Huawei’s latest annual report released: Losses in overseas markets exceed US$10 billion, striving to survive in 2020

On the afternoon of March 31, Huawei announced its 2019 annual results. Huawei's annual report shows that in 2019, Huawei achieved global sales revenue of 858.8 billion yuan, a year-on-year increase of 19.1%, net profit of 62.7 billion yuan, a year-on-year increase of 5.6%, and operating cash flow of 91.4 billion yuan, a year-on-year increase of 22.4%.

The consumer business maintained steady growth, achieving sales revenue of 467.3 billion yuan, a year-on-year increase of 34%. Among them, the shipment volume of smartphones exceeded 240 million units, and the full-scenario smart ecological layout centered on consumers, such as PCs, tablets, smart wearables, and smart screens, was further improved.

The operator business achieved sales revenue of 296.7 billion yuan, a year-on-year increase of 3.8%; the corporate business achieved revenue of 89.7 billion yuan, a year-on-year increase of 8.6%.

Huawei’s latest annual report released: Losses in overseas markets exceed US$10 billion, striving to survive in 2020

Huawei's R&D expenses account for more than 10% of revenue every year, and last year was no exception. R&D expenditures reached 131.7 billion yuan, accounting for 15.3% of annual sales revenue. The total R&D expenses invested in the past decade exceeded 600 billion yuan.

Huawei’s latest annual report released: Losses in overseas markets exceed US$10 billion, striving to survive in 2020

In the Q&A session for reporters after the performance meeting, Huawei’s rotating chairman Xu Zhijun responded to some issues such as performance fluctuations, the impact of the epidemic on Huawei’s operations, and the impact of the US ban on overseas business.

Xu Zhijun said frankly that Huawei's net profit growth rate was lower than in the previous three years, and the decline in overseas sales revenue was mainly related to Huawei's inclusion in the US entity list last year. The estimated loss to Huawei's overseas consumer business is at least US$10 billion.

After being included in the list of entities by the U.S. Department of Commerce on May 16, we will definitely increase R&D investment in an effort to "fill holes." Suddenly a large number of suppliers can no longer supply Huawei products, we need to restructure the supply chain. Under this circumstance, it is impossible for us to pursue maintaining the same net profit margin growth as in 2018 and 2017 regardless of our own life and death. We must first fill up the hole and make survival our goal.

The decline in the proportion of overseas revenue was mainly because after that, Google no longer provided GMS services to our newly launched products. Our consumer business outside China experienced rapid growth before May 16 and a rapid decline after May 16, and did not rebound until the fourth quarter.

In terms of 5G, Xu Zhijun said that the suppression and containment of the United States has brought a great impact on Huawei’s development and created a lot of extra workload for Huawei-“We have to spend a lot of time talking with our customers, partners and Relevant government agencies to explain. There are still a few original customers of 2G, 3G, and 4G who did not choose to continue to cooperate with Huawei."

Affected by the epidemic, Xu Zhijun said that 5G deployment in Europe will be postponed, and China is speeding up 5G construction after the epidemic is brought under control. At present, the three major operators are advancing the bidding process. It is believed that the three major operators will complete the construction planned at the beginning of the year, and It may increase appropriately.

As for Huawei itself, the first task is to protect the safety of Huawei employees, while responding to the needs of fighting the epidemic on this basis. Huawei's current production activities in China have all resumed, and there will be no problems in the short term. However, the epidemic is spreading overseas, and the supply chain will be notified of the latest developments every day, and Huawei will also provide support within its capacity. If the epidemic cannot be controlled, Huawei is temporarily unable to predict whether a small number of suppliers can guarantee supply in the long term.

Looking ahead, Xu Zhijun said that 2020 will be the toughest year for Huawei because it is under the entity list for the whole year. Many industry forecasts also point out that Huawei's reserves are almost exhausted. This is a critical year for comprehensively testing whether Huawei's supply continuity can be fully utilized.

"Because the global epidemic is still rapidly spreading, the current focus is on ensuring the safety of employees and responding to the needs of local governments and customers. We have not had the energy to predict the performance of the year. In 2020, we will strive to survive and next year We can publish the annual report!"

Xu Zhijun further pointed out that in overseas markets, Google’s GMS service is no longer available for Huawei phones. In order to ensure the experience of Huawei smartphone users around the world, Huawei has launched the HMS service and expects that applications on Google or Apple stores can also be used. Put it on the Huawei AppGallery, which can help users get more and better applications together.

"We expect that 5G mobile phones can be sold more overseas, but there is no way to make predictions now. It depends on the situation of Huawei's HMS ecosystem construction overseas."

In addition, Xu Zhijun responded to the rumors that the White House may impose stricter supply controls on Huawei and subsequently restrict the supply of Huawei chips: "If the US policy is implemented, the Chinese government will not let Huawei be slaughtered or ignored. I believe the Chinese government Countermeasures will be taken."


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