3 lessons from Huawei’s 2022 financial report


I attended Huawei’s 2022 financial results meeting in Shenzhen and it was mostly a story of “back to normal”. As CFO and now rotating Chairperson Sabrina Meng said:

“In 2022, Huawei gradually pulled itself out of crisis mode. US restrictions are now our new normal, and we are back to business as usual.”

The ending title for Eric Xu’s presentation was “sustainable survival and development”. Note: This is in contrast to their 2021 report which was under the title “Solid Operations, Investing in the Future”.

Here were my take-aways:

1. Huawei’s Strategy Has Always Been About Long-Term Survival – And That Means Continuity, Resilience, and Quality

Twenty plus years ago, Huawei founder Ren Zhengfei began writing and speaking about how to survive long-term as a technology company. That’s a really good question because it is actually quite rare. Most major tech companies don’t last beyond one or two technology cycles. Maybe they get disrupted by the new technology. Or maybe they lose focus, as the now rich founders move on. Or maybe the culture just becomes lazy and non-innovative.

So, Mr. Ren studied tech companies that did last, like Hewlett Packard. And he explicitly set Huawei on a strategic course to focus on long-term survival. And that means that the key question for Huawei for the past 2 years has been the retention of its international carrier customers.

Huawei needs to have international scale in its ICT business. You cannot win as a telecommunications equipment company with only one country, regardless of the size of the US or China. You need to be international to have the scale to compete in manufacturing cost and research spending. So Huawei’s core business has always been China plus international telecommunications (ICT).

Huawei really began when they started design and manufacturing their own simple telecommunications equipment (like PBX switches) in the early 1990’s. And that was when they also really began investing in R&D. This began what would become a +30-year march in increasing manufacturing and R&D scale. R&D spending increased (yet again), reaching 161B RMB. This was 25% of revenue, a very big increase from their typical 15% of revenue. And it was up from 142B (22%) in 2021, which was already very high.

This march took them from fixed into wireless equipment. From 3G to 4G and then 5G. And into all the technologies surrounding ICT (such as consumer devices and cloud). This march also took them from China to +170 markets. To +$100B in revenue. And eventually to surpass Ericsson as the largest telecommunications manufacturer in the world.

But this all depends on winning internationally. Not just in China.

So, you can see Huawei bending over backwards to ensure international carriers are getting the highest quality equipment now and in the future. You can see the company going above and beyond to maintain the trust of these customers. The key number I look at is the percentage of Huawei’s ICT revenue coming from international (i.e., non-China) sources. In 2021, it was +50% of carrier revenue.

This is what I heard throughout the presentation by Eric Xu and Sabrina Meng.

There was a lot of talk about having the highest “quality” equipment.
There was a lot of talk about ensuring the “continuity” of supply.
There was a lot of talk about “resilience”. That means diversifying the supply chains and redesigning components to avoid any potential future risks.
There was details about Huawei’s capital structure and big cash reserves. They are sitting on a lot of cash versus debt.

2. Cloud Revenue More Than Doubled to +45B RMB in 2022. This is Now Huawei’s Biggest Growth Opportunity.

This was the first year that cloud was broken out as a business unit. It was under Enterprise in 2021, which totaled 102B RMB in revenue for that year. For 2022, cloud revenue reached 45B RMB. It is now a significant business, although still small compared to ICT and Consumer.

But cloud revenue appears have more than doubled in 2022. The presentation didn’t have an exact growth number, but they did use the phrase “maintaining fast growth”. This is an increase from the +30% growth in 2021.

Cloud is important because it is now significant in size – and because it is a business that has the potential to grow 10x in the future.

Compare Huawei Cloud to Alibaba Cloud, which had $11B in revenue in 2022. Matching Alibaba would mean another doubling of Huawei Cloud revenue.
Look at Amazon’s AWS as a comparable. Cloud in China does have significantly slower growth and adoption than we see in the US. But the overall markets could be comparable in size one day. If Huawei Cloud were to one day just match the 2022 revenue for AWS, that would mean over 350B RMB in revenue, surpassing ICT in revenue.

For China cloud, Alibaba Cloud is still the market leader. But in 2021, Huawei Cloud was #2 or #3, about tied with Tencent at 17%. And keep in mind, Western cloud companies will never be allowed in much of China, and especially not in areas like government and financial services.

Overall, cloud’s top line growth in 2022 looked pretty good (from the outside). It is Huawei’s biggest potential revenue growth opportunity. Profits and ROIC are another question.

3. The Hard Hit Consumer Business Revenue Stabilized at 214B RMB in 2022. This Was Surprising.

During the China-US “tech war”, Huawei found itself at the center of a political storm not of their making. And in 2020-2021 it impacted quite a bit of their business.

Their ICT business was politically pushed out of several developed markets (UK, Japan, etc.). Either in part or entirely.

Their tech supply chain was hit across the board. The consumer business unit subsequently fell by 50% to 243B RMB in 2021, with international smartphone sales being the hardest hit. And unlike in ICT where the components and supply chain could be restructured, it was not obvious how to overcome limitations on high end chipsets and operating systems.

And yet, the consumer revenue in 2022 was 214B RMB (vs. 243B in 2021). I thought it would be quite a bit lower. Yet, the consumer business appears to have stabilized its previous decline.

I assume this is mostly coming from smartphones in China (their foldable smartphones are awesome) and their “1 + 8 + N” strategy. They were already moving from selling smartphones to selling smartphones plus a suite of 8 ancillary products (earbuds, smart home, etc.). These ancillary products don’t require the same chipsets and are compatible with phones everywhere. I used Huawei earbuds which are pretty great.

Overall, Huawei’s Consumer Business appears to have successfully shifted its product mix and stabilized its revenue. If this continues, it will defy a lot of analyst expectations.


Overall, the company looks like it has come out of the political storm quite well. I expect the conversation to shift more from resilience to growth in 2023.


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