Figure: Figure worm
Source: 21tech
Author: Ni Yuqing
Editor: Lin Hong
On the afternoon of March 28, Huawei released its 2021 financial report. Last year, Huawei achieved global sales revenue of RMB636.8 billion, down 28.6% year-on-year; net profit of RMB113.7 billion, up 75.9% year-on-year; and R&D investment reached RMB142.7 billion in 2021, accounting for 22.4% of the annual revenue.
In 2021, under the condition of a changeable external environment, Huawei will continue to move forward under pressure and seek a better quality of survival. In the face of multi-dimensional challenges such as supply chain, Huawei has made a multi-faceted attack to break through. After about three years of strategic adjustment, what is the progress of Huawei's three major BG businesses, as well as emerging businesses such as digital energy, automotive, and cloud, and what are the strategic plans in the medium and long term? At the press conference, Guo Ping, huawei's rotating chairman, and Meng Wanzhou, huawei's chief financial officer, interpreted Huawei's business conditions.
Guo Ping stressed 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.
On the same day as the annual report was released, a large number of Xinhua in the H area of Huawei's headquarters handled the entry procedures for people and officially entered the training stage. Judging from a series of measures, Huawei has been in a good position in the past three years, continued to adhere to technology investment under pressure, continued to recruit talents, reduced burdens and increased efficiency, and had a stable style in strategic management.
Guo Ping also said bluntly that Huawei still faces a series of challenges in 2022 and will work closely with global partners to overcome difficulties. In the new year, we must have a strong foundation, continue to invest in the future, and "survive and survive with quality" by creating value for customers and partners.
Pictured: Huawei rotating chairman Guo Ping
The scale becomes smaller, and the profits increase significantly
For the 2021 results, Meng Wanzhou said: "Our scale has become smaller, but our profitability and cash flow acquisition capabilities are increasing, and the company's ability to cope with uncertainty is constantly improving." "Thanks to the improvement in the profitability of the main business, Huawei's operating cash flow has increased significantly in 2021, reaching 59.7 billion yuan; the asset-liability ratio has been reduced to 57.8%, and the resilience and resilience of the overall financial structure are strengthening."
Specific to the three core business levels, Huawei is still advancing in 2021. According to the financial report, in 2021, the sales revenue in the operator business field will be 281.5 billion yuan. Huawei has signed more than 3,000 commercial contracts for 5G industry applications, and 5G has been commercialized on a large scale in manufacturing, mining, steel, ports, and medical care.
In the global communications market, Huawei still maintains the top position in 2021, and the data of the research agency Dell'Oro Group shows that in terms of sales, Huawei's share of the global communication equipment market in 2021 is 28.7%, ranking first, an increase of 7% year-on-year, and the second is Ericsson (15%).
Huawei's enterprise business achieved sales revenue of 102.4 billion yuan. For key industries such as government, transportation, finance, energy, and manufacturing, Huawei released 11 scenario-based solutions, established legions such as coal mines, smart highways, customs, and ports, and increased the number of service and operation partners to more than 6,000.
The terminal business achieved sales revenue of 243.4 billion yuan, and smart wearables, smart screens, TWS headsets and consumer cloud services all achieved sustained growth, of which wearable devices and smart screen business revenue increased by more than 30% year-on-year. With more than 220 million Huawei devices equipped with HarmonyOS, it is the fastest growing mobile terminal operating system in the world.
Overall, under external sanctions, the respective revenues of the three major businesses have also been affected by some effects, such as the revenue of the operator business fell by 7% year-on-year, and the revenue of the consumer business fell by 49.6% year-on-year, but the enterprise business increased, up 2.1% year-on-year.
For the reasons for the decline in revenue, Meng Wanzhou talked about three factors, one is that the supply chain challenges have continued to increase in the past three years, and the multiple rounds of sanctions by the United States have put pressure on Huawei's mobile phone PC business; the second is that China's 5G construction has been basically completed in 2020, and customer demand has decreased, and the third is because the epidemic has been affected. She also stressed once again that Huawei will continue to maintain investment in talent and research and development.
Cut from Huawei's 2021 financial report
On the other hand, Huawei's net profit increased significantly, and the financial report pointed out that the increase in net profit was mainly due to the income from the sale of some businesses, the improvement of operating quality, and the optimization of product structure. Among them, in 2021, due to the sale of Honor Business and Super fusion Digital Technology Co., Ltd. (x86 server business), the net income from the disposal of subsidiaries and businesses was 57.431 billion yuan.
Even without considering the income from asset disposal, our net profit margin is still higher than that of the previous year, which is mainly due to the company's measures in several aspects, one is that we have adjusted the sales structure of our products, so that our sales rules have been better improved. On the other hand, we have better collaborative management of the entire supply plan, which also greatly improves our cycle from order to revenue. At the same time, due to Huawei's continuous technology accumulation in the ICT field, we have greatly promoted the improvement of internal operation efficiency through organized operations. Meng Wanzhou said.
Chip and mobile phone business continued to break through
At the press conference, huawei terminal mobile phone business and chip supply topics are still the focus of everyone's attention.
Counterpoint data shows that in the Chinese mobile phone market in 2021, Huawei's market share has fallen from 38.4% in the previous year to 10%. Although Huawei's mobile phone business is shrinking strategically, Huawei is still actively seeking solutions.
For the terminal business, Guo Ping said: "The United States has caused great difficulties to Huawei for many years of sanctions, especially the consumer business, such as the baseband chip of the mobile phone, etc., the demand for chips with strong computing power and low power consumption and a small volume, we still have difficulties in obtaining it." We are actively exploring sustainable solutions for mobile phones, and new areas such as wearables and whole house intelligence are developing at a high speed. ”
For the chip supply chain security issues that the outside world is very concerned about, Guo Ping said: "From sand to chips, to solve the problem of the entire semiconductor, it is a very complex and long investment project, which requires patience, originally some technology repeated development does not necessarily have commercial value, but under the market division and technology blockade, technology investment has commercial value, we are happy to see more and more enterprises join this market." ”
At the same time, he also said that in the case of advanced technology and single point technology are not available, we are looking for systematic breakthroughs. For example, communication products use multi-core structures and other methods to inject new vitality into chips to increase the ability to continue supply.
From the latest organizational structure of the financial report, it can also be seen that the HiSilicon department, which undertakes the chip business, is included in the core organizational structure and is listed as a first-level department alongside the three major BGs. According to the latest adjustment in 2021, the ICT infrastructure business includes operator BG, enterprise BG, ICT products and solutions, in addition to terminal BG, Huawei cloud computing, digital energy, smart vehicle solution BU, and HiSilicon. This is also the first time in recent years that HiSilicon has appeared in the business architecture diagram.
Some Huawei insiders told 21Tech reporters that at present, Dasi is still under the 2012 laboratory, listed as a first-level department or for Shanghai HiSilicon (Xiaohaisi), the chips designed by Xiaohaisi are sold to the outside world, including TV chips, camera chips and other terminal chips. From the perspective of adjustment, Huawei is further releasing the capabilities of each business line and seeking new development with a relatively independent business form.
Regarding the future development of chips, Guo Ping further affirmed that the 2012 laboratory has made great contributions to Huawei's competitiveness in the past 20 years, and Huawei will continue to invest no matter how much difficulty it encounters.
In 2021, Huawei founder Ren Zhengfei also elaborated on Huawei's supply chain problems at the Academia Sinica Innovation Pioneer Symposium, he said: "In the past two years, we have been sanctioned by the United States, no longer pursuing the best products with the best parts, and under the scientific and reasonable system traffic balance method, we have also created high-quality products with reasonable components, which has greatly improved profitability." ”
Multi-track strategic investment increased
At the same time, Huawei is also building new capabilities and expanding new space through combination of punches, and in addition to the ICT chassis, Huawei continues to strengthen R&D investment and open cooperation. For example, Huawei will focus on the core, open up its peripherals, strengthen strategic investment, and maintain long-term competitiveness; increase investment in "Hongmeng + Euler" to build the root of basic software in the digital world; increase investment in digital energy root technology, develop clean energy and promote the digital two-wheel drive of traditional energy.
According to the financial report data, Huawei has invested more than 845 billion yuan in research and development expenses in the past decade. According to the "2021 EU Industrial R&D Investment Scoreboard", Huawei ranks second, second only to Google.
Regarding the support of R&D investment, Meng Wanzhou said: "Our operating cash flow is 59.7 billion, an increase of nearly 70% compared with the previous year. On the other hand, Huawei's current net cash is 241.2 billion yuan, which is the guarantee of our future R&D investment. ”
Guo Ping also introduced that Huawei's investment will continue to focus on establishing a reliable and credible supply chain to ensure the continuity and competitiveness of Huawei products. On the other hand, Huawei has established several legions to combine these digital, intelligent and low-carbon demands, combining Huawei's technology and customer demands to create more revenue and profits for Huawei.
From the perspective of classification, on the one hand, Huawei is making heavy investments, such as the latest legion organization, directly cutting into traditional businesses such as coal, and going deep into the sinking digital market to survive. Previously, Huawei has established a coal mine corps, a smart road corps, a customs and port corps, a smart photovoltaic corps, and a data center energy corps, with a total of more than 300 people. The team of the legion is still expanding, which is also an organizational change under Huawei's "survival" strategy. While investing in R&D and innovation, Huawei also needs more "grain" reserves, and organizational departments such as the Legion have undertaken the heavy responsibility of "broad grain". It can be seen that the legion shoulders the heavy responsibility and directly seeks growth in the market.
Looking at the cloud business, the organizational structure of the cloud business will continue to be adjusted in 2021, and in April last year, Huawei cancelled the cloud and computing BG and renamed it "Cloud BU". Meng Wanzhou said that HUAWEI CLOUD achieved revenue of 20.1 billion yuan last year, an increase of 34%. Ranked second in China's IaaS market and fifth in the world, HUAWEI CLOUD proposes a strategy of everything as a service in 2021, and will continue to deploy globally around the strategy, invest in data centers, etc. in 2022.
As a rising star bet by Huawei, the automotive business is exploring the tracks of parts suppliers, autonomous driving solutions, and channel providers. Huawei has announced that it will build sub-brands in the automotive field with BAIC, GAC, and Changan, and jointly launch a new automotive brand AITO with Xiaokang.
On the other hand, Huawei is making basic investment, Huawei will build two operating systems in the future, one is The Hongmeng operating system, the other is the Euler operating system, both are open source, if Hongmeng is to survive, Euler contains more mission feelings in it. At the same time, Huawei is also accelerating the reconstruction of the underlying technology, Guo Ping said that Huawei will increase investment in root technology, achieve basic theory, architecture and software three reconstructions, and support the long-term sustainable development of itself and the ICT industry.
Editor: Lu Taoran