Author 丨 Lin Xiahuai
Editor 丨Liu Xiaoying
Source 丨 City Boundary
On March 28, 2022, Huawei held a 2021 performance conference, and Meng Wanzhou made an appearance in a black dress, saying that 2021 is the third year of Huawei's "load-bearing", and Huawei has passed through the black barrier area of this disaster.
As the first independent financial report after huawei and glory "broke up", it reduced revenue by 28.6% year-on-year, exhausting Huawei's bitterness.
As Huawei's third annual report more than 1,000 days after being sanctioned by the United States, it increased its net profit by 75.9% year-on-year, but it was surprising that Huawei did "survive".
What changes has the departure of Glory brought to Huawei's financial report? The problem of not being able to buy 5G chips, how to solve it in the future? In addition to the consumer business, where is Huawei's next growth point?
This annual report and this conference give us some answers.
"Survive" Huawei
In 2021, Huawei's revenue was 636.8 billion yuan, down 29% year-on-year, but its net profit increased significantly by 75.9% to 113.7 billion yuan, the highest level in history.
In the third year after the sanctions, Huawei's revenue fell for the first time, and the 29% decline is not a small number for Huawei of this size.
Huawei's revenue is mainly divided into three segments: consumer business, carrier business, and enterprise business, including To C products such as mobile phones, PCs, and IoT; carrier business mainly refers to services such as base station construction for operators such as mobile and Unicom worldwide; enterprise business is digital construction and intelligent upgrading services for various large and medium-sized enterprises, including cloud computing.
According to Meng Wanzhou's explanation at the press conference, there are three reasons for huawei's revenue plunge: first, the sanctions have led to continuous pressure on Huawei's supply chain, and consumer businesses including mobile phones and PCs have been greatly reduced; second, the construction of China's 5G base stations has been basically completed in 2020, and there is no longer so much customer demand for 5G deployment; third, the pressure brought by the epidemic to Huawei.
In addition, it was sold by Huawei in November 2020, so Honor's performance will completely "disappear" from the 2021 annual report, which is also an important factor in Huawei's performance decline.
In terms of sub-sectors, huawei's consumer business revenue in 2021 was 243.431 billion yuan, a sharp decrease of 49.6% year-on-year, operator business revenue was 281.469 billion yuan, a slight decrease of 7% year-on-year, only the enterprise business was relatively stable, with annual revenue of 102.444 billion yuan, a slight increase of 2.1% year-on-year.
In this way, the consumer business that once took mobile phones as the core is no longer the growth driver of Huawei's performance, and the proportion of corresponding revenue in Huawei's total revenue has directly dropped from 54.18% in the previous year to 38.23%.
Interestingly, in the past few years, with the continuous improvement of the proportion of consumer business with low gross profit margin, Huawei's overall gross profit margin has continued to decline, and the mobile phone business has encountered obstacles and the glory of the table has led to a sharp decline in the proportion of consumer business, and Huawei's overall gross profit margin has also rebounded sharply - from 37%-40% in the past few years to 48.3%.
In addition to the mobile phone business, Huawei's remaining business segments are reflecting stronger profitability.
In addition, during the year, Huawei disposed of two companies, Honor and Super fusion (which produced X86 servers), bringing a net income of about 57.4 billion yuan, accounting for more than half of the net profit, and the improvement of the gross profit margin, which eventually led to a substantial increase of 75.9% in the net profit for the whole year.
If this part of the revenue from the disposal of subsidiaries and businesses is excluded, Huawei's net profit in 2021 should be 56.269 billion yuan, a year-on-year decrease of 8.3 billion yuan, a decrease of 12.9%. Compared with reducing revenue by nearly 30%, Huawei is partially buffering external influences by releasing higher profitability, which is considered to have achieved a "soft landing".
In addition, last year, Huawei's cash flow from operating activities decreased significantly, and this year there was also a significant relief, the annual cash flow from operating activities was 59.67 billion yuan, a significant increase year-on-year, the asset-liability ratio fell from 62.3% in the previous year to 57.8%, and the capital structure also improved.
(Huawei Rotating Chairman Guo Ping)
It is also worth mentioning research and development. In the case of a sharp decrease in revenue in 2021, Huawei's R&D investment has not decreased but increased, with R&D investment of 142.7 billion yuan accounting for 22.4% of revenue, and the absolute value and proportion have reached the highest level in history, becoming the second highest R&D investment in the world. In the words of rotating chairman Guo Ping, "Huawei's problem cannot be solved by cutting down on food and clothing."
From the perspective of per capita wages, Huawei paid employees a total of 137.14 billion yuan in wages, bonuses and allowances throughout the year, based on the disclosed 195,000 employees (a year-on-year decrease of 2,000 people), the per capita annual salary was 703,300 yuan, and the average monthly salary was 58,600 yuan, a slight decrease of 2,800 yuan year-on-year, which did not seem to have an impact.
However, considering that in the past two years, Huawei has recruited a large number of people through OD (outsourcing), this part of the personnel may not be counted in the total number of employees, so the actual average salary should be reduced.
In any case, all the signals seem to indicate that Huawei not only "survived", but also lived not badly.
(Huawei Headquarters Shenzhen Bantian Base)
Behind this, the divestiture of Honor, although it reduced Huawei's revenue in 2021, but increased Huawei's gross profit margin, brought a substantial increase in net profit, and also exchanged a valuable cash flow for Huawei.
These may be regarded as the last "gifts" left by glory to Huawei.
"Disappearing" phones
Until 2019, Huawei will disclose smartphone shipments in its annual report, starting in 2015, the number is 108 million units, 139 million units, 153 million units, 206 million units and 240 million units.
However, since being included in the "entity list" on May 16, 2019, Huawei first experienced the interruption of Google services, and google "family buckets" such as Google Maps, YouTube, and Gmail that overseas users rely heavily on could not be installed, resulting in a significant contraction in its overseas mobile phone business; and then it was cut off by Qualcomm, Intel and other US manufacturers, unable to purchase 5G baseband chips, and could only sell 4G mobile phones while mobile phone manufacturers continued to "roll up", in an embarrassing situation.
Starting from the 2020 annual report, Huawei no longer discloses smartphone shipments, but data disclosed by third-party agency IDC shows that Huawei's mobile phone shipments in 2020 will be 189 million units – Huawei has returned to the level before 2018.
By 2021, Huawei has fallen out of the top five in the global smartphone shipment rankings announced by major third-party institutions since the first quarter of that year, losing its "name" and entering the category of "other".
Huawei, which lost in the international market, once "turned from attack to defense", with more than 40% of the domestic market share - several percentage points higher than Nokia's market share in China many years ago. Until the end of 2020, Huawei still ranked first in the domestic market with 125 million units in China, occupying 38.3% of the market share.
But the shortage of 5G chips will soon not even be able to support the shipments of the domestic market, and the data released by IDC for the whole year of 2021 shows that Huawei has also fallen out of the top five in the domestic smartphone market.
The mobile phone business is losing ground, and Huawei is trying to maintain the survival of the consumer business sector as much as possible by exerting its efforts on IoT products, including PCs and smart wearable devices, as well as The Hongmeng system.
According to the annual report, in the third quarter of 2021, Huawei's watches and bracelets ranked first in global shipments, and by the end of 2021, there were more than 220 million Huawei devices equipped with Harmony OS.
According to industry insiders, the profit margin of Huawei's IoT products is still relatively high, and the revenue of this part of the business alone exceeds the sum of the revenue of honor mobile phone + IoT products.
At the same time, due to the passive "evacuation" of the mobile phone business, the assessment method of employees within Huawei's consumer business department in 2020 was changed from the original "KPI model" to the "OKR model", replacing the assessment method focusing on sales profits with an assessment method focusing on consumer operation and brand reputation, which has the meaning of "recuperation".
Relevant people told the city that although the consumer business department still uses "OKR" as the assessment model in 2021, the relevant indicators have gradually returned to performance-oriented, "more looking at quantifiable specific achievements, such as offline retail sales and so on."
This means that Huawei has completed the adjustment of direction and footsteps, and the problems of the mobile phone business are no longer the reason for its "stop".
Of course, Huawei's mobile phone business has not completely stopped, and it still launched two folding screen mobile phones in 2021, and the P series and nova series are also continuing to be launched, but the sense of existence is much weaker.
(Huawei P50Pocket)
For the current problem of follow-up chip supply, the solution presented by rotating chairman Guo Ping is that in the future, it may be possible to reconstruct the theory and system architecture, exchange area and stacking for chip performance, and ensure the competitiveness of products as much as possible in the case of using less advanced processes.
The implication is that in the tense situation of high-end mobile phone competition, Huawei may still be in an embarrassing situation of only selling 4G mobile phones.
On the other hand, glory after independence has not lived up to Huawei's "painstaking heart" when sending off, returning to the top five of Chinese smartphones for the first time in the second quarter of 2021 with 6.9 million units of shipments and 8.9% market share.
In the second half of the year, Honor continued to work hard, returning to the third and second positions in China in the third quarter and the fourth quarter, respectively, corresponding to 15% and 17% of the market share, respectively, and the fourth quarter shipments were second only to Apple.
After gaining a foothold in the domestic market, Honor CEO Zhao Ming said at the press conference on March 17 that Honor will restart a number of overseas markets including Europe, the Middle East, Africa and the Asia-Pacific region, which means that Honor's "counterattack" on a global scale will soon begin.
After leaving Glory, huawei's mobile phone business is no longer the protagonist in the annual report, but it has also been able to return to the stage of high gross profit; and after leaving Huawei, Glory has obtained "life-sustaining" chips and channels as expected, starting from the Chinese smartphone market and returning to the battlefield of mobile phones.
The next growth point?
The consumer business sector is "dumb", and the growth of the operator business sector needs to wait for the next round of technology cycle, so Huawei's next growth pressure has obviously come to the enterprise business.
At the press conference, meng Wanzhou was asked where Huawei's next performance growth "locomotive" was, and did not give a clear answer, but there was only a mention of the relevant data of "HUAWEI CLOUD", which means that HUAWEI CLOUD is likely to be an important driving force for Huawei's next performance growth.
Meng Wanzhou said that HUAWEI CLOUD achieved revenue of 20.1 billion yuan in 2021, an increase of 34% year-on-year, and currently ranks second in China and fifth in the global IaaS market.
(Meng Wanzhou)
In 2017, Huawei officially announced its entry into the public cloud field, at which time HUAWEI CLOUD has been swinging in the direction of private cloud and public cloud for a long time, missing the golden time for the early start of cloud computing.
Wang Lan of Huawei's cloud computing department told the city that the reason for the hesitation is that the private cloud business involved in the early days of HUAWEI CLOUD is mainly because Huawei has a large number of large-scale government and enterprise customers, and a large part of them have high requirements for data security and do not want to put data on the public cloud.
At the same time, if Huawei does public cloud, it means "grabbing food" with operators such as mobile, Unicom, and Telecom, and these operators are also important customers in Huawei's operator business.
However, the drawbacks of private clouds are obvious, in addition to the need to have a strong ability to customize the needs, time-consuming and laborious to do, private clouds can not be repeated sales, is not conducive to large-scale, improve efficiency.
The backwardness in time has led to Huawei losing at the starting line. Later facts proved that intervening in public cloud services will not affect the cooperative relationship between Huawei and domestic operators, because cloud services have never been the strength of operators, and even if Huawei does not do it, it will be robbed of share by other cloud vendors.
After catching up, HUAWEI CLOUD has grown rapidly, but it still maintains a certain gap with Alibaba Cloud in the front.
According to data released by market research agency Canalys, the top four in China's cloud service market in 2021 are Alibaba Cloud, HUAWEI CLOUD, Tencent Cloud and Baidu Cloud, with market shares of 37%, 18%, 16% and 9% respectively.
As the only "non-Internet" enterprise among the four most famous cloud vendors on the list, Huawei takes advantage of the government and enterprise customer resources accumulated by operators and the original enterprise business, and at the same time vigorously expands the Internet enterprise customer base, with revenue increasing by 67% year-on-year, which is the fastest of the four, and thus consolidating the second place.
With high hopes placed on her internally, Wang Lan felt that the recruitment efforts of the cloud and computing departments this year were greater than in previous years, and the growth of personnel was relatively obvious.
But overall, Huawei's workforce in 2021 fell from 197,000 last year to 195,000, a decrease of 2,000, and the first downsizing in recent years. This means that the weight of people in the cloud and computing departments has increased relatively, as well as the expectations they assume internally.
In the enterprise business segment, THE 20.1 billion yuan of revenue generated by HUAWEI CLOUD accounted for 19.6%. In addition, the enterprise business segment also includes Huawei's digital transformation business in a "legion" manner, facing key industries such as government, transportation, finance, energy, and manufacturing.
The so-called "legion", in the words of Ren Zhengfei, is a saying that Huawei learns from Google, that is, to gather talents in various fields within the enterprise, break the boundaries of departments, concentrate on breakthroughs in key industries, and produce more "food" for the company.
(Ren Zhengfei)
This is relatively in line with Huawei's consistent "wolf nature" culture.
In February 2021, Huawei took the lead in establishing the "Coal Mine Corps", which aims to empower coal mining enterprises, the most important energy source in China, with the intention of empowering Huawei's technical experience in the 5G era. After that, Huawei quickly set up a corps including smart roads, customs, ports, etc., and held a inaugural meeting on October 29, 2021.
In 2021, when the other two major business sectors have been reduced to varying degrees, the enterprise business has maintained a growth of 2%, which means that the "legion" has made initial achievements and will continue to undertake the heavy responsibility of Huawei's performance growth.
To borrow the words of Ren Zhengfei when he gave the members of the legion "heroic deeds" on the day of the inaugural meeting of the formation of the "legion", "History will remember you, and when we drink the celebratory wine together, we will hear the thunder in the silent place."
(Except for the separately marked source, the above picture is from Visual China)
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