Huawei’s 2020 Annual Report: Net profit of 64.6 billion slows down, R&D spending is still high

On March 31 last year, Huawei’s rotating chairman Xu Zhijun said that 2020 will be the most difficult year for Huawei, and it will be under the entity list throughout the year. “We will strive to survive in 2020, and hope to publish our annual report next year.” 2021 On the afternoon of March 31, 2019, Huawei released its 2020 annual performance report at the Bantian Huawei Base in Shenzhen as scheduled. Although the growth rate has slowed down, it has basically achieved business expectations. It is worth noting that, under the pressure of performance, Huawei is still aggressive in terms of R&D expenditure…

On March 31 last year, Xu Zhijun, then the rotating chairman of Huawei, said that 2020 was the most difficult year for Huawei, and it was under the entity list throughout the year. “We strive to survive in 2020, and hope to publish an annual report next year.”

On the afternoon of March 31, Huawei held a 2020 performance conference at the Huawei Base in Bantian, Shenzhen, and released the 2020 annual performance report as scheduled.

The growth rate of performance has slowed down, and R&D is still in the air

The past year has been really difficult for Huawei. On the one hand, the severe challenge of the new crown pneumonia epidemic, on the other hand, geopolitics has brought enormous external pressure to Huawei’s global supply chain system.

The report shows that Huawei’s performance growth in 2020 will slow down, but it has basically achieved business expectations. Global sales revenue was 891.4 billion yuan, a year-on-year increase of 3.8%; net profit was 64.6 billion yuan, a year-on-year increase of 3.2%. The current cash flow from operating activities is 35.2 billion yuan, a year-on-year decrease. Huawei said that this is because of increased investment in supply, research and development, material reserves, etc., and the current asset-liability ratio is 62.3%.

The data shows that under the pressure of performance, Huawei’s R&D expenditure is still high. In 2020, Huawei’s R&D expenditure reached 141.8 billion yuan, accounting for 15.9% of operating income, maintaining a slight increase from 131.7 billion yuan in 2019. The accumulated R&D expenditure in the past 10 years More than 720 billion yuan, these R&D have been invested in many emerging businesses, such as auto parts, operating systems and artificial intelligence.

As can be seen from the above figure, in the past three years, from 2017 to 2019, the compound annual growth rate of Huawei’s revenue has reached 19.15%, but the growth rate of revenue in 2020 has slowed down significantly to 3.8%. Serious impact.

　　Epidemic, geopolitical impact

In terms of Huawei’s business segment, the operator’s business remained stable, with revenue of 302.6 billion yuan, an increase of 0.2%; enterprise business revenue of 100.3 billion yuan, an increase of 23%; consumer business revenue of 482.9 billion yuan, an increase of 3.3%, a growth rate Did not meet expectations. As of the end of last year, Huawei’s global terminal connections exceeded 1 billion, and the number of mobile phone users exceeded 730 million.

The consumer business represented by mobile phones accounts for half of Huawei’s sales performance. In recent years, it has made great progress. However, due to the impact of US sanctions in 2020, the supply of chips has been affected, and Huawei’s mobile phone sales revenue has declined. Improvements in chip supply in the future depend on when the global supply chain is repaired. The sales of wearable devices and other products grew rapidly, and revenue increased by 65% ​​year-on-year, which to a certain extent made up for the impact of the decline in mobile phone sales revenue.

The report also shows that, benefiting from factors such as the high-speed construction of 5G networks in China, China’s revenue in 2020 will be 584.9 billion yuan, a year-on-year increase of 15.4%, accounting for 65.6% of total revenue. Revenues from overseas markets declined to varying degrees.

Hu Houkun, Rotating Chairman of Huawei, said: “This year, despite the difficulties, we continued to create value for our customers with innovative ICT technologies, helped the global technology fight against the epidemic, economic development and social progress, improved business quality, and achieved annual business performance. Basically met expectations.”

“We are still in a complex and turbulent environment. The repeated epidemics and the uncertainty brought about by geopolitics will definitely be a challenge to normalization.” Hu Houkun said that facing the severe challenges of the external environment, Huawei continues to implement globalization , Diversified supply strategy, does not depend on any single country or region, and uses a globalized supply chain to ensure supply continuity.

At the press conference, Hu Houkun mentioned some of Huawei’s measures during the epidemic.

In 2020, in the operator business field, Huawei has achieved stable operation of 1,500 operator networks in more than 170 countries and regions around the world, meeting people’s needs for online work, online education, and online purchases of daily necessities during social isolation. Huawei has also cooperated with operators to implement more than 3,000 5G innovation projects in more than 20 industries including coal mines, steel, ports, and manufacturing.

Healthcare and education were also the key landing scenarios last year. During the epidemic, HUAWEI CLOUD AI-assisted diagnosis and other solutions provided technology and experience to many countries and regions. In education scenarios, HUAWEI CLOUD provides primary and secondary education cloud platform services for more than 50 million students.

From a regional perspective, Huawei’s business in China performed well last year, accounting for 65.6% of the business, showing steady growth, with revenue of 584.9 billion yuan, a year-on-year increase of 15%. Overseas, affected by the epidemic and supply, different regions have experienced declines to varying degrees. The markets of Europe, Middle East and Africa, Asia-Pacific and the Americas fell by 12.2%, 8.7% and 24.5% respectively, but they are still expected.

Mobile is not everything in consumer strategy

Hu Houkun said at the press conference that there will be both opportunities and challenges for Huawei in 2021. Huawei not only sees the huge opportunities of digitalization, but also recognizes that the road ahead is full of obstacles and difficulties. “Strategically, we must stay focused and do our own thing well.”

Hu Houkun emphasized that Huawei’s two major business directions have not changed: one is to focus on ICT infrastructure and act as an enabler of social digital transformation; the other is to focus on consumers and create a full-scenario smart life experience.

What will be the future trend of the mobile phone business in the consumer business? Hu Houkun said that Huawei’s mobile phone business was greatly affected last year, and the supply situation this year is still unclear, and it is difficult to predict what changes will be made to the mobile phone business. However, the flagship models that were originally planned to be launched will not change. For example, the recently released second-generation folding screen hand is still “hard to find”. I believe that in the next few years, Huawei mobile phones can still maintain a leading position in the market.

He believes that from a consumer business perspective, mobile phones are only part of it. In the future, Huawei will focus on high-frequency application scenarios for the consumer market to create a seamless and intelligent experience. To this end, we will continue to invest in Hongmeng, HMS and AI, and build services and ecology on this basis. “Consumers can use a unique Huawei ID to experience different services on different terminals. This service is highly intelligent.”

Hu Houkun said that in the future, consumer business must be centered on consumer experience. Different hardware is only a different means of contact, and the same is true for mobile phones. In fact, Huawei’s strategy has been implemented for some time. Last year, mobile phone sales declined, and other terminals performed well, which further strengthened Huawei’s confidence. “In the future of Huawei’s consumer strategy, mobile phones are only a part, but not the whole. This strategy has also been responded by partners.”

He said that the consumer business will adhere to the “1+8+N” all-scenario smart life strategy, with HarmonyOS and HMS ecology as the core driving and service capabilities, and will focus on smart office, sports health, smart home, smart travel and audio-visual entertainment. Based on the five major life scenarios, it creates a full-scenario smart life experience for consumers.

In the Q&A session of the performance meeting, Hu Houkun, the rotating chairman of Huawei, responded to hot issues such as Huawei’s chip supply, Hongmeng operating system, car building, and pig raising.

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