The latest report from Bloomberg says few companies are putting more revenue into research and development as Huawei, and for Huawei, developing new technologies is about thwarting U.S. trade and investment sanctions that have affected it.
China's biggest tech giant has nearly doubled its R&D budget over the past five years, reaching $22.1 billion in 2021, more than any other company in the world outside the United States. This R&D investment will account for 22.4% of its 2021 sales :( this share) is almost twice that of Amazon and Google's parent company Alphabet and more than three times that of iPhone maker Apple. According to data compiled by Bloomberg, of the so-called Faang Group (C114 note: Facebook, Apple, Amazon, Netflix, Google), only Mata Platforms (formerly Facebook) is slightly closer to Huawei at a rate of 20.9%.
Growing R&D spending underscores Huawei's desperate gamble to develop chips, network devices and even smartphones that don't rely on U.S. technology. Since Washington accused Huawei of endangering U.S. national security in 2019, Huawei has been banned from using American technology. The full U.S. sanctions cost the Chinese company nearly a third of its revenue in 2021 and boosted its share of its R&D spending — though in absolute terms, its R&D spending is still up from the previous year.
Meng Wanzhou, Huawei's rotating chairman and CFO, said at Huawei's 2021 earnings conference, "The real value of Huawei lies in the R&D capabilities, R&D teams, and R&D platforms accumulated and accumulated by long-term investment in R&D, which is the core of Huawei's long-term and sustainable competitiveness." She said, "10% of Huawei's annual revenue is fixed in the field of research and development, which is written into Huawei's basic law." ”
Proportional distribution
Figure 1: Among the top R&D spending companies, Huawei ranks first in terms of R&D as a percentage of revenue.
According to Bloomberg data, Huawei, which is not publicly listed, is one of only six companies in the world last year to spend more than $20 billion on research and development. Its R&D investment is on par with Microsoft's, $1 billion less than Apple and $2.5 billion less than Meta. So far, this approach has paid off — According to an independent study, Huawei was granted 2,770 U.S. patents last year, ranking fifth, behind the perennial leader IBM.
Amazon and Alphabet spent $56 billion on research and development and $31.6 billion, respectively. The median of the 15 companies in the SuperTech index is $2.9 billion.
Maximum budget
Figure 2: Huawei's R&D spending closely follows Faang Group.
While sanctions imposed during Trump's presidency have hampered huawei's smartphone business and banned it from selling 5G devices in parts of Europe and Asia, the company has raised money by selling assets and relying on its industry-leading intellectual property portfolio. In 2021, Huawei sold its Honor handset division to a Chinese state-owned conglomerate and sold its x86 server business to another Chinese consortium.
But Bloomberg notes that the company's ability to spend is limited.
While Huawei's R&D spending in 2021 doubled from five years ago, according to its earnings report, the company's annual spending growth slowed. Meta quadrupled its own spending — thanks to its focus on developing metaverse technology. According to data compiled by Bloomberg, Amazon has more than tripled its own research and development budget.
Increase your budget
Figure 3: R&D spending growth since 2016.
The Chinese company says it has 195,000 employees in 2021, of whom 107,000 (55 percent) are "working on research and development." Because different companies use different definitions, it is difficult to accurately compare technicians. By comparison, Microsoft's annual report shows that about 60,000 or a third of the company's employees are classified as R&D personnel.
"Huawei's problem cannot be solved by cutting back on food and clothing." Guo Ping, chairman of Huawei's supervisory board, told reporters at a recent press conference. "Huawei is now facing difficulties that advanced technology is not available, and if we want to survive, we must increase strategic investment and actively seek system breakthroughs when a single point of technology leadership encounters difficulties." (C114 Ace)