Huawei'S "Internal And External Dual Circulation"

The world is like a new chess game. How will Huawei end up in the middle game?

On the afternoon of March 31, Huawei announced its operating results for 2020. According to the report, in 2020, Huawei's growth rate of performance slowed down, but it basically achieved its business expectations, including sales revenue of 891.4 billion yuan, a year-on-year increase of 3.8%, and net profit of 64.6 billion yuan, a year-on-year increase of 3.2%.

Among them, the business revenue of operators was 302.6 billion yuan, with a year-on-year growth of 0.2%; that of enterprise business was 100.3 billion yuan, with a year-on-year increase of 23%; and that of consumer business was 482.9 billion yuan, with a year-on-year growth of 3.3%.

Hu houkun, chairman in office of Huawei, told the media including the 21st century economic report that "behind the growth, Huawei has seized several key opportunities. From the perspective of industry, although the epidemic situation was serious last year, the demand for network capacity and services was increasing. The business of operators keeps stable development. Enterprise business has been maintaining double-digit growth. The growth rate of the consumer business did not meet the expectations. Huawei's sales data of mobile phones have been advancing rapidly for many years. Last year, due to the supply problem, revenue fell. But at the same time, there was a "1 + 8 + n" strategy in the consumer business. Other wearable sales other than mobile phones achieved a relatively rapid growth, and eventually the overall growth was achieved. "

Under the heavy pressure of 2020, it is not easy for Huawei to maintain growth. At the press conference of the 2019 annual report, Xu Zhijun, Huawei's rotating chairman, once said: "2020 is the most difficult year for Huawei."

In November last year, Huawei sold glory to enable it to develop independently. In addition to divesting its business for survival, Huawei has also taken such measures as counterclaim at the legal level, more transparent and open public opinion, preparation of inventory in advance, response to spare tire, expansion of new business lines, reserve of cash flow, adherence to multi suppliers, and cultivation of domestic semiconductor industry chain.

Recently, the U.S. government has indicated that the sanctions against Huawei and other enterprises will continue. If things are going to be a new game and the game is in the middle, what will Huawei do next?

Domestic market contributes more than 65% of revenue

Under the severe external challenges, Huawei's growth rate will slow down in 2020. In 2020, the revenue will shrink to single digit growth (3.8%), and in 2019, the revenue will grow by 19.1%, while in recent years, the compound growth rate of revenue will reach 14%; in terms of net profit, it will reach a single digit growth of 5.6% in 2019 and 3.2% in 2020.

In terms of regions, Huawei's revenue in China accounted for 65.6%, and its revenue in China was 584.9 billion yuan, an increase of 15% over the same period last year, which contributed most of the revenue. However, overseas regions experienced different degrees of decline. The financial report shows that sales in the Americas region decreased by 24.5% year-on-year, while that in Europe, the Middle East and Africa region decreased by 12%, mainly due to the receiving department The impact of market investment fluctuation of operators in different countries and the inability of consumer business to use GMS ecology.

At the same time, the financial report also shows that in 2020, the company will continue to increase investment in cloud and R & D, increase depreciation and amortization, and decrease accounts payable. The annual cash flow from operating activities is RMB 35.218 billion, down 61.5% compared with that in 2019.

If you look at Huawei's core business, in 2020, Huawei's organizational structure will be greatly adjusted. At the beginning of the year, it upgraded cloud & AI (cloud and Computing) to Huawei's fourth largest BG, and formed Huawei's four BGS together with operator BG, enterprise BG and consumer BG. However, the financial report did not disclose the specific performance of cloud and computing business. Hu houkun said that Huawei's cloud growth rate would reach 168% in 2020. At the same time, Huawei's intelligent automobile business also appears in the financial report. In 2020, the auto Bu and consumer BG will be integrated.

In various businesses, the focus of external attention is still focused on consumer business and chip issues.

In this regard, Hu houkun said that Huawei will create seamless and intelligent application scenarios in high-frequency application scenarios, which will open up the two ecology of service and hardware. In the future, consumer business will focus on consumers. Different hardware is just different means of contact, and so will mobile phones. With the decline of mobile phone sales last year, sales of other hardware and services showed a rapid growth trend, which is in line with the needs of the consumer market.

As of December 31, 2020, Huawei has more than 1 billion terminal connections and 730 million mobile phone users.

On chip supply, Hu houkun said: "in the past two years, in order to deal with unfair treatment, we have invested a lot of capital resources to solve the chip problem. In the face of customer demand, especially the demand of b-end customers, there is no problem."

Regarding the recent situation of Hisilicon, a chip design company of Huawei, Hu houkun said: "we are positioned as an ICT system equipment supplier, and we still rely heavily on the global industry chain of chips. As an important unit of Huawei, Hisilicon participates in the global semiconductor industry chain. We also expect that the form of industrial chain based on global cooperation mode should still become the mainstream of semiconductor industry chain development, so we will adhere to innovation based on open cooperation. "

"We see that both upstream and downstream of the industry have been hurt. Last year, a part of the business decline was directly affected by the destruction of the global supply chain. On the other hand, upstream suppliers are also victims. In the past, Huawei's procurement from suppliers in the United States alone was $10-20 billion, and a large part (orders) would be taken away by other suppliers. For non-U.S. suppliers, in the face of the unreasonable requirements of the United States, they should try to avoid the influence of the United States, so in this case, the industry has no winner. " Hu houkun said.

Huawei's "internal and external dual circulation"

Recently, the United States continues to pursue Huawei, and geopolitical conflicts have affected Huawei and the global supply chain.

Compared with the past years of fighting high and low, Huawei is now adjusting to a stable and stable survival tone and doing a good layout step by step.

From the industrial level, on the one hand, Huawei's mobile phones are seeking survival, and the consumer business is also expanding to the smart home and automobile business, and building a cross platform terminal software ecology around harmonyos. The mobile phone market has been fiercely competitive, and Huawei's market share will inevitably decline under the situation of supply chain obstruction. Especially in the fourth quarter of 2020, Huawei fell to the sixth place in the world. However, in 2020, Huawei still stands in the top three. According to counterpoint data, after the U.S. trade sanctions were upgraded, Huawei was in serious shortage of spare parts. However, Huawei still ranked third with its outstanding performance in the Chinese market. China contributed about 70% of Huawei's total shipment. In the Chinese mobile phone market, Huawei (including glory) ranked first in 2020, accounting for 41% of the share.

On the other hand, Huawei needs to accelerate the growth of new businesses. The cloud and computing industry and automobile business are Huawei's stars of tomorrow. How to grow rapidly is a key challenge. Major Internet companies and technology companies are all cutting into the fields of cloud computing, AI and intelligent vehicles. As an enterprise with hardware gene, Huawei is also facing competition.

As for the planning of automobile Bu, Hu houkun said: "our positioning is to be a supplier of automobile parts. We believe that the ICT technology we have mastered can cover many fields of electric vehicles, including the Internet of vehicles, vehicle cloud, automatic cockpit, automatic driving, power management, intelligent power system, etc. Last year, we merged the investment management of smart cars with consumers. On the one hand, our understanding of consumers can be better reflected in automotive solutions. On the other hand, we have a strong design ability of consumer business, which can be used by car bu. We will further strengthen the positioning of car business and become a competitive supplier. "

For future development, Huawei has also put forward various plans, such as continuing to consolidate the core business of b-end, strengthening digital services, cloud services, continuous investment in R & D and open cooperation, etc.

From the regional perspective, this series of measures can be seen as Huawei's "internal and external dual cycle". On the one hand, it mainly focuses on internal circulation. As mentioned above, the Chinese market has contributed more than 60% of its revenue. On this basis, Huawei is also constantly cultivating and investing in domestic supply chain, cultivating Hongmeng ecology, and cooperating with more companies to establish a new ecology.

On the other hand, in the external circulation side, open cooperation and R & D investment should be maintained. In 2020, Huawei's R & D investment still accounts for more than 15% of its revenue, which is at a high level among Huawei's R & D investment intensity over the years. At the same time, Huawei holds more than 400 important positions in more than 600 standard organizations, industry alliances, open source communities and academic organizations around the world.

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