AutoBeta(AutoBeta.net)08/24 Report--

On the afternoon of June 22, Ren Zhengfei shared an article entitled "the whole company's business policy should shift from the pursuit of scale to the pursuit of profit and cash flow" in Huawei's internal forum. Ren Zhengfei mentioned in the article that with the decline in global consumption power, Huawei should change its thinking and business policy from pursuing scale to pursuing profits and cash flow to ensure that it will tide over the crisis of the next three years.

There are four main points in the core content of the article.

First, the next decade will be a very painful historical period, the global economy will continue to decline, and the world economy cannot improve in the next three to five years. Coupled with the impact of the epidemic, no region in the world should be a bright spot. Under such circumstances, there will be a significant decline in global consumption power, which will put pressure on both supply and market for Huawei, which will make survival its main platform in 2023 and even by 2025.

Second, Huawei's budget in 2023 will maintain a reasonable pace, shrink or close businesses that will not generate value and profits in the next few years, and at the same time adjust the market structure, make a little money wherever there is money, focus on market value customers, and completely abandon some countries or markets.

Third, Huawei should also make reasonable arrangements in terms of staff post arrangement, performance appraisal, company finance, inventory, etc., preferring a decline in sales revenue, but profits and cash flow should increase, encourage people to compete for profits, and will let the cold air pass on to everyone; finance should make a good plan for cash flow, and the main thing in times of crisis is to make blood. Reasonable control of inventory to avoid excessive inventory caused Huawei insufficient profits and tight cash flow, thus forming a new crisis.

Fourth, shrinking the front does not mean reducing the quality. Huawei R & D is responsible for the quality and performance of its products. At the same time, Huawei used to focus on R & D rather than service, but now it wants to improve the status of the service system. In addition, Ren Zhengfei stressed that Huawei can still invest at any cost in strategic key opportunities and survival crisis points, but should not spend money indiscriminately on non-strategic opportunities.

Generally speaking, in Ren Zhengfei's view, the global economy will face a sustained recession and a sharp decline in consumption power in the next decade. Huawei needs to change its thinking and business policy from pursuing scale to pursuing profits and cash flow. to make sure to weather the crisis of the next three years. Take survival as the main program, the marginal business shrinks and shuts down, passing on the cold to everyone.

On August 12, Huawei released its results for the 2022 cycle. Huawei reported revenue of 301.6 billion yuan in the first half of 2022, down 5.8 per cent from a year earlier. From the perspective of specific business, the business income of operators was 142.7 billion yuan, up 4% from the same period last year; enterprise business revenue was 54.7 billion yuan, up 27.5% from the same period last year; and terminal business revenue was 101.3 billion yuan, down 25.3% from the same period last year.

Since Huawei was sanctioned, Huawei's terminal business revenue has been declining due to factors such as limited chip supply, especially in the mobile phone business. Huawei's terminal revenue fell from 135.7 billion yuan in the first half of 2021 to 101.3 billion yuan in the first half of this year, with net profit margins falling to 9.8 per cent in 2021 compared with 5.0 per cent in the first half of this year, according to data.

In order to survive, Ren Zhengfei proposed that businesses that could not generate value and profits in the next few years should be reduced or closed, and even the smart car parts business should reduce the research budget and strengthen the commercial closed loop. Ren Zhengfei said in the article that the smart car solution cannot pave a complete front, and that it is necessary to reduce the research budget, strengthen the commercial closed loop, take a modular path in research and development, and focus on several key components to make them competitive. the rest can be connected to others.

Over the past few years, although Huawei has repeatedly reiterated that it will not build cars, the layout of its auto-related business has been very aggressive. On the one hand, Huawei has launched the high-end brand AITO through cooperation with Cyrus, and has already launched two models, the M5 and the M7. On the other hand, Huawei actively cooperates with Changan, BAIC Jihu, Guangzhou Auto and other auto companies to provide partners with key components and self-driving capabilities.

Although Huawei does not build cars, in order to ensure enough influence, Huawei has invested a lot in smart cars. Yu Chengdong, Huawei's managing director, consumer business BG CEO and Huawei smart car solution BU CEO, has publicly revealed that research and development of smart car solutions will cost as much as $1 billion in 2021. At the 14th China Automobile Blue Book Forum, Yu Chengdong said with a wry smile: "Automobile is the only lossmaking business of Huawei at present." This area is definitely a very expensive game, definitely a loss-making business, and definitely a very difficult business. "

As much of the R & D work is aimed at long-term development, it is unclear whether Huawei's adjustment in its R & D budget for smart cars will affect the short-term competitiveness of Huawei partners.

Huawei also encountered an extremely difficult situation in 2000, when the global IT bubble burst. Ren Zhengfei wrote in the article "the Winter of Huawei": "there are a thousand sails passing by the sunken ship, and there are 10,000 strong trees in front of the sick tree." If there is no foresight or prevention, it will freeze to death. At that time, whoever had a cotton-padded coat would survive. "

Welcome to subscribe to the WeChat public account "Automotive Industry Focus" to get the first-hand insider information on the automotive industry and talk about things in the automotive circle. Welcome to break the news! WeChat ID autoWechat