Analysis of Huawei 2020 Annual Report: Make Preparation for Mastering Own Destiny

As we know, 2020 is a very challenge year for Chinese companies, because of the COVID-19 impact. However, I believe Huawei has most tough year compared with others, since US government make strict ban of key component procurement. 

Let’s see what financial data Huawei achieved in 2020.

From the above graph, we can see that the revenue and net profit are still growing slightly. Considering the dual impact of COVID-19 and US procurement ban, it’s not easy for Huawei. However, there is still real challenge, the operating margin and cash flow form oerating activities are dropped sharply. That shows Huawei paid higher price from suppliers in advance, and try its best to provide products to customers as normally. 

When we look through financial performance based on business segments and regions, we will clear understand how the US ban impacted Huawei. 

As the previous annual reports shows, the Consumer Business growing very fast and takes the largest share in recent year. For example, the Consumer Business revenue grew at 34% in 2019 annual report and 43% in 2016 annual report. However, the Consumer Business grew at only about 3.3% in 2020, and the reasons are given in the annual report:

In the Chinese market, our carrier business continued to grow thanks to rapid domestic rollout of 5G. Our enterprise business seized new opportunities in digital and intelligent transformation, and our consumer business optimized its Seamless AI Life strategy, which aims to deliver an intelligent experience across all scenarios through a variety of consumer devices like PCs, tablets, smart wearables, and smart screens. Thanks to these factors, Huawei’s 2020 revenue from the Chinese market reached CNY584,910 million, up 15.4% YoY.

In Europe, the Middle East, and Africa (EMEA), our carrier business maintained robust performance thanks to 5G network deployment, and our enterprise business maintained strong growth momentum as industries pursued digital transformation. However, as our consumer business has been denied access to the Google Mobile Services (GMS) ecosystem, our total revenue from this region declined by 12.2% YoY to CNY180,849 million.

So Huawei still has positive growth in 2020 because of Chinese huge market. Unlike the Carrier Business, the key technology of Consumer Business is mastered in the US Companies, such as Chipset, Operating System, etc. If US government is not willing to open procurement to Huawei, the Consumer Business of Huawei is possible to shrink in future. 

Considering the Consumer Business takes more than 50% of Huawei whole revenue, Huawei sold Honor brand and invest a lot in Consumer Business to make preparation for its own destiny instead of relying on US government policy. 

Here are three major things Huawei has been preparing:

  1. Chipsets: In 2020, Huawei unveiled its flagship SoC, the Kirin 9000. This chipset utilizes the cutting-edge 5 nm manufacturing process and integrates up to 15.3 billion transistors, making it the most fully functional 5G SA solution available in the smallest footprint possible. The brand-new Cortex-A77 CPU delivers superior performance and ultra-fast 5G connectivity. 
  2. Operating systems: In 2019, Huawei announced HarmonyOS, an epoch-making distributed operating system that is applicable across all scenarios. In 2020, Huawei upgraded HarmonyOS to Version 2.0, which brought comprehensive improvements to the existing distributed capabilities, including software bus, data management, and security. Huawei also introduced an adaptive UX framework that allows developers to quickly reach tens of millions of new devices and users. The HarmonyOS 2.0 Developer Beta for smartphone app developers was launched in December 2020.
  3. HMS ecosystem: In June 2020, Huawei officially launched HMS Core 5.0, opening up more than 50 kits and nearly 13,000 APIs to global developers. This meant that Huawei’s software and hardware system capabilities, as well as cloud capabilities, were all available to developers for use. By December 31, 2020, over 120,000 apps worldwide had been integrated with HMS Core, and the number of global registered developers exceeded 2.3 million, including 300,000 developers outside China. The number of apps launched on AppGallery in 2020 outside China was more than 10 times that of 2019. Currently, HMS is the world’s third largest mobile app ecosystem. Ecosystem partners worldwide are supporting HMS apps, including HUAWEI Browser, HUAWEI Ads, HUAWEI Wallet, HUAWEI Video, HUAWEI Music, and HUAWEI Reader, helping them expand their global adoption and driving the development of a richer and seamless AI lifestyle for consumers. Huawei’s Seamless AI Life ecosystem continues to thrive and strives to lead the pack.

The above are the three most challenged things Huawei has been faced, and it is difficult for a single company to achieve success together. The road is long and bump, but Huawei has made determine to start the journey for the purpose of mastering own destiny. 

Besides, Huawei has launched a new service solution for future growth, that is Intelligent Automotive Solution Business. As core technologies like AI, new energy, 5G, and cloud services are being integrated into the traditional automotive industry at an increasing speed and electric vehicles are becoming more intelligent. 

Huawei has provided a safe and secure development environment for car OEMs and ecosystem partners, bringing secure travel experience to consumers. This can shape the industry landscape and promote stable development of intelligent vehicles. Huawei are positioning itselves as a new component provider for intelligent connected vehicles, and aim to help car OEMs build better vehicles. Huawei strives to bring digital to every vehicle in the future and work with industry partners to build a better world of intelligent travel.

 

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