‘Survival’ becomes Huawei’s ‘primary goal’

Ren Zhengfei, le fondateur et chef de file de Huawei.

Obviously, we should expect big changes from Huawei. In an internal note revealed on August 23 by the Chinese press, Ren Zhengfei, the founder and chief of the smartphone and telecommunications giant, was pessimistic to say the least for the coming years. According to him, the “main goal” of Shenzhen’s technological flagship is now to ensure its “survival”, in an economic context considered especially dangerous. “The continuing recession in the world economy, as well as the impact of the Covid-19 epidemic, will greatly affect consumption.explains the leader. We are not only facing supply pressure, but also weakening market demand. »

For ” stay alive “Therefore, Huawei must, in the words of Ren Zhengfei, “adjust your business strategy and decide what can be done and what should be abandoned”. In other words, the group wants to refocus on its most profitable activities, even if that means liquidating, without hesitation, some “most marginal businesses”. East “Change Your Mind” it will refer, in particular, to the period 2023-2024, where Ren Zhengfei does not see the situation improving significantly.

Telecommunications: how Huawei wants to remain indispensable with its patents

Gear lever

It is, clearly, a real change of gear announced by the leader of Huawei. The group, in fact, has bet everything for a long time on rapid international expansion, sparing no expense. This aggressive growth strategy initially paid off: in just a few years, Huawei became the world smartphone champion alongside Apple and Samsung. It has also become a leader in 5G, the new generation of mobile communication. But this success has also aroused mistrust in the West, and in particular in the United States. As concerned about its technological leadership as it is about Huawei’s proximity to Chinese power, the country of Uncle Sam has launched a violent crusade against the Shenzhen group.

In 2019, Washington notably banned Huawei from sourcing American technology. This caused a collapse in its international smartphone sales. At the end of 2020, Huawei was forced to divest itself of its precious Honor brand, with cheap terminals aimed at young people. At the same time, the group has been banned from many 5G markets, on suspicion of spying on behalf of Beijing.

How Huawei is reorganizing its business in the face of US sanctions

Sales drop

Added to these severe restrictions were the economic repercussions of the Covid-19 epidemic and the war in Ukraine. Last year, Huawei saw its sales fall by almost 30%, to 634 billion yuan (87 billion euros). The current year promises to be just as difficult. On August 12, a few days before Ren Zhengfei’s departure, Huawei reported a 5.9% drop in H1 revenue year-on-year to 301 billion yuan (43 billion euros). Above all, their profit margin was only 5% during this period, compared to 9.8% the previous year…

Among its most profitable and growing activities, Huawei can count on the cloud. This segment is booming and supports the growth of its “Companies” branch. In the first half, the revenue of this division increased by 28% to 54.7 billion yuan (almost 8 billion euros). On the other hand, Huawei’s investments in connected and electric cars, seen as unprofitable in the medium term by many observers, could well bear the brunt of the Chinese group’s strategic refocus.

Huawei can rely on the huge Chinese market

Since the US sanctions, Huawei has positioned itself as a support for the digital transformation of companies. The idea is to offer them technologies – in terms of cloud, connectivity or terminals – to boost their sales, reduce their costs and moderate their carbon footprint. If Huawei can rely on the giant Chinese market to sell its solutions, the deal is now entirely different outside the borders of the Middle Kingdom, at a time when considerations of economic and technological sovereignty are making a comeback.