Huawei looks for new areas of business growth despite U.S. sanctions

Midlife crisis of Huawei 

Founded in 1987, Huawei is a leading global provider of information and communications technology (ICT) infrastructure and smart devices. We have approximately 195,000 employees and we operate in over 170 countries and regions, serving more than three billion people around the world.

Since entering the "U.S. Entity List", Huawei relies on the "global supply chain system" has been frequently challenged, the chip and other core technology restrictions have also made the company began a long mending tire self-help. After three years of being added to the list of U.S. entities, how is the development of Huawei's main business? In the face of restricted device business development, how does Huawei carry out new business? Facing the future, what kind of scientific hypothesis business vision does Huawei put forward? Under the limitations of technology, how Huawei should move forward have become the topic of much attention on this analyst summit.
 

How is Huawei doing now?

According to Huawei 2021 Annual Report, in 2021 Huawei brought in revenue of 636.8 billion Chinese yuan ($99.9 billion), a 28.5% year-on-year decline. Huawei’s net income surged 75.9% year on year to 113.7 billion yuan as it focused on boosting profitability. And Huawei’s business has been hurt by U.S. sanctions which have sought to cut it off from key software and components like semiconductors.

Under former U.S. President Donald Trump, Huawei was put on a U.S. blacklist called the Entity List which restricted American firms from exporting key components and software to the company.

On Huawei Annual Analyst Summit, Ken Hu, Huawei rotating chairman admired that Huawei is still facing many challenges. These include geopolitical conflicts, the lingering pandemic, looming global inflation, rising prices of bulk commodities, and possible exchange rate fluctuations. These changes will make the challenges presented by business environment even more formidable.

 

How Huawei looks to the future?

Ken Hu mentioned that Huawei's business policy is indeed centered on "keeping the company alive with quality". For the future, bystrengthening approach to innovation, equipping all industries with the tools and knowledge they need to go digital, and helping build a low-carbon world four ways, Huawei showed confidence that live alive with equality.

1. Strengthening approach to innovation

To counter U.S. sanctions, Huawei is investing heavily in new areas including the automotive industry and hiring more scientists to focus on technology development.

Guo Ping, Former Huawei’s rotating chairman, said that “Relying on talent, scientific research, and an innovative spirit, we will continuously increase investment to reshape our paradigms for fundamental theories, architecture, and software, and build our long-term competitiveness.”

Ken Hu said Innovation is in Huawei’s DNA. Despite considerable operational challenges over the past few years, Huawei has continued to steadily increase our investment in R&D. For nearly a decade, Huawei strategy has been to re-invest at least 10% of our annual revenue back into R&D. Last year, the number devoted in invested about 22%. As Mengwanzhou said on Huawei annual report 2021, Huawei spent 142.7 billion yuan on research and development in 2021, slightly higher than 2020′s figure of 141.9 billion yuan.

On April 25, Huawei once again issued a global invitation for Top Minds. Ken Hu said that Huawei's recruitment message offered a salary of more than 5 times the industry average income, hoping to recruit talents in the fields of digital, computer, physics, materials, chips, intelligent manufacturing and chemistry. "Five times the salary is an imaginative thing." He mentioned that innovation is also highly dependent on talent, and Huawei hopes to use world-class problems to attract world-class talent to jointly meet the challenges and promote scientific and technological progress.

Huawei's "Top Minds" project was officially announced in June 2019. At that time, Ren Zhengfei, CEO of Huawei mentioned in a speech within Huawei's EMT (management team) that "this year (2019) we will recruit 20-30 top minds from around the world, and next year we want to recruit 200-300 from around the world. These talented teenagers are like 'mudskippers', drilling to live our organization and activating our team."

In addition to talented teenagers, Huawei has also invested in the training of scientists and other talents for many years in a row. According to public data, Huawei has at least including more than 700 mathematicians, more than 800 physicists, more than 120 chemists, and 15,000 people engaged in basic research, as well as more than 60,000 product development personnel. Huawei also has cooperation with more than 300 universities and 900 research institutions and companies around the world, has implemented 7,840 projects, has invested $1.8 billion, and has signed more than 1,000 R&D cooperation contracts for external payment. These basic talents support Huawei's exploration of future technologies.

In the keynote speech, Ken Hu said that the purpose of Huawei's innovation is ultimately to create value for customers and society.

2. Equipping all industries with the tools and knowledge they need to go digital

At the Analyst Summit, Ken Hu also shared his views on digital transformation in Asia Pacific. He believes that Asia Pacific is one of Huawei's most important markets besides China, and that the Thailand government's "Digital Hub" national strategy for digitalization is relatively advanced and clear, and can guide the development of digitalization in Thailand. Thailand is also very active in digital development, which is directly attributed to the rapid development of digital infrastructure, such as 5G, broadband, and data centers.

In Thailand, CEO of Huawei Thailand Abel Deng said that Thailand has long been a strategic overseas market for Huawei, and Huawei has been committed to the mission “Grow in Thailand, Contribute to Thailand” for 22 years, with continuous dedication to contributing social values to Thai people, businesses and society. The contributions span over three main areas, namely strong and immediate support to protect people and get society back up and running during COVID-19, digital talents ecosystem cultivation and SMEs and Startups ecosystem support.  

At the same time, he mentioned that Huawei will improve digital transformation in the Asia-Pacific region by helping countries in which it operates business to build digital infrastructure, adhere to low-carbon development, and train ICT talent.

First, Huawei is helping local governments, operators and enterprises to make good use of these digital infrastructures through wireless, fixed broadband networks, and data center infrastructure in Asia Pacific.

Second, Huawei is actively promoting green site solutions this year to help Asia Pacific customers build more green sites and help operators achieve emissions reductions.

The third point Ken Hu highlighted is "because we are an ICT company with long-term roots in the Asia Pacific region, Huawei will increase the training of ICT talent in the region. Through Huawei's ASEAN Academy and the "Seeds of the Future" program, we plan to train another 500,000 ICT talents in the Asia-Pacific region in the next five years."

The fourth point is to help empower ICT startups in the Asia-Pacific region. Huawei has launched a program called SPARK, which plans to invest $100 million over three years to help build a more vibrant and healthy startup ecosystem in the Asia-Pacific region.

3. Maintain confidence in device business and optimism in new business

Huawei's mobile business has seen a major decline over the past two years because of a shortage of high-end support chips due to U.S. sanctions. In 2021 Huawei recorded consumer business revenue of 243.431 billion yuan, down 49.6% year-on-year, slipped to 38.2% of revenue, falling back to the second-largest revenue source, while the last time such a structured share occurred in 2017.

Ken Hu said “Huawei smartphone business has seen a sharp decline over the past two years, for reasons everybody knows. It's a real shame – not just for Huawei, but for consumers too. However, it also gave us the opportunity to rethink our device business and how we can provide consumers with greater value.”

In Thailand, Huawei have seen remarkable growth in the shipments of "+ 8" products, including wearables such as smart watches and bands, as well as smart speakers, smart screens, and tablets.

In a video released by Huawei Device Business Group on April 27, Huawei Device business CEO Richard Yu said that Huawei's cell phone supply has been greatly improved. This year Huawei smartphone business is back to normal, and consumers can buy a variety of Huawei's products. Richard said with a smile that the new folding screen smartphone to be released is "super thin, super flat and super reliable". He ended the video by thanking consumers for Huawei's ongoing support and trust, and promised to bring you good products and services.

4. Huawei always with an open and cooperative mindset and industry chain cooperation

At the end of the analyst summit media Q&A, Huawei denied the plan to build its own chip factory. Although Huawei is now facing a chip shortage, Huawei still believe it is necessary to have a division of labor along the value chain, and not build its own chip factory.

At the same time, Executive Director of the Board and Chairman of ICT Infrastructure Managing Board, David Wang addressed chip supply issues will require the joint efforts of all participants up and down the value chain. He addressed that no company can independently produce chips, and Huawei is no exception.