The cost of Huawei's "make-up class" is written in the financial report

On the afternoon of March 31, Huawei's annual results conference arrived as scheduled, and its revenue in 2022 was 642.3 billion yuan, a year-on-year increase of 0.9%, just looking at the figures, it is only able to stabilize the revenue market, but if you consider that the dark clouds hovering over Huawei's head are still cloudy, coupled with the impact of global macroeconomic headwinds, this achievement is not easy.

Huawei's rotating chairman Xu Zhijun and Huawei CFO Meng Wanzhou took the stage successively, and when talking about the business environment, the two said that the severe external environment and non-market factors continue to affect the company's operation, and overall, the operating performance is in line with expectations.

Huawei has been under sanctions for nearly four years, and it can be clearly felt both internally and externally that in the past few years, Huawei's expectations of the US policy shift have gradually disappeared, and Huawei's belief in relying on itself has become stronger and stronger. Meng Wanzhou also mentioned that 2022 is a year in which Huawei gradually changes from a wartime state in response to constant sanctions from the United States to a year in which sanctions are normalized and normal operations.

The 2022 earnings report answers this question, how Huawei under sanctions will operate normally, and more specifically, Huawei must both survive and ensure future growth. If the global supply chain is normal, Huawei does not have to "make up classes", and now the development of alternative products is an urgent matter.

Get a glimpse of your financial data

Before the 2022 financial report, Huawei announced each part of the revenue according to the business BG, that is, the customer perspective, and for the first time this year, the industry perspective appeared, and the financial report was explained to match the changes in the company's business management structure, and the new industry perspective segment information in 2022.

From the perspective of customers, Huawei's carrier business revenue reached 284 billion yuan, a year-on-year increase of 0.9%. enterprise business was 133.2 billion yuan, a year-on-year increase of 30.0%; Terminal business was 214.5 billion yuan, down 11.9% year-on-year.

The 5G capital expenditure of the three major domestic operators has declined, while the expenditure in the direction of cloud and computing power has increased slightly, and the challenges in overseas markets have not been alleviated, and the "sideways" of operators' business revenue is a relatively good situation.

Enterprise business continues to be Huawei's fastest-growing business BG, and with the continued popularity of the digital economy, enterprise business has also ushered in good development opportunities, and the platform plus ecosystem strategy is in line with the needs of industry customers, and is expected to continue high growth in recent years.

Although the terminal performance actively expands revenue sources other than mobile phones, it is still difficult to stop the declining trend, when to stop the decline, and whether it can stop the decline are all practical problems facing Huawei's terminal business.

From an industry perspective, Huawei's first five major industry operation data are ICT infrastructure revenue of 354 billion yuan, terminal business revenue of 214.5 billion yuan, HUAWEI CLOUD business revenue of 45.3 billion yuan, digital energy revenue of 50.8 billion yuan, and intelligent vehicle solution component business revenue of 2.1 billion yuan.

By region, the Chinese market achieved sales revenue of RMB404 billion, down 2.3% year-on-year, accounting for 63% of the total revenue; The sales revenue in EMEA reached 149.2 billion yuan, a year-on-year increase of 13.5%, accounting for 23% of the total revenue; The Asia-Pacific region achieved sales revenue of 4.8 billion yuan, down 10.5% year-on-year, accounting for 7% of the total revenue; The Americas achieved sales revenue of 31.9 billion yuan, a year-on-year increase of 9.1%, accounting for 5% of the total revenue.

In terms of profit, Huawei's net profit in 2022 was 35.6 billion yuan, down 68.7% year-on-year, and its net profit margin was 5.5%, at a historical low, and its operating profit was 6.6%, also hitting a new low in recent years.

In fact, because Huawei sold its x86 server business and Honor mobile phone business in 2021 and obtained a net income of 57.4 billion yuan, there was an abnormal increase in Huawei's profit data in 2021, and if this part of the income is excluded, Huawei's net profit has declined for three consecutive years. Profit is also not Huawei's current focus, and it is more important to invest profits in the future.

To survive, but also to grow

Xu Zhijun said in his speech, "In the midst of the storm, we continue to run, strive to ensure business continuity, and ensure support and service to customers; We also strive to get more food so that we can both survive and lay the foundation for future development. ”

To survive, Huawei must ensure that the previous supply chain can continue to operate, and to this end, Huawei has basically implemented substitution in device replacement, single board reconstruction, operating system, database, product development tools, CRM/ERP/PDM/MES, etc. "But it only solves the problem of whether there is a problem, and there is still a gap from being advanced, easy to use and sustainable," Xu said.

To grow, Huawei also needs to rely on "open source", throttling can only alleviate for a while, Huawei's focus is on opening up growth opportunities, which partly explains why Huawei has listed all five major industries, Huawei is constantly optimizing the product portfolio, from the perspective of organization and process to release more productivity.

Xu Zhijun introduced that Huawei has now formed a customer-oriented industry portfolio consisting of ICT infrastructure, terminals, HUAWEI CLOUD, digital energy, and smart vehicle solutions, as well as a technology support platform backed by 2012 Lab and HiSilicon.

Huawei's R&D investment is the most emblematic embodiment, with a total R&D expenditure of RMB 161.5 billion in 2022, reaching a record high of 25.1%. In 2021, Huawei's R&D expenditure was RMB142.7 billion, accounting for 22.4% of its annual revenue. Huawei's revenue in the past two years has been basically flat, while R&D expenditure has accelerated.

High intensity R&D investment and declining operating profit contributed to a 70.2% decrease in operating cash flow to RMB17.8 billion in 2022, and net cash decreased by 26.9% year-on-year to RMB176.3 billion.

At the end of 2022, Huawei's asset-liability ratio was 58.9%, and its net cash stock at the end of the year was 176.3 billion. Meng Wanzhou said that Huawei's total assets have reached one trillion RMB, and highly liquid cash, short-term investment, and operating assets constitute the main part of the assets, and Huawei's sufficient capital stock is sufficient to support the company's continuous operation and risk response.

Huawei's financial position is sound, and it has maintained sufficient cash flow in the short term without sacrificing long-term investment.

"Only by maintaining and increasing R&D investment in these areas can we ensure high-quality business continuity. At the same time, continuous innovation can only be achieved by securing and enhancing R&D investment. Improve product competitiveness through architecture refactoring, system engineering, optimization design, etc. As long as there are high-quality business continuity and competitive products, we can continue to survive and develop. Xu Zhijun said.

At the earnings conference, Xu Zhijun and Meng Wanzhou both ended with plum blossoms, which are also in line with Huawei's situation, which can maintain vitality even in cold weather, and it is not far away to bloom in spring.

(This article was first published in the titanium media APP, author |.) Zhang Shuai)