Huawei, surrounded by besieged cities, will usher in what may be the most difficult year in Huawei’s history. Surviving has become Huawei’s top priority.
“In 2020, we strive to survive, and we can publish our annual report next year.” On March 31, when Huawei released its annual report, Huawei’s rotating chairman Xu Zhijun made these remarks. See Huawei’s difficulties.
In 2020, Huawei will be under the physical list throughout the year, and the sudden outbreak of the epidemic will make Huawei’s situation even more difficult than 2019. Xu Zhijun bluntly stated that this was the most difficult year for Huawei.
Speaking of the expectations for 2020, Xu Zhijun said: “Huawei will be very difficult in 2020. It is under the physical list throughout the year. The industry expects that our reserves will also run out. This will be a test of Huawei’s continuous supply. The key year for performance to play a role. The new crown epidemic is also a situation we did not expect before. The global economic recession, financial turmoil and reduced demand it brought are new challenges we did not predict in 2020.
Huawei, surrounded by besieged cities, has become Huawei’s top priority.
To survive is the top priority
Different from the optimistic expectations when the financial reports were released in previous years, when this annual report was issued, Huawei did not give any specific predictions for this year’s development, but just said it would strive to survive.
In 2019, although Huawei entered the list of U.S. entities from May 16th, it still had a rapid growth of four and a half months. With reference to IDC data, in the first quarter of last year, global shipments of Huawei mobile phones grew at a rapid rate of more than 50%. Even so, after being hit by the US ban, Due to the slump in overseas markets, annual shipments grew by only about 20%, with shipments reaching 240 million units.
Xu Zhijun said that last year Huawei consumers lost at least $ 10 billion overseas. “ Last year, our consumer business outside China experienced rapid growth before May 16th, followed by a rapid decline after May 6th, to fourth. The quarter then picked up slightly. “
Although the consumer business has maintained rapid growth in the domestic market after the physical inventory incident, it has not completely offset the decline in overseas markets. According to IDC data, in the second quarter of 2019, Huawei’s mobile phone shipments increased by only 8.3%, which quickly dropped from a high growth rate of 50% in the first quarter. In the fourth quarter of the same year, Huawei’s mobile phoneBall shipments seldom usher in a decline, down 7.1% year-on-year.
And this year, Huawei will be under the physical list all year round. Although Huawei has made strategic adjustments and preparations in the past 10 months, and the impact on the operator’s business has been quickly compensated, Huawei ’s consumer business will still face multiple challenges. Considering that Huawei’s consumer business now contributes more than 50% of Huawei’s revenue and is Huawei’s growth engine, the impact on Huawei can be imagined.
First, as Huawei still cannot use Google’s GMS (Google Mobile Services), Huawei’s dilemma in overseas markets will continue. Although Huawei’s self-developed HMS (Huawei Mobile Services) can barely fill the gap, it will take a long time to build an ecology and consumer recognition.
Secondly, Huawei ’s mobile phone shipments in 2019 have maintained a growth of about 20%. One is to base the rapid growth before May 16. The second is to increase the domestic market after the physical inventory event. To a degree hedging losses overseas. However, Huawei’s domestic share is currently at a high level of 40% -50%, and it is not easy to maintain it.
Gartner mobile analyst Lu Junkuan once said that maintaining more than 40% of the plate in the domestic market is not easy, neither consumers nor channel partners and operators want to see a dominant company. Condition. These external factors are beyond the scope of Huawei’s control, not just competition between mobile phone manufacturers. After the buying spree from patriotism ebbs, whether Huawei can leave users is also a challenge.
In addition, there is a new challenge, the spread of the new crown epidemic worldwide. This will have a huge impact on the entire mobile phone industry chain, and the construction of 5G networks and the promotion of 5G mobile phones will be delayed. Huawei’s consumer business covers all major markets outside of the United States, especially Huawei’s core markets such as China, the Middle East, and Europe. It has become the hardest hit area of the epidemic, which will definitely add to the already difficult situation of Huawei.
At the same time, how long can Huawei’s technology and component reserves support, can the continuity of Huawei’s supply chain withstand greater tests? Will Huawei face new sanctions? These are the swords of Damocles that may fall at any time.
All of these have made Huawei’s consumer business face an unprecedented dilemma. According to The Information report, Huawei internally predicts that due to the impact of US sanctions and the epidemic, Huawei’s annual smartphone shipments will fall by about 20% this year, with only 190 million to 200 million units.
Left and right: keep sales in China and build HMS ecology overseas
So, there is pressure from the physical list before, and the spread of the global new crown epidemic. How should Huawei’s consumer business respond?
If you can get Google GMS service back to supply, it is naturally the best policy. In an interview with , Xu Zhijun said that Huawei still wants to use all Google services, but the initiative is not Huawei.
But when the list of entities will be lifted, whether the GMS service can be restored can be obtained, but it cannot bet on it. On the contrary, Huawei may even face new sanctions.
According to Reuters, the White House is considering a new export control measure to modify the “foreign direct product rules”, which may restrict chip makers, including TSMC, from supplying to Huawei. According to the proposed rules, foreign companies using US chip manufacturing equipment need to obtain a US license before they can supply specific chips to Huawei. According to a report issued by China Everbright Securities, most chip makers rely on U.S. companies such as KLA Corp device.
In short, if this rule is implemented, Huawei ’s chip supply chain selection will not only become narrower, Huawei ’s self-developed HiSilicon chips will not even be produced. TSMC is One of Huawei’s major chip makers may not be able to produce chips for Huawei.
For this, Xu Zhijun even gave a tough statement:
“I think the Chinese government will not let Huawei be slaughtered or ignore Huawei. I believe the Chinese government will also take some countermeasures. Why ca n’t American companies be banned based on the same cybersecurity reasons? 5G chips, base stations, smartphones, and various smart terminals containing 5G chips are used in China?
Even in this case, Huawei can buy chips from Samsung, Korea MTK, and Spreadtrum of China to produce mobile phones. Even if Huawei has made sacrifices because it ca n’t produce chips for a long time, I believe there will beMany chip companies have grown up, using the chips currently provided by chip makers in South Korea, Japan, Europe, and Taiwan to develop and produce products. “
In this case, Huawei can do nothing more than two. One is defense, that is, keeping the domestic market. Huawei has many advantages in the domestic market, such as brand, technology, and channels. The domestic market provides more than half of the shipments, which is the home base of Huawei’s consumer business. It is of course fundamental to keep a good home base.
In addition, the domestic market is not affected by the ban of GMS, and the current domestic epidemic is slowing down. It is the region with the best epidemic control in all major mobile phone markets. The supply chain capacity and end-use enthusiasm are gradually recovering. These are all favorable factors for the domestic market.
In previous analysis of P40 , we mentioned Although the P40 series uses HMS to rescue overseas markets, the main position for its sales is still domestic. The price and sales strategy of the P40 series National Bank Edition will be the key factors that control the sales of this phone.
Mobile phone architecture with Huawei HMS service, picture from Tianfeng Securities Research Report
The second is “heading”, which means developing the HMS ecology and saving overseas markets. This task is arduous, and there is little possibility of sing and advance. The earthmoving industry can only dig step by step forward.
Although the consumer business overseas market is blocked, it is impossible for Huawei to give up the global market. Xu Zhijun said that Huawei’s smart terminal business will not be confined to the domestic market and will strive to become a global business.
In the overseas Android market, Google GMS is basically a card neck, unlike hardware components and the possibility of adjusting suppliers. Google GMS provides services such as search, email, maps, YouTube, and application store Play store. These are high-frequency applications that overseas users are accustomed to. Therefore, once supply is cut off, Huawei’s overseas market will struggle. The cold response of the Mate 30 series in the European market is evidence.
After the GMS restriction, Huawei needs to find a stand-in for it—that is, HMS developed by Huawei. Xu Zhijun said in an interview that the performance of Huawei ’s consumer business overseas depends on the construction of the HMS ecology.
Now that Huawei has basically set up the shelf, HMS apps such as Huawei AppGallery, Huawei Video, Huawei Music, and Huawei Reading have been launched. However, it is still a difficult challenge to make the HMS ecosystem well and make consumers happy to use it.
Google GMS has been operating for more than ten years, and Android system has held more than 80% of the global mobile phone share. HMS, as a rising star, needs patience even if there is a battle. Earlier, Yu Chengdong also said that it would take several years to gradually restore the total amount of overseas business, at the same time accelerate the construction of HMS Core capabilities, and lay a solid ecological foundation.
For Huawei, the external environment is so bad that there is no sexy or clever answer, only hard power competition is left. Has Huawei been pushed to its limits? If faced with new sanctions, how much room does Huawei have for turning around?
When talking about the challenges facing the global economy, such as economic confrontation, unilateralism, and the new crown epidemic, Xu Zhijun said: “Many questions today need to be answered by technological innovation, which is not the answer All, but the answer is fundamental. “For Huawei, the answer may be the same.
Header image from Huawei
“I think the Chinese government will not let Huawei be slaughtered or ignore Huawei. I believe the Chinese government will also take some countermeasures. Why ca n’t American companies be banned based on the same cybersecurity reasons? 5G chips, base stations, smartphones, and various smart terminals containing 5G chips are used in China?
Even in this case, Huawei can buy chips from Samsung, Korea MTK, and Spreadtrum of China to produce mobile phones. Even if Huawei has made sacrifices because it ca n’t produce chips for a long time, I believe there will beMany chip companies have grown up, using the chips currently provided by chip makers in South Korea, Japan, Europe, and Taiwan to develop and produce products. “
In this case, Huawei can do nothing more than two. One is defense, that is, keeping the domestic market. Huawei has many advantages in the domestic market, such as brand, technology, and channels. The domestic market provides more than half of the shipments, which is the home base of Huawei’s consumer business. It is of course fundamental to keep a good home base.
In addition, the domestic market is not affected by the ban of GMS, and the current domestic epidemic is slowing down. It is the region with the best epidemic control in all major mobile phone markets. The supply chain capacity and end-use enthusiasm are gradually recovering. These are all favorable factors for the domestic market.
In previous analysis of P40 , we mentioned Although the P40 series uses HMS to rescue overseas markets, the main position for its sales is still domestic. The price and sales strategy of the P40 series National Bank Edition will be the key factors that control the sales of this phone.
Mobile phone architecture with Huawei HMS service, picture from Tianfeng Securities Research Report
The second is “heading”, which means developing the HMS ecology and saving overseas markets. This task is arduous, and there is little possibility of sing and advance. The earthmoving industry can only dig step by step forward.
Although the consumer business overseas market is blocked, it is impossible for Huawei to give up the global market. Xu Zhijun said that Huawei’s smart terminal business will not be confined to the domestic market and will strive to become a global business.
In the overseas Android market, Google GMS is basically a card neck, unlike hardware components and the possibility of adjusting suppliers. Google GMS provides services such as search, email, maps, YouTube, and application store Play store. These are high-frequency applications that overseas users are accustomed to. Therefore, once supply is cut off, Huawei’s overseas market will struggle. The cold response of the Mate 30 series in the European market is evidence.
After the GMS restriction, Huawei needs to find a stand-in for it—that is, HMS developed by Huawei. Xu Zhijun said in an interview that the performance of Huawei ’s consumer business overseas depends on the construction of the HMS ecology.
Now that Huawei has basically set up the shelf, HMS apps such as Huawei AppGallery, Huawei Video, Huawei Music, and Huawei Reading have been launched. However, it is still a difficult challenge to make the HMS ecosystem well and make consumers happy to use it.
Google GMS has been operating for more than ten years, and Android system has held more than 80% of the global mobile phone share. HMS, as a rising star, needs patience even if there is a battle. Earlier, Yu Chengdong also said that it would take several years to gradually restore the total amount of overseas business, at the same time accelerate the construction of HMS Core capabilities, and lay a solid ecological foundation.
For Huawei, the external environment is so bad that there is no sexy or clever answer, only hard power competition is left. Has Huawei been pushed to its limits? If faced with new sanctions, how much room does Huawei have for turning around?
When talking about the challenges facing the global economy, such as economic confrontation, unilateralism, and the new crown epidemic, Xu Zhijun said: “Many questions today need to be answered by technological innovation, which is not the answer All, but the answer is fundamental. “For Huawei, the answer may be the same.
Header image from Huawei