Huawei posts increase in profit despite external challenges

Huawei Technologies Co said its net profit in 2021 posted a 75.9 percent year-on-year surge to 113.7 billion yuan ($17.8 billion), as the Chinese tech giant boosted its profitability and cash reserves to better cope with uncertainties and challenges such as US government restrictions.

Meng Wanzhou, chief financial officer of Huawei, said at a news conference in Shenzhen, Guangdong province that despite the company's revenue in 2021 recording a nearly 29 percent decline to 634 billion yuan, "our ability to make a profit and generate cash flows is increasing, and we are more capable of dealing with uncertainty."

Meng, making her first public appearance after returning from Canada to China last year, said the company's business performance was stable and within expectations.

Specifically, Huawei's carrier business hit 281.5 billion yuan, with over half coming from overseas markets. Its enterprises business hit 102.4 billion yuan. Its consumer business, which includes smartphones and internet of things devices, hit 243.4 billion yuan, down nearly 50 percent year-on-year. The plummet came after Washington restricted its access to vital US chip-making technologies, software and components.

Guo Ping, rotating chairman of Huawei, said the company's challenges cannot be solved through frugality, but via innovation. It is difficult for Huawei to obtain advanced technologies including high-end chip-making manufacturing techniques at present, and Huawei needs long-term investment into innovation to find systematic solutions to overcome challenges.

"When it is difficult to access advanced manufacturing process techniques, or achieve leadership in single technologies, we need to find system-level breakthroughs. For instance, our communication products are now using multi-core chipsets and we are reengineering our software, which could help inject new life into chips to ensure long-term supply," Guo said.

According to him, it is complex and takes time to turn sand into chipsets. And when global supply chains are good, repeated development of some chip technologies does not make sense. But when industry chains are fragmented, new demands will rise and Huawei welcomes more companies to invest into semiconductor manufacturing.

Huawei has spent 142.7 billion yuan on research and development in 2021, slightly higher than 2020′s figure of 141.9 billion yuan despite the difficulties it faces. Huawei's research and development spending over the past decade hit 845 billion yuan, with over 107,000 employees engaged in R&D work.

The company is not just pouring resources into current technologies but investing in the future. About 10 to 20 percent of its annual R&D spending, $2 to 3 billion every year, is earmarked as pre-research expenses, used to explore promising and state-of-the-art technologies.