One step forward is a cliff, looking back at the road is nowhere to go, perhaps only by living to death can we deeply appreciate the meaning of survival.
On the last day of March, Huawei held a still difficult annual report conference. Meng Wanzhou, Vice Chairman and CFO of Huawei, wore a black dress and appeared at Huawei's 2022 Annual Report press conference for the first time as a rotating chairman.
Just two days before the press conference, Huawei just announced the results of a new round of board elections on its intranet, and the board of directors has expanded from 13 to 17 people, and a number of core business leaders have joined the board of directors. Another highlight is that Meng Wanzhou served as the company's rotating chairman, which lasted for six months from April 1 to September 30 this year.
According to people close to Huawei, as early as the beginning of this year, Meng Wanzhou entered the role of rotating chairman in advance. "Earlier, in fact, I started rotating last year, but I just don't want the outside world to interpret it too much."
Since May 2019, Huawei has encountered a "technology blockade" for the first time, and for four years, survival has been Huawei's main theme. Today, things are still changing, and sanctions have become the norm. Meng Wanzhou also got out of trouble in the United States, breaking her father's assertion that "Meng Wanzhou has no technical background, and it is impossible to be a successor forever", officially becoming Huawei's "supreme leader" and the real helm of Huawei's big and small affairs in the coming period.
In addition to caring about Huawei's own business progress, the outside world is also concerned about what fresh ideas Meng Wanzhou can bring to Huawei's management and business development when she takes over in the storm.
"Looking back on 2022, the severe external environment and non-market factors continue to affect the company's operations. In the middle of a storm, we had to keep running. At the annual report press conference, Huawei's rotating chairman Xu Zhijun, who is about to end his term, first concluded Huawei's development in 2022 and set the tone for its development in 2023 and for a long time, "2023 is still a key year for Huawei's survival and development. We must strive to fight more food, not only to survive, but also to lay the foundation for future development. ”
What Xu Zhijun said is true, under the new normal, in 2022, Huawei will achieve revenue of 642.3 billion yuan (RMB, the same below), a slight increase of 0.9% year-on-year, and the broader market will stop falling. However, net profit fell 68.7% year-on-year to 35.6 billion yuan, and the net profit margin was 5.5%, both at historical lows.
"It's not easy, this performance is not very good." An industry insider sighed about the play.
Unlike last year's annual report meeting, Huawei said that it actively expanded new fields from the three directions of basic theory, architecture and software, but this year Huawei seems to have clearer in the division of business sectors and clarified the traction point of revenue in the next few years.
At this annual report meeting, Huawei for the first time divided Huawei's core business by digital energy, cloud business, intelligent automotive component solutions, ICT infrastructure, and terminals, and disclosed specific revenue separately from enterprise business, terminal business, and carrier business. Let the outside world understand for the first time the actual operation of specific business segments. Including the three sectors of intelligent automotive component solutions, cloud business, and digital energy, which everyone is quite concerned about.
Of course, the first thing everyone pays attention to is the main channel of Huawei's big ship.
Declining net profit and pressure-based R&D investment
In 2022, Huawei's revenue stopped falling and rebounded slightly.
In 2021, the theme poster of Huawei's annual report was a red ice ship, struggling to row a course on the endless frozen sea. This year, Huawei-themed posters are red plums blooming after the ice and snow melt.
The side confirms that Huawei's darkest moment has passed, and a storm is about to come. In 2021, Huawei's revenue completely ended its five-year high growth of nearly 20%, a sharp decline of 28.6%, becoming the lowest point of revenue since the sanctions. In 2022, Huawei's revenue will be 642.3 billion yuan, basically the same as last year's 636.8 billion yuan, while also slightly increasing by 5.5 billion yuan.
However, the performance in net profit, net profit margin, cash flow and other aspects is not satisfactory. In 2022, Huawei achieved a profit of CNY 42.2 billion, a net profit of CNY 35.6 billion, a net profit margin of 5.5%, an asset-liability ratio of 58.9%, and a cash flow of CNY 17.8 billion from operating activities. Compared with 2021, these figures are 121.4 billion yuan, 113.7 billion yuan, 17.9%, 57.8% and 59.7 billion yuan, respectively.
Meng Wanzhou explained, "Last year's overall operating profit declined, while R&D investment increased, resulting in a decline in operating capacity as a whole." It is understood that in 2022, Huawei's R&D investment will reach 161.5 billion yuan, and the R&D expense rate will reach 25.1%, which is at a historical high.
Not long ago, Ren Zhengfei mentioned at the "Problem Unveiling" Spark Award ceremony that in three years, Huawei has completed the replacement development of 13,000+ devices and the repeated replacement development of 4,000+ circuit boards. Huawei has made its own management system, MetaERP software, which uses its own operating system, database, compiler, and language.
Xu Zhijun also emphasized at the press conference that Huawei ensures high-quality business continuity and enhances product competitiveness through pressure-based R&D investment. "Business continuity includes continuity of supply, continuity of development and manufacturing, and continuity of IT systems."
Xu Zhijun also pointed out that although after years of efforts, Huawei has made great progress in device replacement, single board reconstruction, operating system, database, product development tools, CRM, ERP, PDM, MES, etc., and solved problems, but there is still a gap from advanced, easy to use, and sustainable.
It is worth noting that in 2021, Huawei's net profit increased by 75.9% year-on-year, in addition to Meng Wanzhou's adjustment, better supply plan collaborative management, and internal management efficiency improvement brought about by digitalization, it is also related to the disposal of subsidiaries including Honor and the net income of up to 67.4 billion yuan.
Combining the two factors of strong investment in R&D and the disposal of subsidiaries' businesses, it is reasonable for Huawei's net profit to decline sharply in 2022.
From the perspective of different business segments, the trend of carrier business, enterprise business, and terminal business is the same as last year. This year is the fourth year of 5G commercialization, the peak period of 5G investment and construction has passed, and the industry will focus more attention on the prospects and technologies of 5.5G, gigabit optical networks, and even 6G. In this context, Huawei's carrier business increased slightly by 0.9% this year to 284 billion yuan, based on a year-on-year decline of 7% last year.
The enterprise business continued to maintain high growth, achieving revenue of 133.2 billion yuan, a significant increase of 30% year-on-year; The terminal business continued to decline, achieving revenue of 214.5 billion yuan, down 11.9% year-on-year. However, compared with the terminal business in 2021, the terminal business fell by 49.6%, and the terminal business has significantly improved its business stop-loss ability in 2022, or it may be related to the hot sales of Mate 50 series, folding screen mobile phones, and terminal commercial products.
This year, Huawei's annual report includes an industry perspective, that is, it discloses the operation status of different businesses from the perspective of the industry. Among them, ICT infrastructure achieved revenue of 354 billion yuan, and terminal business achieved revenue of 214.5 billion yuan; cloud business revenue of 45.3 billion yuan; 50.8 billion yuan for digital energy; The intelligent vehicle solution business was CNY 2.1 billion and other businesses were CNY 4 billion.
After disclosing HUAWEI CLOUD operations for the first time last year, it further disclosed the operational resilience of core business segments.
From the perspective of different regions, China is still Huawei's main revenue battlefield, achieving revenue of 404 billion yuan, accounting for 63%, a slight decrease of 2.3% year-on-year; Followed by Europe, the Middle East and Africa, accounting for 23%, with revenue of 149.2 billion yuan, a year-on-year increase of 13.5%. Next, the Asia-Pacific region accounted for 7%, achieving revenue of 48 billion yuan, down 10.5% year-on-year; The Americas accounted for 5%, achieving revenue of 31.9 billion yuan, a year-on-year increase of 9.1%.
A tougher terminal and vehicle business
As we all know, the terminal business has always been at the center of Huawei's "supply chain blockage" storm. Whether the smart auto parts business can redeem the terminal under the trap of the mobile phone business is also the focus of external attention.
"The mobile phone business has the greatest impact, from the world's second to the ranks of others," Xu Zhijun easily quipped to the media, because of Huawei's services, everyone is still willing to buy 4G mobile phones in the 5G era, and they are using Huawei's latest Mate X3 folding screen mobile phone, which is no different in weight from ordinary mobile phones.
"As long as the US Department of Commerce approves 5G chips, Huawei can produce 5G mobile phones, and we can also do (5G) folding screen mobile phones."
Last year, Huawei Mate 50 series just released "one machine is difficult to find", wearing many positions, Huawei executive director, terminal BG CEO, intelligent vehicle solution BU CEO Yu Chengdong bluntly said, "Mate 50 sales make Huawei come alive again." ”
But the truth is not so simple, Huawei's mobile phone business due to the absence of 5G chips, the global smartphone market consumption decline in the impact of the overall market share continues to shrink. According to Counterpoint statistics, in 2022, the market share of Huawei mobile phones in China further fell from 10% in 2021 to 7.9%.
However, the smart car parts business faces many difficulties in the process.
On March 31, the day of the annual report meeting, Ren Zhengfei issued a document clearly pointing out that Huawei will not build cars in five years, which is another strategic continuation of Huawei's 2020 resolution on the management of intelligent automotive parts business "Huawei does not build cars".
At the release of the annual report, Xu Zhijun specifically reiterated Huawei's positioning for the intelligent vehicle solution business, "Huawei's strategy has not changed, do not build cars, help car companies build good cars." ”
Xu Zhijun bluntly said that individual departments, individuals or partners are abusing the Huawei brand, and in the process of investigating and handling this matter, the brand built by Huawei for more than 30 years will not be abused. Huawei will rectify internal promotional materials such as flagship stores and return to strategy.
That night, Yu Chengdong issued an order: the store will begin to remove all relevant promotional materials with Huawei words on April 1. Subsequently, the network reported that Yu Chengdong would not build a car, and the abuse of Huawei's logo, a message on Huawei's intranet responded, "For an industry, only a deep understanding can grasp the right direction!" Mark it and look back in a few years! ”
The internal controversy caused by the car-making faction led by Yu Chengdong and the non-car-making faction represented by Ren Zhengfei and Xu Zhijun is producing a strong ripple effect.
On April 1, Yu Chengdong immediately clarified the misunderstanding of his "car building" at the China Electric Vehicle 100 Conference. "Now the removal of the Huawei logo is hyped up on the Internet, in fact, Huawei has always insisted on not building cars, but to help car companies build good cars." Yu Chengdong said that the reason for the emergence of HUAWEI is because car companies including Cialis, Chery, Jianghuai and other car companies have joined the market, which cannot form a unified understanding at the consumption level, which brings obstacles to marketing and retail.
Yu Chengdong denied that there is a dispute over the route of Huawei's smart car solution business, and "banning Huawei as a car brand is not a model to deny Huawei's smart car business."
At present, Huawei mainly enters the automotive industry chain through three modes: first, the parts supply model, that is, the direct sales of customized parts to car companies, which can also be regarded as the Tier 1 model; The second is the solution integration model (HI), which provides full-stack intelligent vehicle solutions for automotive companies; The third, the smart car mode, helps customers complete industrial design and other links on the basis of the second model.
Among the three modes, except for the smart car mode, which is represented by Qianjie, is progressing smoothly. The other modes are caught in the dilemma of "thunder is loud, rain is small" or "wake up early and catch up late". The Alpha S Huawei HI version was released in early 2021 and officially delivered in the first half of 2022, during which Huawei's offline flagship stores displayed engineering prototypes.
The Avita 11, jointly developed by Huawei, Changan Automobile, and CATL, was officially released in August 2022 and is currently in the offline distribution stage.
On March 27, GAC announced that due to resource allocation and other issues, the AH8 project of its holding subsidiary, GAC AION New Energy Automobile Co., Ltd., was changed from joint development with Huawei to independent development.
Last year, Xiao Yong, deputy general manager of GAC AION, publicly confided the difficulty of cooperation with Huawei, "It may not only be batteries, Huawei is also a big-name supplier, the price is relatively high, uncontrolled, we want to cooperate with Huawei, and found that there is basically no bargaining power." ”
At the bottom of Yu Chengdong's message, Huawei employees bluntly said that HI mode provides intelligent cockpit and intelligent software, which are the core technologies of intelligent vehicles in the future. This remark coincides with SAIC's "soul theory".
Many industry insiders believe that after Huawei clearly cuts the logo with partners and extends the strategy of not building cars, it may be more difficult for Huawei's intelligent automotive parts business in the future.
However, many industry insiders and Huawei employees believe that it is more beneficial to Huawei not to build cars. Fu Liang, a telecom analyst, believes that at present, Huawei is not suitable for asset-heavy entry into the automotive field, and the outsourcing of manufacturing links is not possible, with large investment, high risk, long return on investment, and far from the main business.
In 2022, Huawei's intelligent vehicle solution business will only be 2.1 billion yuan, which is a drop in the bucket compared with the revenue of the emerging segment of the enterprise business. In the future, Huawei's heavy responsibility for food should be in other business segments.
Cloud and digital energy shoulder the important task of "fighting food"
From the perspective of industry, HUAWEI CLOUD business and digital energy services performed well. Cloud business revenue was RMB45.3 billion, double last year's RMB20.1 billion. Digital Energy disclosed for the first time that it achieved revenue of 50.8 billion yuan, exceeding the cloud business revenue that has entered the public cloud market for nearly eight years in a very short period of time.
Last year, HUAWEI CLOUD launched a narrative focusing on two themes: going global and ecosystem.
At HUAWEI's Connect 2022 Thailand event, Huawei announced that it will soon start serving Indonesia and Ireland. At the same time, 15 innovative services including cloud native, AI development, data governance, digital content, software development, and Kaitian aPaaS have been implemented globally.
In terms of operating system ecology, by the end of 2022, the cumulative installed base of Euler system Euler exceeded 3 million sets, the new market share of Chinese servers exceeded 25%, and the global download volume exceeded 1 million. "At present, HUAWEI CLOUD overseas markets also use Euler, the Euler operating system, and GaussDB, a Gaussian database." Employees of Huawei's computing product line confirmed to Pinplay.
HUAWEI CLOUD's software business, represented by Euler, has crossed the key inflection point where the ecosystem has grown from scratch to taking shape.
According to the 2022 China Cloud Market data released by Canalys, HUAWEI CLOUD ranks second with a 19% market share, second only to Alibaba Cloud. Canalys report believes that 2022 was the most difficult year for Alibaba Cloud, and growth continued to slow after experiencing strong growth in 2021. At the same time, HUAWEI CLOUD partner revenue increased by 55%, and HUAWEI CLOUD achieved rapid growth in overseas regions.
In terms of digital energy, Huawei provides six product solutions, including clean power generation, ICT energy infrastructure, transportation electrification, embedded power supply, integrated smart energy, and energy management cloud.
In September last year, Huawei provided technical solutions including intelligent string inverters and power carrier communication (PLC) for the photovoltaic Junma Power Station in the Kubuqi Desert in Inner Mongolia. According to IHS Markit statistics, since 2014, Huawei's inverter market share has ranked among the top three in the world.
In recent years, the national policy level has favored the construction of large-scale wind power photovoltaic bases focusing on deserts, Gobi and desert areas, as well as the development and utilization of new energy. It is foreseeable that Huawei's digital energy business segment has great growth potential in the future.
Of course, Huawei is casting a net in all directions to salvage a glimmer of life.
Since 2021, in order to find opportunities for survival, Huawei has established dozens of corps/system departments, spanning three business segments: operators, enterprises, and terminals. In addition to the changes in the board of directors this year, the corps/system department and organizational structure are also continuing to change in the face of changes in business and market demand.
For example, last year, Huawei established a portfolio corps similar to "think tanks" for different industry corps. When serving customers, it was found that some business scenarios of the Smart Highway Corps, Customs Corps and Port Corps were similar, so the two corps were merged.
For another example, Huawei's business organization modules have become six, namely ICT infrastructure business, terminal business, Huawei cloud computing, digital energy, intelligent vehicle solution business, and HiSilicon. Among them, carrier business, enterprise business, ICT products and solutions, and global technical services belong to the ICT infrastructure business.
It is worth noting that HiSilicon's business is also quietly looking for business locations after it is unable to manufacture advanced process chips through wafer foundry, including wireless short-range communication chips and HDR Vivid video standard chip business. A HiSilicon employee told Pinplay, "Many of HiSilicon's capabilities in wireless short-range communication and UWA (World Ultra High Definition Video Industry Alliance) are implemented on chips, which require extensive and multi-party participation and are slowly cultivated." ”
Not long ago, at the hardware and software tools pledge conference held by Huawei, Xu Zhijun said that in the past three years, Huawei has completed the replacement of 78 software/hardware development tools around three R&D production lines of hardware development, software development and chip development, ensuring the continuity of R&D operations.
At the same time, Huawei's chip design EDA tool team and EDA companies within the United Nations have jointly created EDA tools required for processes above 14nm, basically realizing the localization of EDA tools above 14nm, and will complete their comprehensive verification in 2023.
This year, the story of Huawei's survival continues to be told. As Xu Zhijun said, today's Huawei is like plum blossoms, and plum blossoms are fragrant because she has experienced severe cold tempering. The pressure on Huawei is undoubtedly enormous, but we also have growth opportunities, portfolio resilience, differentiation advantages, the trust of customers and partners, and the courage to invest.
Written at the end: Back to Meng Wanzhou herself
At the annual report meeting, a reporter from Japan's Yomiuri Shimbun asked Meng Wanzhou a rather pointed question, "On April 1, you will be appointed as rotating chairman, what are your plans?" In view of your unfortunate experience in 2018-2020, some investors believe that if you become the rotating chairman, the US control of Huawei will be intensified, what do you think? ”
Meng Wanzhou answered calmly, she said, "Huawei's governance charter has made it clear that the succession of the system and the succession of the system, not the succession of an individual, the entire company is moving forward under the collective leadership." Companies do not tie the fate of the entire collective to one individual, and we have a very clear agreement that a blueprint is drawn to the end. ”