As a leading ICT industry company, what trends does Huawei's annual report reveal?
On March 28, Huawei released its 2021 annual operating results. According to the report, Huawei achieved global sales revenue of 636.8 billion yuan, down 28.56% year-on-year, and net profit of 113.7 billion yuan, an increase of 75.9% year-on-year, which is also the first time that Huawei has shown negative revenue growth in the past three years of sanctions in the United States.
On March 28, Huawei released its 2021 annual operating results.
In view of Huawei's 2021 performance, Guo Ping, huawei's rotating chairman, pointed out that Huawei's overall operating situation is in line with expectations, the performance of operator business is stable, the enterprise business is growing steadily, the terminal business is developing rapidly, and the ecological construction has entered the fast lane.
Huawei's chief financial officer Meng Wanzhou also pointed out that our scale has become smaller, but our profitability and cash flow acquisition capabilities are increasing, the company's ability to cope with uncertainty is constantly improving, in the past time was Huawei's more difficult moment, and now Huawei has passed through the "black barrier zone".
So, behind this annual report of declining revenue and rising net profit, what exactly is reflected? What is Huawei's strategic layout in the future? In the subsequent media QA session, Guo Ping and Meng Wanzhou made further explanations on these issues.
Net profit first exceeded 100 billion
As a technology giant and ICT leader, Huawei has been making great progress in business revenue and business layout, but with the continuous escalation of sanctions and suppression, Huawei achieved sales revenue of 636.8 billion yuan in 2021, down 28.56% from 2020, ending 18 consecutive years of growth. However, in addition to the decline in revenue, Huawei's profitability has indeed improved, of which the net profit of 113.7 billion yuan, an increase of 75.9% year-on-year, operating cash flow of 59.7 billion yuan, an increase of 69.4% year-on-year, net profit for the first time exceeded 100 billion yuan also hit a record high.
Huawei's chief financial officer Meng Wanzhou pointed out that in the past, time was a difficult time for Huawei, and now Huawei has passed through the "black barrier area".
"In the past year, Huawei has reduced its spending by nearly 10 billion yuan in sales and management expenses alone." In Meng Wanzhou's view, the reasons for the significant increase in Huawei's net profit margin in 2021 include the adjustment of product structure, the improvement of operational efficiency by digital operations, and the control of sales and management expenses.
At the same time, according to the "Communication Industry News" all-media reporter, in this profit calculation, Zhonghua will also include part of the proceeds from the sale of glory and super fusion (Huawei X86 server) business, which also responds to the smaller scale pointed out by Meng Wanzhou, but profitability and cash flow acquisition capabilities are increasing.
Overseas remains an important market
Over the past two years, 5G has developed rapidly in terms of network coverage, terminals, and user scale, and user growth has brought commercial returns and driven the continuous construction and development of the network. By the end of 2021, in China, South Korea, Switzerland, Kuwait and other countries, the penetration rate of 5G users has exceeded 20%, and 5G in hotspot cities has carried more than 30% of the traffic.
As the "ballast stone" in Huawei's revenue system, in 2021, Huawei achieved sales revenue of 281.5 billion yuan in the field of operator business, although it fell by 7% year-on-year, but in 2021, overseas operator business revenue accounted for more than 50%.
Guo Ping, rotating chairman of Huawei, pointed out that theoretical breakthroughs, software breakthroughs, and architectural restructuring will lay the foundation for our future survival and development.
In this regard, Guo Ping pointed out that the global operator business is closely related to the global 5G construction cycle, mainly after the peak of 5G construction in 2020, to 2021, due to the slowdown due to the epidemic. In 2021, overseas operators' business revenue will account for more than 50%, and overseas is still an important market for Huawei, and at present, Asia-Pacific, Latin America, Africa and Europe have entered the 5G planning and construction period. We have always been an important participant in the rapid development of global 5G, and by the end of 2021, according to third-party test reports, huawei has built the best user experience in 13 countries, including Switzerland, Germany, Finland, the Netherlands, South Korea, and Saudi Arabia. Together with operators and partners, Huawei has signed more than 3,000 commercial contracts for 5G industry applications, accumulating rich industry application experience in the process, which can better help global operator customers seize new opportunities for digital transformation.
"We can't decide what customers choose, we don't need to serve all operators around the world, we just need to do our best to help customers who choose Huawei achieve commercial success." Guo Ping pointed out that 5G revenue is still an important part of Huawei's operator business revenue. For customers who choose Huawei, Huawei will go all out to support operators to build the world's best experience, most innovative and competitive 5G network, and help customers achieve business success.
2022 will be the most challenging year for terminal BG
In 2021, Huawei's consumer business achieved revenue of 243.4 billion yuan, down 49.6% year-on-year. In fact, since 2019, after many rounds of suppression in the United States, the profitability of Huawei's terminal business has been much worse than before, mainly because of the great impact of chip supply on the mobile phone business.
"2022 is likely to be the most challenging year in the history of terminal BG." Guo Ping pointed out that Huawei's chip reserves in To B can support normal operation and development, in the case of mobile phone business is greatly affected, terminal BG around the smart office, sports and health, smart home, smart travel, video and audio entertainment and other five major scenarios, continuous product innovation, equipped with HarmonyOS Huawei equipment more than 220 million, Hongmeng Zhilian has more than 1900 ecological partners, in 2021 the shipment of new ecological equipment exceeded 100 million units. We will continue to build an ecosystem based on HarmonyOS in the era of the Internet of Everything, adhere to open source and openness, and let more developers use, contribute and benefit from it.
In terms of chip challenges, Guo Ping said bluntly that solving the semiconductor problem is an industry-wide problem, starting from basic education and basic research, which is a very long investment process. "Originally, in the context of globalization, the repeated development of these technologies has no commercial value, but in the case of market fragmentation or technology blockade, new demand will be generated, and investment in this area will become commercial logic, and we believe that we will see more companies participate in this market and are happy to see their success."
It is worth noting that according to Guo Ping, in the past two years, Huawei has done a lot of work in software and architecture, making the existing chip use more economical, and the overall performance is still improving, which also means that the use of Huawei's inventory will exceed the original expectations, but with area for capacity, with stacking to enhance system capabilities, can only be used in the TO B system, our approach to the terminal is still relatively lacking.
Digitalization and carbon neutrality are two core themes
At present, digitalization and intelligence have become the key driving forces of economic and social development, leading a new round of industrial transformation, enabling the digital transformation of the industry, and creating business value and social value together. In this regard, Huawei is strengthening the development of new businesses such as cloud, AI, digital energy, and sports health, all of which invariably conform to the two core global themes of digitalization and carbon neutrality.
In 2021, Huawei's enterprise business achieved revenue of 102.4 billion yuan, an increase of 2.1% year-on-year, and is the only business in Huawei's revenue system to achieve positive growth. Meng Wanzhou pointed out that although Huawei's limited business on chips such as mobile phones, tablets, and PCs has affected the decline in consumer business, emerging businesses have grown significantly, and HUAWEI CLOUD and digital energy revenue growth rates have exceeded 30%.
It is reported that HUAWEI CLOUD is already the second largest vendor in China and the top five in the global IaaS market. In China, HUAWEI CLOUD has served more than 600 government clouds, helping more than 35 cities upgrade their government clouds to cloud-native. In the financial sector, we have served six major banks in China, all 12 joint-stock commercial banks and Top5 insurance institutions, and we have also served 80% of the TOP50 Internet customers. In asia pacific, HUAWEI CLOUD is the fastest growing mainstream public cloud provider. In Latin America, HUAWEI CLOUD is already the cloud service provider with the largest number of nodes.
Digital energy continues to innovate around clean power generation, energy digitalization, transportation electrification, green ICT energy infrastructure, integrated smart energy, etc., and works with global customers and partners to build a low-carbon society. It has helped customers achieve 482.9 billion kWh of green power generation, save about 14.2 billion kWh of electricity, reduce carbon dioxide emissions by nearly 230 million tons, and have more than 1,600 patents in digital energy business by the end of 2021, and its business has spread to more than 170 countries and regions.
"We see new businesses with a larger market space." Meng Wanzhou pointed out that new business needs continuous technological breakthroughs, more system innovation, and even the theoretical support of continuous progress, 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 high-value products and services for our customers and partners in a long-term, continuous and quality manner.
Investing in the Future: "Three Restructurings" for Building Long-Term Competitiveness
Undoubtedly, behind the innovation of technology and solutions is continuous investment in research and development, and in Huawei's view, the more difficult the period, the more it attaches importance to future investment.
In 2021, even in the decline in revenue, Huawei continued to increase R&D investment, with R&D investment reaching 142.7 billion yuan in 2021, accounting for 22.4% of sales revenue, and in the past decade, Huawei's cumulative R&D investment has exceeded 845 billion yuan. Both R&D expenses and expense ratios are at the highest level in nearly a decade. At present, Huawei's R&D investment ranks second among global enterprises. In 2021, about 107,000 people will be engaged in research and development, accounting for about 54.8% of the total number of companies.
In this regard, Meng Wanzhou pointed out that facing the future, we will still increase investment in the field of 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.
The future begins with assumptions. Without correct assumptions, there is no right direction, no right ideas, theories and strategies. In fact, customers expect Huawei to continue to provide competitive leading products in the future. According to Guo Ping, Huawei continues to strengthen R&D investment, strengthen system engineering innovation, and promote the three reconstructions of basic theory, architecture, and software. System drive component design, architecture design is born for the system, and actively seek system breakthroughs, so as to achieve first-class product competitiveness.
The first is theoretical reconstruction. We continue to explore theories and technologies such as next-generation MIMO and wireless AI to further push Shannon to the limit. At the same time, he studied new theories such as semantic communication, tried to surpass Shannon's limits, and opened up a broader space for communication. Our exploration at the forefront of communication theory has begun to "lay eggs along the way", Massive MIMO's innovative product MetaAAU can simultaneously increase the upstream coverage of the cell by 30% and the downstream coverage by 30%, and the average experience of edge users can be increased by 25%, compared with traditional AAU, the energy consumption is reduced by about 30%.
The second is architectural refactoring. In the field of communications, the technology of wireless and optical will be fully coordinated, and photoelectric fusion technology will be introduced to solve the problems of wireless ultra-high frequency, ultra-high bandwidth and ultra-high speed, and break through the process bottleneck faced by future chips. In terms of computing architecture, to solve the current contradiction that "AI and big data applications are booming, while traditional computing architectures are still CPU-centric", Huawei is designing a "peer-to-peer" architecture, using the Lingqu bus, so that GPUs, NPUs, and new hardware can support the great development of AI services. We expect that by extending this design to compute centers, the third generation of cluster computing centers will be able to improve performance by 5-10 times.
Finally, there is software refactoring. Facing the future, with the outbreak of AI, the demand for computing power has increased sharply, but the progress of hardware processes has slowed down. We have raised the priority of software, sorted out the technical system of basic software, made breakthroughs in high-performance, easy-to-expand, pan-storage, easy-to-develop and other technical directions, and more effectively exerted the computing power potential of diversified hardware through HarmonyOS and Euler; Through the MindSpore framework, scientists and engineers can dramatically improve development efficiency. Huawei's AI-centric full-stack software reconstruction is expected to create a new ecosystem. Our software enhancement program boosts key metrics such as wireless cell count and scheduled users by 1x; Ether switch user access performance is improved by 3 times; Optical transmission products have greatly increased the leading capabilities. These innovations have enabled us to maintain first-class product competitiveness under extremely difficult conditions.
"Theoretical breakthroughs, software breakthroughs, and architectural reconstruction will lay the foundation for our future survival and development." Guo Ping pointed out that Huawei will move forward in the direction of digitalization, intelligence, and low carbon, rely on the three elements of talent, scientific research, and innovation spirit, continue to increase investment, and strive to reconstruct the technical base of basic theory, architecture, and software to build long-term competitiveness.
Written by: Party Blog Post
Editor: Hu Yuan
Guidance: New text