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3 classes from Huawei’s 2022 monetary report


I attended Huawei’s 2022 monetary outcomes assembly in Shenzhen and it was principally a narrative of “again to regular”. As CFO and now rotating Chairperson Sabrina Meng stated:

“In 2022, Huawei steadily pulled itself out of disaster mode. US restrictions at the moment are our new regular, and we’re again to enterprise as common.”

The ending title for Eric Xu’s presentation was “sustainable survival and improvement”. Notice: That is in distinction to their 2021 report which was beneath the title “Strong Operations, Investing within the Future”.

Right here had been my take-aways:

1. Huawei’s Technique Has At all times Been About Lengthy-Time period Survival – And That Means Continuity, Resilience, and High quality

Twenty plus years in the past, Huawei founder Ren Zhengfei started writing and talking about learn how to survive long-term as a expertise firm. That’s a extremely good query as a result of it’s really fairly uncommon. Most main tech corporations don’t final past one or two expertise cycles. Perhaps they get disrupted by the brand new expertise. Or perhaps they lose focus, because the now wealthy founders transfer on. Or perhaps the tradition simply turns into lazy and non-innovative.

So, Mr. Ren studied tech corporations that did final, like Hewlett Packard. And he explicitly set Huawei on a strategic course to concentrate on long-term survival. And that implies that the important thing query for Huawei for the previous 2 years has been the retention of its worldwide service prospects.

Huawei must have worldwide scale in its ICT enterprise. You can not win as a telecommunications tools firm with just one nation, whatever the measurement of the US or China. It is advisable to be worldwide to have the dimensions to compete in manufacturing value and analysis spending. So Huawei’s core enterprise has all the time been China plus worldwide telecommunications (ICT).

Huawei actually started once they began design and manufacturing their very own easy telecommunications tools (like PBX switches) within the early 1990’s. And that was when in addition they actually started investing in R&D. This started what would grow to be a +30-year march in growing manufacturing and R&D scale. R&D spending elevated (but once more), reaching 161B RMB. This was 25% of income, a really huge enhance from their typical 15% of income. And it was up from 142B (22%) in 2021, which was already very excessive.

This march took them from mounted into wi-fi tools. From 3G to 4G after which 5G. And into all of the applied sciences surrounding ICT (reminiscent of client units and cloud). This march additionally took them from China to +170 markets. To +$100B in income. And ultimately to surpass Ericsson as the most important telecommunications producer on the planet.

However this all depends upon profitable internationally. Not simply in China.

So, you may see Huawei bending over backwards to make sure worldwide carriers are getting the best high quality tools now and sooner or later. You may see the corporate going above and past to take care of the belief of those prospects. The important thing quantity I take a look at is the proportion of Huawei’s ICT income coming from worldwide (i.e., non-China) sources. In 2021, it was +50% of service income.

That is what I heard all through the presentation by Eric Xu and Sabrina Meng.

  • There was plenty of discuss having the best “high quality” tools.
  • There was plenty of discuss guaranteeing the “continuity” of provide.
  • There was plenty of discuss “resilience”. Which means diversifying the availability chains and redesigning parts to keep away from any potential future dangers.
  • There was particulars about Huawei’s capital construction and massive money reserves. They’re sitting on plenty of money versus debt.

2. Cloud Income Extra Than Doubled to +45B RMB in 2022. That is Now Huawei’s Largest Development Alternative.

This was the primary yr that cloud was damaged out as a enterprise unit. It was beneath Enterprise in 2021, which totaled 102B RMB in income for that yr. For 2022, cloud income reached 45B RMB. It’s now a big enterprise, though nonetheless small in comparison with ICT and Shopper.

However cloud income seems have greater than doubled in 2022. The presentation didn’t have an actual progress quantity, however they did use the phrase “sustaining quick progress”. This is a rise from the +30% progress in 2021.

Cloud is necessary as a result of it’s now vital in measurement – and since it’s a enterprise that has the potential to develop 10x sooner or later.

  • Examine Huawei Cloud to Alibaba Cloud, which had $11B in income in 2022. Matching Alibaba would imply one other doubling of Huawei Cloud income.
  • Have a look at Amazon’s AWS as a comparable. Cloud in China does have considerably slower progress and adoption than we see within the US. However the general markets might be comparable in measurement someday. If Huawei Cloud had been to someday simply match the 2022 income for AWS, that might imply over 350B RMB in income, surpassing ICT in income.

For China cloud, Alibaba Cloud remains to be the market chief. However in 2021, Huawei Cloud was #2 or #3, about tied with Tencent at 17%. And take note, Western cloud corporations won’t ever be allowed in a lot of China, and particularly not in areas like authorities and monetary companies.

Total, cloud’s high line progress in 2022 appeared fairly good (from the surface). It’s Huawei’s greatest potential income progress alternative. Income and ROIC are one other query.

3. The Onerous Hit Shopper Enterprise Income Stabilized at 214B RMB in 2022. This Was Shocking.

In the course of the China-US “tech battle”, Huawei discovered itself on the middle of a political storm not of their making. And in 2020-2021 it impacted fairly a little bit of their enterprise.

Their ICT enterprise was politically pushed out of a number of developed markets (UK, Japan, and so on.). Both partly or completely.

Their tech provide chain was hit throughout the board. The patron enterprise unit subsequently fell by 50% to 243B RMB in 2021, with worldwide smartphone gross sales being the toughest hit. And in contrast to in ICT the place the parts and provide chain might be restructured, it was not apparent learn how to overcome limitations on excessive finish chipsets and working methods.

And but, the patron income in 2022 was 214B RMB (vs. 243B in 2021). I believed it could be fairly a bit decrease. But, the patron enterprise seems to have stabilized its earlier decline.

I assume that is principally coming from smartphones in China (their foldable smartphones are superior) and their “1 + 8 + N” technique. They had been already transferring from promoting smartphones to promoting smartphones plus a set of 8 ancillary merchandise (earbuds, good house, and so on.). These ancillary merchandise don’t require the identical chipsets and are appropriate with telephones in all places. I used Huawei earbuds that are fairly nice.

Total, Huawei’s Shopper Enterprise seems to have efficiently shifted its product combine and stabilized its income. If this continues, it’ll defy plenty of analyst expectations.


Total, the corporate seems to be prefer it has come out of the political storm fairly effectively. I anticipate the dialog to shift extra from resilience to progress in 2023.




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