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"We're getting smaller, but our profitability and cash flow access are increasing, and the company's ability to cope with uncertainty is increasing." For the 2021 financial report, Huawei CFO Meng Wanzhou said.
Revenue was 636.8 billion yuan, down 28.6% year-on-year, and net profit was 113.7 billion yuan, up 75.9% year-on-year. This is the 2021 "report card" handed over by Huawei.
In terms of intuitive data alone, in the face of the continuous turbulent external environment, although it has suffered many rounds of SANCTIONS sanctions from the United States and has been impacted by the epidemic, Huawei may have passed through the most dangerous black barrier area and is "surviving" with quality.
At the same time, we also see that under the pressure of the main business, Huawei has been forced to "change the wheel", and some new businesses have burned out the "fire of hope".
/ 01 /
In 2021, Huawei continues to live a "hard life"
In 2021, Huawei continues to crawl in the mud, and the two main operator businesses (base stations) and consumer businesses (smartphones, tablets, PCs, etc.) have experienced revenue declines.
Observing Huawei, the first thing to say must be the base station business. This is the soul and root of Huawei, but also its deepest moat and the widest "graben", the underlying organization is perfect, and the patented technical standards of each project are strong. According to the statistics of the German patent database company IPIytics, Huawei ranks first in the number of 5G standard essential patent applications in the world.
In 2021, the sector achieved revenue of 281.5 billion yuan, a year-on-year decrease of 7.0%, accounting for 44.2% of revenue.
Source: Huawei financial report
The overall decline is not large, but with a long-term axis, Huawei's carrier business may have reached a bottleneck period.
From 2016 to 2020, this part of the revenue has been stable at 290-300 billion yuan, exceeding 300 billion yuan in 2020 to reach 302.6 billion yuan, and declining in 2021, combined with the progress of the construction of the mainland base station, or showing an inflection point signal.
"5G investment this year is down slightly from last year. 5G investment will no longer grow from next year and will show a gradual downward trend. Yang Jie, chairman of China Mobile, said at a recent results meeting. The same is true for China Telecom and China Unicom.
In other words, the large-scale domestic 5G construction is nearing the end, the dominant budget is shrinking, and the industrial chain is facing a downturn in prosperity.
Theoretically, Huawei can also vigorously expand overseas markets and use construction cycles at different times around the world to smooth out operator business fluctuations.
On the one hand, our 5G construction is relatively advanced, and many places abroad may have just begun; on the other hand, Huawei has been cultivating overseas markets for decades, and in 2021, the overseas revenue of operator business will account for more than 50%, and the advantages of technology and brand have long been widely recognized.
However, given the stability of long-term supply in the shadow of sanctions, it is difficult to say that it will not interfere with customers' choice of Huawei products.
As for the consumer business, which is most closely connected to Volkswagen, revenue in 2021 was 243.4 billion yuan, a decline of 49.6% compared with 2020.
Meng Wanzhou admitted that in the past three years, Huawei has been under continuous pressure on supply continuity, and a variety of sanctions by the United States have put a lot of pressure on Huawei's mobile phone and PC business.
Further, it should be mainly related to the impact of the forced disconnection of the sale of Honor and Huawei mobile phones. According to relevant insiders, the revenue of Honor mobile phones in 2019 is about 70 billion to 80 billion, and the net profit is about 5 billion.
Suddenly tens of billions or even hundreds of billions of dollars, as well as Huawei's mobile phones in recent years due to the "lack of core" problem market share continues to lose, will definitely cause revenue "big blood loss".
However, the contribution of asset disposal to profits is considerable. In 2021, the divestiture of Honor and Super Fusion (which produces X86 servers) brought Huawei a total of about 57.4 billion yuan in net income, accounting for more than half of the total net profit, and the increase in gross profit margins eventually led to a 75.9% increase in the company's net profit and a 69.4% increase in operating cash flow.
It is worth mentioning that for wearable devices, TWS headsets, smart screens, etc., which do not require a chip process, Huawei's revenue growth in 2021 will exceed 30%.
In short, Huawei in 2021 is still a hard day, and under the premise of not being able to obtain advanced technology, the decline of the main business is expected.
Fortunately, the operator's business has not changed much, and the scale of consumer business revenue has been abandoned for three and a half years (2019-2021), which is almost to the end, and the traction of other new services has basically completed the "soft landing".
/ 02 /
How fast are elephants equipped with "new wheels"?
It is not easy for elephants to change their rhythms, and it is even more difficult to change wheels on the highway. This is the reality that Huawei has already faced at the moment: no matter how bulky and huge the body, it must also be equipped with "new wheels" for him.
Operator revenue fell 7 percent and consumer revenue fell 49.6 percent, but total revenue fell only 28.6 percent. Under the data appearance, Huawei's "new wheel" has gradually gained momentum.
In 2021, Huawei announced its cloud performance for the first time, its revenue was 20.1 billion yuan, an increase of 34% year-on-year, the Chinese market position is second only to Alibaba Cloud, ranking second, and the global IaaS market ranking rose to the top five.
However, with reference to Alibaba Cloud's 11 consecutive years of losses, the probability of HUAWEI CLOUD's profitability is not very good, and compared with Alibaba Cloud's revenue of 72.4 billion yuan in 2021, HUAWEI CLOUD's second-in-command always feels "virtual", accounting for too low in the volume of more than 600 billion.
It should be pointed out that the cloud is a growth-stage market. Canalys expects the Chinese mainland cloud infrastructure market to reach $85 billion by 2026, with a five-year CAGR of 25%.
Based on a longer-term perspective, higher technical investment requirements, and a stronger Matthew effect, HUAWEI CLOUD may be able to obtain more profits with the expansion of scale.
But this time must not be too long, because the cloud market is now both ends of supply and demand, the industry reshuffle is fierce, and Huawei's situation is different from other companies, can only grow rapidly, it is best to control within 2 or 3 years.
The young digital energy business is another "new wheel" for Huawei.
According to public reports, Huawei's digital energy business is growing rapidly at a rate of 20% per year, with revenue reaching 37.7 billion yuan in 2020 and more than 30% in 2021, with a conservative estimate of about 50 billion.
Recently, in the second batch of ten legions formed by Huawei, digital energy has become Huawei's first-class business side by side with HiSilicon and HUAWEI CLOUD, and its importance is not in short.
The next Hongmeng may not be a "new wheel", but its significance to Huawei, and even to the entire Chinese software industry, may be no less than the historian Baros recorded when he arrived at the Cape of Good Hope five hundred years ago: "What we see is not only a cape, but a new world." ”
Huawei also highlighted at the press conference: On June 2, 2021, Hongmeng System 2.0 officially landed on mobile phones, tablets, smart watches and other applications. By the end of 2021, Hongmeng Zhilian has more than 1,900 partners, including well-known brands such as Midea, Fotile, Philips, iFLYTEK, etc., with more than 4,500 certified product categories, and the shipment volume of new products exceeded 115 million units in 2021.
Unlike Android and iOS systems, Hongmeng is not limited to mobile phones, and its core breakthrough is to jump out of the original category and point to a new era of internet of everything.
Taking the world's top three technology companies by market capitalization, Apple, Google and Microsoft as the "mirror", one of their common features is that they all have operating systems and stand in the commercial position.
In this regard, we tentatively report with optimistic expectations, Hongmeng is expected to help Huawei leapfrog the traditional business model of hardware terminal integrators, have the chassis (OS) of the digital economy, and enter the operating system camp, which is a lot of imagination.
/ 03 /
Where is Huawei headed?
Milan Kundera once said: "In the chaotic mountains and gravel of time, the scenery on both sides of the river does not matter, what matters is whether the stream will flow to the wilderness or the desert." ”
In the current business and the new round of drastic changes and reconstruction of the scientific and technological cycle with digitalization, new energy and intelligence as the mainstay, everything is due to this.
The annual report reflects only the past business situation, for the outside world, more concerned about Huawei's future: where will the aircraft carrier sail?
Huawei said in its earnings report: "We will continue to invest in future-oriented research and innovation such as cloud, artificial intelligence, intelligent auto parts, and software root technologies, as well as to ensure business continuity." ”
The data shows that Huawei is one of the world's largest patentees. By the end of 2021, it holds more than 45,000 valid authorized patents worldwide (more than 110,000), and more than 90% of the patents are invention patents. In addition, Huawei ranked first in the number of patents granted by the State Intellectual Property Office of China and the European Patent Office in 2021, and ranked fifth in the number of patents granted by the USPTO in 2021.
Source: Huawei financial report
In 2021, Huawei had 107,000 R&D personnel, an increase of 11.5% compared with 2019, which was included in the entity list, accounting for 54.8% of the total number of employees; at the same time, the R&D expenditure was 142.7 billion yuan, accounting for about 22.4% of the annual revenue, a record high.
Node Finance believes that in the continuous investment in technology and unremitting improvement, Huawei's pursuit will not be the surface of the "seam patching", but the forerunner and first promoter of "top-level design", which is Huawei's confidence and courage for the future.
Returning to the end market, the boundaries derived from the origin of the technology are indeed difficult to define.
At present, Huawei is vigorously expanding smart homes, that is, driven by HarmonyOS, reshaping the future home space with 1 smart host, 2 networks, and N subsystems in different scenarios, such as lighting, shading, audio and video, home appliance systems, security, water use, and energy consumption.
According to the "Quarterly Tracking Report of China's Smart Home Device Market" released by IDC, China's smart home device shipments will be close to 540 million units in 2025, with a compound growth rate of 21.4% in the next five years, which is still a sunrise industry.
In addition, the electric vehicle parts and software business, such as automatic driving, vehicle-machine software, vehicle-road collaboration, etc., is also an area where Huawei can show its fists. It is reported that Huawei's smart auto parts business has listed more than 30 smart auto parts.
Huawei predicts in its annual report that by 2030, The penetration rate of new autonomous driving vehicles in China will exceed 20%, the overall on-board computing power will exceed 5,000 TOPS, and the on-board single-link transmission capacity will exceed 100 Gbps.
In the next decade, the tide of electrification + intelligence is unstoppable, and Huawei has a reason to show up.
The vision is very good, however, we must also see that the above new formats are still in the strategic investment period, and will not give Huawei "charcoal in the snow" in the short term.
Back to the question at the beginning: Where will Huawei go? This is actually a topic of benevolence and wisdom, and different people, different times, and different behaviors are thinking about "Schrödinger".
If you have to give a unified answer, Huawei will eventually sail to the "sea of stars" of technology.
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