On March 31 this year, Huawei released its 2022 annual report, which showed that Huawei's overall operations were stable, with global sales revenue of 642.3 billion yuan and a net profit of 35.6 billion yuan.

Looking to the future, Huawei continues to increase its R&D investment. In 2022, R&D investment reached 161.5 billion yuan, accounting for 25.1% of annual revenue. The cumulative R&D expenses invested in the past ten years exceeded 977.3 billion yuan. Chief Financial Officer Meng Wanzhou said: "In 2022, Huawei's operations are still facing great pressure. Overall, the operating performance is in line with expectations. Huawei's asset-liability ratio is 58.9%, and its net cash balance is 176.3 billion yuan. Among the total assets of nearly one trillion yuan, high-liquidity assets such as cash, short-term investments, and operating assets constitute the majority of its assets. Its financial situation remains stable and has strong resilience and elasticity."

In 2019, the United States began to sanction Huawei, restricting or banning Huawei from hardware chips to software operating systems. Objectively speaking, Huawei does have many excellent products and technologies, but the US sanctions have directly pushed Huawei to the forefront of public opinion. Now that four years have passed, many people have taken the sanctions against Huawei with a normal attitude. Huawei now needs such a breathing space. Judging from the financial report, it is not easy for Huawei to achieve such results after being "normalized" for nearly four years.

Looking back to 2019, Samsung, Huawei, and Apple ranked among the top three in the world. That year was the peak of the mobile phone market and the most glorious period for Huawei. That year, Huawei's annual smartphone shipments reached 240 million units, surpassing Apple and approaching Samsung, with revenue of 858.8 billion yuan, of which the consumer business dominated by smartphones accounted for 467.3 billion yuan, which is Huawei's largest source of revenue, accounting for more than half of the revenue.

According to the profit and loss statement of this annual report, under the double superposition of sanctions and the sluggish semiconductor industry last year, Huawei's comprehensive gross profit can still reach about 40%, but its operating profit margin is only 6.6%. So where did Huawei spend its money? The answer is research and development. It is well known that Huawei invests in R&D regardless of cost. Among Huawei's 207,000 employees, there are 115,000 R&D positions, accounting for 55.4% of the total number of employees. Huawei continues to extract more than 15% of its sales revenue for R&D every year, and sends the best talents to the market and service front line, making profits through technological leadership, and then using the profits for R&D to drive more breakthroughs.

According to the report, Huawei's R&D expenses increased by 20 billion yuan compared with last year, a year-on-year increase of 13.2%. Last year, Huawei invested a total of 160 billion yuan in R&D. Regardless of the rise and fall of overall sales revenue, R&D investment continues to rise. Although the United States began to sanction Huawei in 2019, the R&D expenses of that year increased by more than 30% compared with the previous year.

Continuous R&D investment has enabled Huawei to complete the localization replacement of more than 13,000 parts and the repeated replacement of more than 4,000 circuit boards in more than three years. In addition, Huawei has also completed the replacement of 78 software and hardware development tools; in terms of chip design, it has basically achieved the localization of EDA tools above 14nm, and will conduct comprehensive verification this year. Huawei said that 2023 is the year for Huawei to respond to the normalization of US sanctions and normal operations, and it is also a key year for its survival and development. Huawei's R&D tasks in basic research, wireless, AI, software ecology, etc. are still arduous, but as Meng Wanzhou said, "After the snow, the sparse plums are pressing down on the branches, and the morning sun is shining in spring."

The US sanctions have the greatest impact on Huawei's terminal business. The sanctions have caused Huawei to lose its Kirin chips and 5G equipment, and its global share of smartphones has dropped directly from 10.98% at its peak to 4.84%; and Huawei in China has also suffered setbacks, causing Huawei's market share to decline from nearly 40% to the current 26.1%. But even so, Huawei still contributed 214.463 billion yuan in revenue, accounting for 33% of total revenue. From the current point of view, the overall situation of Huawei's terminal business has gradually improved, and the core mobile phone business of revenue is returning to normal. The normal iteration of Mate50&P60 will be the core support of Huawei's terminal business revenue in the future. At the same time, the launch of the new category of folding screens and the technology accumulated by Huawei in the field of folding screens will also provide Huawei with a growing revenue contribution point.

For Huawei in the future, the profit of the terminal business may not be high. Although it has little impact on Huawei's survival, if Huawei wants to go against the current in the future, brand influence is very important. On the one hand, Huawei is actively expanding other businesses, such as smart cars. Although Huawei claims that it will not make complete vehicles within five years, with the unoptimistic sales of products jointly launched by Huawei and Wenjie, and Huawei's repeated jumps in the automotive business, other car companies do not believe that Huawei is going to be an honest supplier. Therefore, most of the manufacturers who are willing to cooperate with Huawei at present are those with poor brand power and unsuccessful transformation to new energy.

On the other hand, in the energy field, this is an aspect that Huawei is optimistic about and values. In 2021, Huawei established a new company called Huawei Digital Energy Technology for it. Huawei's photovoltaic inverters have been ranked first in global shipments for many years, so Huawei has confidence and technical strength in the energy field. Recently, Huawei has also won the world's largest energy storage project. In terms of energy, Huawei's prospects may be far broader than we think, and now it is at a critical juncture of global energy transformation, which may also become an important growth point for Huawei in the future.