August 24, 2022
BEIJING – ‘Survival main principle’ for tech giant with profits, cash flow to be highlighted
The founder of Huawei Technologies Co highlighted the need to shift its focus from pursuing business scale to ensuring profits and cash flow, including giving up some overseas markets, to guarantee that the company can survive the challenges over the next three years.
The comments came as Ren Zhengfei, founder of Huawei, said the global economy is expected to enter a long period of recession, and the next decade is likely to be a very painful historical period.
Ren said in an internal article to its staff that with survival as the main principle, the company’s marginal businesses will be shrunken and closed, and there is a need to let everyone at the company feel the chill, sources familiar with the matter told China Daily on Tuesday.
Huawei said the article was for employees and declined to comment further.
According to Ren, the global economy is unlikely to improve in the next 3 to 5 years. Coupled with the impact of the COVID-19 pandemic, global consumption power will be greatly reduced, which will not only put pressure on the company’s capabilities to ensure supply but also weigh down on the market side.
Amid such a context, there is a great need to shift the company’s focus to ensuring profits and cash flow, instead of pursuing sales revenue as its target, the senior executive added.
“We must tone down overly optimistic expectations about the future. In 2023 and even through 2025, we must take survival as the main principle. We must survive with quality, and every business should implement the principle seriously,” Ren said.
Ren said Huawei will give up some overseas markets to focus its talent and resources on markets that have more opportunities, but he did not elaborate on the details.
Meanwhile, Huawei’s cloud computing business should focus on supporting the company’s business development in a down-to-earth manner, and play a bigger role in supporting the development of the industrial internet.
Ren also called for Huawei’s digital energy business to pounce at the strategic window of opportunity to increase investment, create greater value and contract management staff while expanding frontline teams.
When it comes to Huawei’s intelligent automobile solutions business, efforts should be made to reduce the scientific research budget, strengthen the development of commercial solutions and focus on key components to be more competitive, with the remaining parts left to connect with others, Ren added.
The adjustment in company strategies came after Huawei recorded 301.6 billion yuan ($44 billion) in revenue in the first half of 2022, with a net profit margin of 5.0 percent.
That means its first-half revenue fell around 5.9 percent from a year ago, as the Chinese tech company continues to battle US government restrictions and external uncertainties.
Hu Houkun, rotating chairman of Huawei, said: “While our device business－mainly smartphone business－was heavily impacted, our information communications technology infrastructure business maintained steady growth.
“Moving forward, we will harness trends in digitalization and decarbonization to keep creating value for our customers and partners, and secure quality development.”
According to market research company Counterpoint, Huawei’s smartphone market share has fallen below 4 percent since the first quarter of 2021, compared with its peak of 20 percent in the April-June quarter of 2020.
Amid challenges, Huawei is actively exploring new revenue opportunities in digital energy solutions and the automobile business.
Cui Dongshu, secretary-general of the China Passenger Car Association, said there is enough room for the development of smart cars in the 5G era. Huawei can offer a slew of technological solutions and services covering both hardware and software.