Source: Securities Times

On March 29, Huawei released its 2023 annual report. It achieved annual revenue of 704.2 billion yuan. Overall, it was in line with expectations, and net profit reached 87 billion yuan. In 2023, Huawei's R&D investment reached 164.7 billion yuan, or 23.4% of sales revenue. The total R&D investment over ten years exceeded 111 billion yuan.

In 2022, Huawei's global sales revenue was 642.3 billion yuan, and net profit was 35.6 billion yuan. Based on this calculation, in 2023, Huawei's revenue increased 9.6% year on year, and net profit surged 144% year on year.

“The overall business situation of the Group in 2023 is in line with expectations. Over the past few years, Huawei has experienced many tests and continued to grow in the midst of challenges. It is the trust and support of customers, partners and all sectors of society that has helped Huawei survive and develop.” Hu Houkun, the rotating chairman of Huawei, said.

The mobile phone business returned strongly and returned to the high-end market

Judging from the 2023 results, the terminal business, including Huawei mobile phones, achieved a significant increase in revenue and became the growth engine for the company's performance. In 2023, Huawei's ICT infrastructure business achieved sales revenue of 362 billion yuan, an increase of only 2.3% over the previous year; the terminal business achieved sales revenue of 251.5 billion yuan, a sharp increase of 17.3% over the previous year.

Behind the rapid increase in sales revenue in the terminal business is the strong return of the Huawei Mate 60 series. According to Counterpoint data, in the fourth quarter of 2023, smartphone sales in China bottomed out and rebounded 6.6% year on year. Among them, Apple phone sales fell 9% year on year, and Huawei sales increased 71.1% year on year. Counterpoint believes that Huawei's Mate 60 series, equipped with its self-developed Kirin 9000S chip, is a key driver of Huawei's success.

Overall, in 2023, Huawei recovered some of its losses in the high-end mobile phone market. According to the Counterpoint report, in the 2023 global high-end smartphone market greater than or equal to 600 US dollars (about 4,333 yuan), Huawei reached 5% of the high-end market share, up from 3% in the same period in 2022.

By 2024, Huawei's “counterattack” on mobile phones will expand further, attacking in various fields such as folding screens. Recently, the screen supply chain consulting agency Display Supply Chain Consultant (DSCC) released the latest forecast report for the global folding screen phone market for the first quarter of 2024, stating that Huawei's market share in the folding screen phone sector is expected to achieve a historic breakthrough of 105% year-on-year increase in shipments in the first quarter of this year, soaring to a landmark high of 40%, surpassing the long-term leader Samsung Electronics for the first time and taking first place in the world.

Furthermore, the successful launch of the HarmonyOS operating system has also contributed to the rise in sales of Huawei phones. At the Hongmeng Ecological Sails launch ceremony held by Huawei on the afternoon of January 18, Yu Chengdong, executive director of Huawei, CEO of Terminal BG, and Chairman of Smart Car Solution BU, said, “The Hongmeng operating system has experienced ten years of refinement, changes time and time again. Today, it is already running on rich full-scene devices. Huawei has taken root downward. It has core technology, full stack capabilities, a base, and ecology. Today, the general trend of Hongmeng's ecology has been decided. The sky is full of stars, and it will eventually converge into a bright galaxy.”

According to Yu Chengdong's disclosure at the event, Hongmeng ecological equipment has grown to 800 million units, which will open up a new blue ocean for the trillion-dollar industry. More than 200 leading companies are already accelerating the development of Hongmeng's native applications, including Alipay, Meituan, JD, DingTalk, WPS, Gaode, Air China, CCTV, Xiaohongshu, Sina, NetEase, etc., covering the fields of convenient living, travel, financial convenience, social information, productivity tools, video entertainment, games, etc., and the Hongmeng native application landscape has basically taken shape.

In his 2024 New Year address, Hu Houkun, the rotating chairman of Huawei, said, “(Huawei) terminals continue to work to build Wang Zhe products and build a warm high-end brand. Together with our partners, we will accelerate the transformation of mobile apps into Hongmeng, achieve a historic leap forward in the Hongmeng ecosystem, and provide consumers with the ultimate experience in all scenarios.”

The automotive business will be profitable and become a new engine of performance

2023 was also a year of rapid development in Huawei's smart car solution business (hereinafter referred to as Huawei Auto Business or Car BU). Since the launch of the new M7 in the world, Huawei cars have ushered in a bright moment. According to Huawei's financial report, sales of the new M7 surpassed 120,000 units in just 100 days after launch.

The hot sales volume in the industry once made Yu Chengdong enter the factory to “drive progress.” On October 13, 2023, Yu Chengdong personally appeared at the Celis Smart Factory to monitor the speed and quality of vehicle production. During the live broadcast of the factory, he said, “We are working overtime and starting production several shifts in a row, so that everyone can drive the new car home as soon as possible!”

Judging from the annual report, in 2023, Huawei's smart car solutions business achieved sales revenue of 4.737 billion yuan, an increase of 128.1% over the previous year.

By 2024, Huawei cars are still “creating miracles.” In January of this year, the entire series delivered 3,2973 new cars, surpassing the 31,165 ideal cars delivered, and won the monthly sales title of the new car builder for the first time. In February, Wenjie was still the sales leader, with sales volume of 21,000 units, of which the new Wenjie M7 delivered 18,500 units in a single month.

Supported by impressive sales, Huawei's auto business has finally reached the brink of break-even. At the China Electric Vehicle 100 People's Conference Forum (2024), Yu Chengdong said, “Huawei Auto BU lost 10 billion yuan in the past year, then lost 8 billion yuan, and lost 6 billion yuan last year. We can probably turn a loss into a profit this year, thanks to the big sales of high-end models we and our partners have built. In the first three months of this year, the optional car business turned a loss into a profit, and the Huawei car BU business is close to the brink of break-even. I expect that starting in April, we should be able to turn losses into profits in the future and achieve healthy positive development.”

Behind turning losses into profits, it is inseparable from Huawei's continued investment in R&D. According to Huawei's financial report, since the establishment of the Huawei Auto BU, it has invested more than 30 billion yuan in R&D, and the R&D team has reached 7,000 people. At present, Huawei's BU business has entered a period of rapid growth, with more than 3 million components shipped, including smart cockpit, intelligent driving, intelligent vehicle control, smart car cloud, lidar, millimeter wave radar, camera, gateway, AR HUD, smart headlights, and T-Box products and solutions.

HUAWEI CLOUD Goes Global, Helping Thousands of Industries to Intelligent Transformation

Currently, the AI boom set off around the world has made the importance of computing power more and more prominent, and market demand in the cloud computing industry has surged. In 2023, HUAWEI's cloud computing business achieved sales revenue of 55.3 billion yuan, an increase of 21.9% over the previous year, and became another engine driving performance growth.

According to Huawei's financial report, by the end of December 2023, HUAWEI CLOUD had covered 30 geographical regions and 84 availability zones around the world, providing services to customers in more than 170 countries and regions.

In order to further seize the high ground of AI, in 2023, Huawei released the Pangu Grand Model 3.0, creating a large model and capability set for the financial, government, manufacturing, mining, meteorology, railway, automobile, medical and other industries, combining industry knowledge with big model capabilities to help the intelligent upgrading of thousands of industries.

For example, in the field of meteorology, predicting torrential rain is one of the most difficult tasks in the field of meteorology. Every year, global economic losses due to torrential rain amount to hundreds of billions of yuan. Combining 40 years of global meteorological data and 10 years of satellite precipitation data, the HUAWEI CLOUD R&D team created a new large Pangu meteorological model with the ability to predict precipitation through 3D EST-3 geospatial network training and optimization. The model's rainfall forecasting accuracy was improved by more than 20%.

In the mining sector, the production rate of refined coal has been a problem that has plagued the industry for many years. Shandong Energy Group fully applied the Pangu mine model to 9 major business systems and 21 scenarios, including mining, excavation, machinery, transportation, transportation, and washing, and introduced predictive large model capabilities for coal mine cleaning. With the help of the Pangu Big Model, the Jining No. 2 coal mine can produce 8,000 tons more refined coal every year, increasing the production rate of refined coal by 2/1000, and increasing revenue by about 20 million yuan.

At the Huawei Full Connectivity Conference held in 2023, Zhang Pingan, executive director of Huawei and CEO of HUAWEI CLOUD, said that in the past few years, HUAWEI CLOUD has sent batch after batch of doctors, experts, and scientists to customer sites to walk through fields, run construction sites, go down mines, and enter workshops. Currently, it has helped more than 1,000 enterprises implement intelligent innovation projects. PhDs and experts go deep into customer sites to help customers deeply integrate AI technology innovation with business needs, truly solve problems in all walks of life, and enable customers to walk more steadily and further on the path of digitalization and intelligence.

At the end of 2022, Xu Zhijun, the rotating chairman of Huawei at the time, said in his New Year address: “2023 is the first year of normal operation for Huawei under the normalization of sanctions, and it is also a critical year. 2023 will definitely be an extraordinary year. All Huawei employees will forge ahead courageously, overcome all difficulties and obstacles, and survive with quality.”

Today, it seems that Huawei has broken through many difficulties and obstacles in the past year and won a key battle. Facing 2024, Hu Houkun, the rotating chairman of Huawei, said in his 2024 New Year address: “Hard work has kept us alive and growing, but the challenges are still serious. The uncertainty of geopolitics and economic cycles, and the continuing impact of technical sanctions and trade barriers are profoundly reshaping the global industrial chain structure and business rules.”

Facing the challenge, Hu Houkun said, “We should actively embrace the window of opportunity and invest our limited resources in the most critical strategic direction. Currently, breakthroughs in big models have moved artificial intelligence from workshop-style development and scenario-based customization to industrial development and large-scale application. Big models require large computing power. We need to build a world-leading computing power base and prosper thousands of industries.”

editor/tolk