Huawei returns to 70 billion in revenue, what signal does this release?

"In 2023, the overall business performance of the group was in line with expectations. Over the past few years, Huawei has undergone numerous trials and has continued to grow amidst challenges," said Hu Houkun, the rotating chairman of Huawei, in his latest statement on the current state of Huawei on March 29th.

That afternoon, Huawei released its overall performance for 2023 on its official website. The data showed that for the full year of 2023, Huawei achieved a global sales revenue of 704.2 billion yuan, a year-on-year increase of 9.64%, with a net profit of 87 billion yuan, a year-on-year increase of 145%.

Based on Huawei's historical annual report data, this also marks the return of Huawei's annual revenue to the 700 billion yuan range after 2021. In addition, Huawei's terminal business achieved a sales revenue of 251.5 billion yuan last year, a year-on-year increase of 17.3%, which is a return to the growth track after two years of decline.

Hu Houkun believes that 2024 signifies the beginning of a new journey for Huawei. However, compared to past specific strategic goals, the reporter noticed that this time Huawei only emphasized the management policy of "winning with quality" in its signals to the outside world, aiming to build quality into a core competitive strength.

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In other words, Huawei still faces challenges brought by a complex external environment. From the normalization of sanctions to normal operations, from survival to development, how Huawei constructs a more resilient supply chain capability and ensures high-quality business continuity and product competitiveness is at the core of its future sustainable development.

Five major businesses drive Huawei back to a revenue of 700 billion yuan.

Compared to the past, the release process of Huawei's annual report this time was extremely low-key, but from the specific data, Huawei's business conditions are improving.

Huawei's revenue last year reached 704.2 billion yuan, while in 2022 and 2021, the figures were 642.3 billion yuan and 636.8 billion yuan, respectively, indicating that sales began to rebound from the bottom. Compared to revenue, Huawei's net profit increased by 144.4% year-on-year, more than doubling from 35.6 billion yuan in 2022.

Regarding the changes in revenue data, Huawei stated the reasons as "relying on the transformation and upgrading of industry digitalization, intelligence, and low-carbonization, as well as the enhancement of product competitiveness, the scale maintained growth. The improvement in profitability mainly comes from the growth in scale, product structure optimization, the improvement of operational quality, and the gains from the disposal of some businesses."

The financial statements show that among other net income and expenses, the fair value changes of financial instruments formed from the disposal of subsidiaries and businesses amounted to 55.853 billion yuan.In terms of specific business data, Huawei's ICT infrastructure business achieved sales revenue of 362 billion yuan, a year-on-year increase of 2.3%; the terminal business achieved sales revenue of 251.5 billion yuan, a year-on-year increase of 17.3%; the cloud computing business achieved sales revenue of 55.3 billion yuan, a year-on-year increase of 21.9%; the digital energy business achieved sales revenue of 52.6 billion yuan, a year-on-year increase of 3.5%; and the smart car solution business achieved sales revenue of 4.7 billion yuan, a year-on-year increase of 128.1%.

It can be seen that in the core businesses, all five major business segments announced by Huawei have experienced growth to varying degrees. Among them, the automotive business saw the largest increase, more than doubling, followed by cloud and terminal businesses, both of which achieved double-digit growth.

Regarding the improvement of each business, Huawei mentioned in the report that the ICT infrastructure business has remained stable, the terminal business performance is in line with expectations, cloud computing and digital energy businesses have achieved good growth, and the smart car solution business has begun to enter the stage of mass delivery.

It is worth noting that in last year's annual report release, Huawei executives mentioned that the smartphone business has been the most affected in recent years. In the overall business revenue share, the reporter noticed that the revenue share of the terminal business has also shrunk from over 50% three years ago to 38.2% the year before last. The renewed growth in terminal revenue this time indicates that businesses such as smartphones are recovering.

According to a report previously released by Counterpoint Research, in the first six weeks of 2024, Huawei ranked fifth in the Chinese smartphone sales share ranking, with a year-on-year increase of 64%. The Huawei Mate 60 series continues to attract market demand and also contributes to the performance of the terminal business. In the foldable screen sector, DSCC estimates that Huawei will surpass Samsung in the share of the foldable phone market for the first time in the first and second quarters of 2024.

However, in terms of the overall revenue share, Huawei's terminal business still hovers around 35%, still some distance from its peak.

Recently, there has been continuous news about the Huawei P70. Analyst Ming-Chi Kuo of TF International previously estimated that the shipment of the Huawei P70 series will grow significantly in 2024. If the demand for mobile phone inventory replenishment can last until the first half of 2024, the shipment of the P70 series could increase by about 230% year-on-year to 15 million units in 2024.

However, a supply chain source told the First Financial reporter that Huawei's flagship model release cycle has become stable, but in the face of market sales, Huawei's goal for high-end phones is still to consider the "long run," to create a distance from other competitors in terms of price segments, and to extend the life cycle of the high-end product line.

From survival to development to "winning with quality"

The year 2023 is a year for Huawei to recover from a state of survival. While digital energy and cloud businesses are growing rapidly, the terminal business, known as Huawei's cash cow, is also gradually rebounding.Regarding Huawei's performance in 2023, Hu Houkun stated: "The overall business situation of the group in 2023 is in line with expectations. Over the past few years, Huawei has undergone numerous trials and has continued to grow amidst challenges. It is the trust and support from customers, partners, and all sectors of society that have helped Huawei to survive and develop. Looking to the future, Huawei will adhere to open innovation, prosper the ecosystem, and win with quality."

In his New Year's speech at the end of last year, Hu Houkun had already indicated that this year, all business units of Huawei should focus on value creation and produce more 'grain.' He demanded that the terminal continue to strive to create top-notch products and achieve a historic leap in the HarmonyOS ecosystem; digital energy should seize the certainty of low-carbon opportunities to contribute more profits; and intelligent automotive solutions should work together with partners to transform technological advantages into commercial success.

Taking HarmonyOS as an example, since Huawei announced the full launch of HarmonyOS native applications in September 2023, companies and developers from various fields including social networking, audio-visual, gaming, information, finance, and food have joined the construction of the HarmonyOS ecosystem. In the latest published data, the number of HarmonyOS ecosystem devices has exceeded 800 million.

Furthermore, with the release of the HarmonyOS NEXT developer preview version, Huawei will launch a developer Beta version (test version) in the second quarter and a commercial version in the fourth quarter. According to Huawei's previously announced goal, it hopes to create 5,000 "pure-blood" HarmonyOS native applications with partners by 2024.

In the automotive business, Huawei is advancing the cooperation process of the Smart Selection Vehicle business. Yu Chengdong, Huawei's Executive Director, CEO of the Consumer BG, and Chairman of the Intelligent Automotive Solution BU, recently stated, "Due to the strong sales of mid-to-high-end models co-created with partners, this year we can achieve the goal of turning the car BU business from loss to profit. Among them, the Smart Selection Vehicle business has turned from loss to profit in the first three months of this year, and the car BU is close to the break-even point. It is expected to achieve a profit from April onwards, forming a positive and healthy development."

While deploying this year's business, Hu Houkun also mentioned the importance of ecosystem construction. He believes that ecosystem construction is a key task for the growth of computing, government and enterprise, consumer, and Huawei Cloud businesses. Huawei's capabilities are limited and should focus on products and services it excels in. Reflected in R&D, Huawei's R&D investment in 2023 was 164.7 billion, accounting for 23.4% of sales revenue, with a cumulative R&D investment over ten years exceeding 1.11 trillion.

"But the challenges remain severe," Hu Houkun mentioned in his New Year's speech, stating that the continuous impact of the external environment is profoundly reshaping the global industrial chain structure and business rules. The reporter also noticed that, according to the data released by Huawei this time, 67% of the business revenue comes from China, 21% from Europe, the Middle East, and Africa, with the revenue contributions from the Asia-Pacific and the Americas being 6% and 5%, respectively, indicating that the recovery of overseas markets is still underway.

"But no matter how the external environment changes, Huawei firmly believes that digitalization, intelligence, and low-carbonization are the most certain development trends," Hu Houkun stated. Huawei will adhere to the management policy of "winning with quality," making quality its core competitive strength. At the same time, facing 9.5 million developers and 46,000 ecosystem partners, it will focus on building ICT core technologies and complex software and hardware platform capabilities, accelerate the opening of platform capabilities, and achieve mutual benefit and win-win with ecosystem partners.