Futu News, March 29, Huawei released its 2018 annual report: 2018Huawei achieved global sales revenue of 721.2 billion yuan, up 19.5% from the same period last year, and net profit of 59.3 billion yuan, up 25.1% from the same period last year.In 2018, Huawei spent 101.5 billion yuan on research and development, accounting for 14.1% of sales revenue.Ranked fifth in industrial R & D investment in 2018 released by the European Union. Huawei has spent more than 480 billion yuan on research and development in the past decade.

Huawei recorded revenue growth of more than 15 per cent in all four major markets.The revenue contribution ratio of the Chinese market reached 51.6%, contributing more than 50% of revenue for the second year in a row.

• In the area of consumer business, Huawei smartphones have further improved their global market scale and high-end brand status, and made a key breakthrough in the intelligent ecological layout of the whole scene, with sales revenue of 348.9 billion yuan, an increase of 45.1% over the same period last year.

At the same time, the consumer business became Huawei's largest revenue pillar for the first time, with annual revenue of 348.9 billion yuan, an increase of 45.1% over the same period last year, accounting for 48.4% of the total revenue.

• In the field of enterprise business, Huawei provides cloud computing, big data, A, Internet of things, converged communications and other technologies as well as data centers, all-flash memory, W call and other products, and integrates these technologies to provide a digital platform to support the digital transformation of smart cities, safe cities, smart parks and customers such as finance, transportation, energy, etc., achieving sales revenue of 74.4 billion yuan, an increase of 23.8% over the same period last year.

• In the field of cloud business, Huawei has more than 160cloud services and 140solutions online, operates 40 availability zones with partners in 23 geographical regions around the world, has more than 6000 global development partners, and explores more than 6000 projects in 10 major industries.

Guo Ping, chairman of Huawei, said:

None of the major network security incidents in the past two years has anything to do with Huawei. The practice of the past 30 years shows that Huawei has the best safety record. In the past years, professional evaluation institutions such as the United Kingdom, the United States, Finland and other professional evaluation institutions have conducted rigorous tests on Huawei's products. Among the 12 abilities, 9 have reached the highest level and 3 are above average. Huawei has accepted the harshest and toughest tests, taking the lead in promising not only the security and credibility of the results, but also the security and credibility of the process.Huawei plans to invest 2 billion US dollars to improve its security capability over the next five years, hoping to establish a new benchmark for network security.

Information and communication technology has rapidly penetrated into various vertical industries, causing digital and intelligent changes, and driving the rapid development of digital economy. Huawei is committed to making the best network connection in the world through pressure investment to lead 5G innovation and large-scale commercial use. At the same time, strictly comply with the standards, give top priority to network security and privacy protection, and create secure and reliable high-quality products. Huawei believes that the customers who choose Huawei will win the best technological and commercial competitiveness in the 5G era, and the country that chooses Huawei will win the advantage of the next wave of digital economy. "

In addition, Guo Ping stressed: "the fortress is the easiest to break from the inside, and the fortress is the easiest to strengthen from the outside." Facing the future, Huawei will strive to eliminate external interference, constantly improve internal management, and move forward along the established strategic direction. Huawei will continue to adhere to compliance, ensure continuous and healthy business development, build an ecological circle of open cooperation and win-win results, and at the same time carry out organizational changes to stimulate organizational vitality. "

Q: carrier business is the same as last year, but Huawei won the most 5G orders last year.Why?

Guo Ping: global telecommunications investment is generally stable, but subject to cyclical effects, it is-1.3% in RMB and 0.2% in US dollars. This figure is within the expectations of management. The environment for 2018 is that the large-scale construction of 4G is almost completed and 5G has just begun. After the global large-scale 5G construction in 2019, it is believed that Huawei will usher in the recovery and growth of carrier business. 4G has basically solved the communication between people before, and 5G will show the connection between people and things, things and things. We believe that Huawei, as the best company to do global connectivity, will benefit from this growth.

Q: how will the United States respond if it imposes a ban on Huawei like ZTE?

Song Liuping, chief legal officer of Huawei: Huawei abides by relevant laws in all operating countries, and we see no reason for the United States to impose administrative sanctions on us. Huawei maintains an open attitude and maintains communication with relevant legislators and executives to cooperate with their investigation.

Guo Ping: Huawei has continued to invest deeply in the past 30 years, which is believed to be helpful to Huawei's global supply. I also believe that global supply partners, including American companies, will benefit from procurement and cooperation with Huawei.

Q: what are the main reasons for the slowdown in profit growth?

Shi Yanli, deputy financial officer of Huawei Group: from the data point of view, there is a certain growth for 2017. Facing the 2019, the company's basic principle, adhere to more than 10% of the income invested in future-oriented R & D, will unswervingly adhere to.

Q: how do you see the consumer business becoming the largest source of revenue for the first time?

Guo Ping: I am very glad to see that both consumer business and enterprise business have grown. The growth of consumer business comes from our starting point to provide value for consumers. We are also pleased to see that Huawei's consumer business has also grown in overseas business, and we believe there will be greater opportunities in the future.

Q: the UK has repeatedly pointed out that Huawei has security flaws. Will the existence of Huawei in the UK network bring risks?

Guo Ping: Huawei products do not have any back door. At the same time, Huawei opened the back door and conducted source code testing. The OB report shows that the UK network is no more vulnerable than it was last year. In response to the higher requirements put forward by the UK, last year Huawei's board of directors decided to invest 2 billion US dollars to improve and establish a safety benchmark. We will cooperate with all parties to improve product quality and safety, and hope to jointly improve the level of the industry. We have completed the high-level design of trusted product development, and we believe that Huawei will establish a new benchmark for credibility and security in five years' time. I also believe that as time goes on, UK partner institutions will become more and more confident.

Q: Trump said he wants to develop 6G quickly. How does Huawei understand Trump's idea?

Guo Ping: compared with 4G, 5G has a larger number of connections and less delay, which makes the existing connection between people and people have a revolutionary progress, just like the electric power 100 years ago. 5G opens up the possibility, as to when 5G will develop to 6G, I want our technical experts to give the answer, not politicians.

Q: what progress has Huawei made in suing the US government? Are you worried that the relationship between the two sides will deteriorate further?

Song Liuping: our lawsuit against the United States is based on Article 889 of the US Defense Authorization Act, which explicitly proposes to exclude Huawei, which is contrary to the Constitution of the United States. We ask the court to pass a notarization trial to remove this unconstitutional law and impose sanctions on a company, not on the basis of facts and evidence, but for political reasons, and we believe that the United States courts will give a fair trial of the case. There is no new progress at present.

Q: what will be the business development of Huawei this year compared with last year? Will Huawei's forecast for 2019 slow down compared with 2018?

Guo Ping: in the first two months of 2019, our revenue grew by more than 30%, with double-digit growth in all three businesses. We predict that this year, with the recovery of 5G-driven investment by operators, digital opportunities in the global industry and demand for consumer business.We will still have double-digit growth this year.Huawei is a customer-centered company, we hope that our partners can be successful in business, Huawei will make efforts on it.

Q: did Ren Zhengfei say that he is not optimistic about the growth forecast for 2019?

Guo Ping: Huawei is an unlisted company, living a healthy life is the most important, as to which financial data is not the core of Huawei's pursuit. Creating value for customers is the reason for Huawei's survival and development. We see the demands of customer development and digitization. Huawei provides competitive products and services. We believe that growth is the result of Huawei's efforts, not its goal.

Q: with regard to the share of overseas income in the future, it was less than 49% last year. Will it decrease in 2019? Did Huawei increase its inventory because of possible US sanctions?

Guo Ping: overseas, the customers and countries that choose us are still growing. We have a good growth in overseas revenue from January to February this year. I believe there will be such a momentum throughout the year. As for inventory, Huawei's cash flow is lower in 2018 than in 2017, but the profit exchange rate is more than 100%, which is still healthy.Properly increasing inventory and dealing with uncertain events are the reasons for the decline in cash flow, but please note that our cash flow is still very healthy.

Q: you mentioned the problem of illness in big companies. Many big companies have adjusted their middle-level employees. Will Huawei do the same?

Guo Ping: the fortress is easy to break from the inside and easier to strengthen from the outside. Thanks to the external pressure, Huawei will be well applied. I'm glad to see that Huawei has grown by more than 30% in the past two months, and we have God's assists to keep the company alive. This unfair and unfair pressure will make us stronger.

Q: operators do not use Huawei equipment because of US pressure. Is there any internal response from Huawei?

Guo Ping: we are very clear about the actions taken by the US government. As we Chinese say, we don't care about the appearance at all, and I feel sorry for these gentlemen. Their actions make us need more communication to gain their trust. As a result, as you can see, companies around the world make their own judgments based on their own interests, standards and facts. For Huawei, it is necessary to do its best to give customers who choose Huawei an advantage in their own competitive field.

Q: for enterprise business, BAT is making efforts. What does Huawei think of enterprise business?

Guo Ping: Huawei has made some achievements and great differences in enterprise-level business. In the field of IP, our main competitor is 13 times that of ours. For the future, cloud, intelligent, digital, creating a huge space, Huawei believes that it can provide competitive solutions.

Q: Huawei has said it will not provide private data to the Chinese government. What will Huawei do if the government asks for this information?

Chen Lifang, senior vice president of Huawei: we clarify once again that we will not cooperate with any government or organization that proposes to collect other people's information from Huawei. I fully understand your concern. A number of leaders of the Chinese government have separately clarified that there is no law in China that requires companies to install back doors and collect information. It is reasonable for Huawei to reject such a request from the Chinese government. Chinese law stipulates that if the law is not written, it is innocent, and Huawei's commitment is guaranteed.

Guo Ping, Chairman-in-Office of Huawei: the ICT industry is a highly cooperative area around the world. We work together to build competitiveness. I have a spare tire when I drive, and my car can still drive when a trillion cars explode. Chief Executive Ren made an internal speech in 2011 or 2012, and Huawei has a spare tire plan. Huawei looks forward to working with global partners. If it is a flat tire, we have a spare tire. In the face of extreme events, Huawei still has the confidence to ensure business continuity. As for the trusted development of Huawei's software, it is not mainly to respond to the requirements of regulators, but to put security and privacy before business because of our responsibility and complicated environment. Specifically, we open the front door so that professional institutions can review our source code, and it is a verifiable security. As far as I know, this is unprecedented in the world, and you can understand what British regulators say are the toughest and strictest requirements for Huawei. I also hope that other partners will try their best to keep up and not be too far away from us.

Q: has Huawei considered going public?

Song Liuping: Huawei's ownership structure is very clear. 100% of the equity is owned by employees, there is no third party equity, and no organization holds Huawei shares.Huawei has no current plans to go public.

Huawei Secretary Dong: as of last year, Huawei had 96768 employees, all of whom are current employees and former employees.

Guo Ping: the problem in the United States is not because of where Huawei is, but because Huawei is Huawei. These problems will not be solved by listing. Huawei has more than 90,000 employees and shareholders, and it is impossible to operate without a sound management system. Call on the media to study Huawei's high-tech wealth creation model, and maybe get a doctoral thesis. Huawei has no major shareholders. By accumulating thousands of excellent minds, Huawei has entered a high-tech field and achieved success. This case may be very different from the traditional capital model controlled by major shareholders. For the future business model, corporate governance model, wealth creation model, this is a subject worth studying. Don't smear Huawei just because you can't compete with Huawei. The background can be everywhere. The biggest background in the world is the American background, and you can't compete with Huawei. What kind of psychology is this? I hope the US government can adjust it.

Q: will the operator business reach the ceiling? Are there any expectations for 5G shipments?

Guo Ping: the consumer business surpassed the operator business for the first time last year to become the highest-paid business among the three BG. It is not said that it is the most profitable. We don't think operator BG has reached the ceiling. 5G opens up endless possibilities. Like electricity 100 years ago, our telecom ICT industry faces such an opportunity. In this field, Huawei should cooperate with the vast number of global partners in innovation to maintain and expand its advantages in the new round of competition. To put it simply, it uses ICT technology to empower a variety of industries, Huawei as a platform, each participant can be successful in their own field.

Q: in fact, the US Government does not trust the Chinese Government. In the face of such a crackdown by the United States, has Huawei considered moving away from its headquarters or board of directors to adjust and become non-Chinese members?

Guo Ping: your question actually consists of three parts: first, who owns Huawei, which has just been mentioned. If we engage in any improper espionage and put the company at risk of collapse, it is a challenge to the basic competence and common sense of Huawei management. Second, who controls Huawei? From more than 90, 000 employee shareholders to 115 shareholding representatives, 17 directors and 7 managing directors to the rotating CEO, who controls Huawei is also very clear. All Huawei directors and management joined Huawei in the early years and grew up with Huawei. With regard to the global intelligence capabilities of the United States, this is not a problem for them. Third, Huawei is popular everywhere. We promote taxes, solve employment, improve industrial development, and provide a lot of charitable activities, which are the enterprises the world needs. Again, just because we are a Chinese company, if we take the lead in this field, we must have the support of the government. If you can succeed only by relying on a background, then there are many companies that can succeed in China. This is an era of the Internet, not only China, next year may be India, maybe Poland, not only American companies, but also other companies need to succeed.

Song Liuping: as a commercial company, we know that this is common sense. Installing a back door and collecting intelligence for a country is tantamount to suicide. We don't have the incentive to kill ourselves. It is believed that China also hopes that Huawei can continue to pay taxes, increase employment and promote industrial development, rather than using Huawei as a tool to attack other countries. Huawei's cooperation is to cooperate within the limits of the law, not to attack others and gather intelligence beyond the scope of the law.

Huawei Secretary Dong: if anyone makes this decision, the shareholder representative will also block the decision.

Huawei 2018 Annual report PDF Edition: https://www-file.huawei.com/-/media/corporate/pdf/annual-report/annual_report2018_cn.pdf?la=zh