The vendor’s founder Ren Zhengfei said that Huawei would shut down marginal business units
Chinese vendor Huawei needs to adopt “survival mode” for at least the next three years chiefly due to the global recession perspectives, Chinese site Yicai Global reported, citing an article published by Huawei’s founder Ren Zhengfei.
“Over-optimistic expectations for the future should be adjusted, and in 2023 or even until 2025, we must adopt survival mode. Survival is the most important program,” Zhengfei said in an article published on Huawei’s internal forum.
The executive also said that Huawei would shut down marginal business units. He also urged employees to focus on profits and cash flows instead of revenue, to ensure the company’s survival over the next years. According to the report, Ren said that Huawei will “give up completely” in some unspecified countries.
“Whether we can achieve a breakthrough during this period is still uncertain,” Ren reportedly said, adding that any business plan should be made mainly based on cash flow and real profits, as Huawei can no longer just target sales growth.
“What we propose, we must capable of realizing it,” Ren said. “No fancy stories are acceptable. Especially when it comes to business forecasting, we must exclude all illusions.”
Earlier this month, Huawei reported overall revenues of CNY301.6 billion ($44.7 billion) in the first half of the year, down 5.9% year-on-year.
In the first quarter of the year, Huawei’s revenues had declined by 13.9% compared to the year-ago period.
In a release, the vendor said its overall performance in the period “was in line with [its] forecast”. Huawei also said it reached a net profit margin of 5.0% in the first half of the year.
Revenue from the device business group, which includes smartphone sales, declined 25.4% to CNY101.3 billion in H1, while Huawei’s Carrier Business Group revenues grew 4.24% to CNY 142.7 billion in the period. In the first half of 2021, revenues from this business division had declined by 14%
“Our strategy for operations in 2022 revolves around surviving and doing so sustainably. First, this goal means we will do everything we can to guarantee the quality of the products and solutions we offer to our customers. Second, solid operations are also a must if we are going to survive and do so sustainably. The third layer of ‘surviving sustainably’ is continuously investing in innovation for the future,” Ken Hu, Huawei’s rotating chairman had previously said, during Huawei Global Analyst Summit 2022.
Last year, Huawei’s representatives had said that that the company was not expecting the Biden administration to remove the company from the Entity List. In May 2019, the U.S. Department of Commerce added Huawei to its Entity List, a decision that effectively banned the company from buying parts and components from U.S. companies without U.S. government approval. Under the order, Huawei needs a U.S. government license to buy components from U.S. suppliers.
The U.S. government included Huawei in the Department of Commerce’s Entity List due to security concerns, as Washington believes that the Chinese government uses Huawei’s equipment for spying purposes. Huawei has been continuously denying those allegations.
