest operating profit since 2017 with about 121.4 billion yuan, but on the other hand, its revenue of 636.8 billion yuan is the first decline after continuous growth in 2017-2020.

In 2021, Huawei spun off two companies, Honor and Super Fusion, and mobile phone sales are an important part of its "consumer business" segment, which last year's revenue was about 243.4 billion yuan, down 49.6%. The market is worried that the decline in Huawei's mobile phone business may affect the rollout of its Hongmeng system, and in today's Android and iOS mobile phone markets, Hongmeng's opportunity to find a head has become more difficult.

Since 2015, Huawei's mobile phone shipments have climbed all the way, from 108 million units to 206 million units in 2019, but in 2020, Huawei will no longer disclose mobile phone sales in its annual report. According to data released by Omdia, Huawei's mobile phone shipments in 2021 have dropped to 35 million units, down 81.6% from 2020, while its global market share has dropped from 15% in 2020 to about 3% in 2021.

It is worth noting that in May 2019, Huawei was included in the "entity list" by the United States and was cut off by Google services, and software such as YouTube and Gmail could not be installed, resulting in a setback in overseas sales. Due to the supply of Qualcomm and Intel, Huawei was unable to purchase 5G baseband chips, which hindered the production of 5G mobile phones such as the Mate40 Pro, and Huawei had to continue to cultivate the 4G market. In addition, in the tablet market, Huawei has also been affected to a certain extent.

Ping An Securities Research Report pointed out that 16% of the world's active equipment is a system's "life and death line", and if Huawei wants to smoothly cross the past, it is expected that the shipment volume in 2022-2023 will reach 560 million units.

Ecological breakout

In fact, Huawei has not given up its efforts to promote the Hongmeng system. Although at the press conference, Guo Ping, Huawei's rotating chairman, once again stressed that "Huawei does not build cars", but said that "it is necessary to deeply integrate the ICT capabilities accumulated for more than 30 years and the automotive industry to help car companies build and sell good cars", and said that it is necessary to "further increase investment in the ecology and work with partners to accelerate the intelligentization of the automobile industry".

In December 2021, Huawei released the "AITO Q&A M5" car, which uses the HarmonyOS smart cockpit, becoming the first car equipped with the Hongmeng system, priced at 249,800 yuan. Huawei said in its 2021 annual report that it has developed more than 300 upstream and downstream industry chain partners, including BAIC, Changan, and GAC, and built a smart cockpit platform with more than 150 software and hardware partners.

Wearable devices are also the soil for the development of Hongmeng system, in 2021 equipped with HarmonyOS 2 a variety of devices came out, including MatePad Pro, HUAWEI WATCH 3, etc., at the same time, Huawei announced the upgrade of HUAWEI HiLink and Powered by HarmonyOS to the new brand HarmonyOS Connect, and announced that its new product shipments exceeded 115 million units.

What is the prospect of Huawei's "relying on hardware and promoting software" approach? Shen Meng, executive director of Chanson Capital, told the Beijing Business Daily reporter that this idea is quite feasible, because Hongmeng is not a simple mobile phone operating system, but a broader service platform, in addition to consumer electronics, as well as smart homes and even the Internet of Things and other broader application scenarios. Therefore, a single scene cannot become a bottleneck restricting Hongmeng.

Carry the weight forward

In addition to enterprises like Apple that build their own ecosystem, most mobile phone manufacturers use the way of the underlying system with the independent UI, and the bottom layer is mostly Android, and the independent design at the UI/UX level is based on the different brand styles and design ideas of each factory. The Android system is based on Google mobile service GMS, but the Hongmeng system is based on Huawei mobile service HMS, which partes ways with Google on the underlying system.

Can Huawei's Hongmeng ecosystem stand out? Shen Meng believes that the development prospects of Hongmeng are closely related to its ability to upgrade, saying that the bottleneck that Hongmeng may face lies in the iteration of technology research and development and innovation, and only by accelerating iteration and continuously improving the functionality and robustness of the system can it be better promoted.

In 2021, Huawei released the HarmonyOS 3 developer preview, visual elastic deployment automation tools, heterogeneous networking technology is its highlights that distinguish it from other systems, at the same time, Huawei launched the Ark development framework 3.0, Ark compiler 3.0, hoping that more developers will join it.

The industry believes that after years of development, the Android ecosystem has been quite mature, from the acquisition of Google in 2005 to the launch of the first mobile phone product in 2008, the Android system has gone through more than ten years, in May 2021, the beta version of Android 12 has been available for download, and the nascent Hongmeng system still has a long way to go compared with it.

Zhang Ying, an expert in the field of consumer electronics, believes that Hongmeng wants to develop not necessarily limited to mobile phones, smart devices in the field of fighting, at present, many home appliance manufacturers carry out the whole house intelligent transformation, which is where the new system is used, and said that "at present, Midea, Suber, Jiuyang have cooperation with Huawei", and Huawei still has a lot of room to expand the ecological chain.

Beijing Business Daily reporter Jin Chaoli Intern reporter Wang Zhuli Picture source: Beijing Business Daily reporter photo