In the past two years, in the face of changes in the external environment, Ren Zhengfei has, as always, maintained the management concept of being prepared in advance. in this internal article, he said bluntly that he came to China next for the need to "take survival as the main program." the marginal business shrinks and shuts down, passing on the cold to everyone. "
Huawei's "Cold Winter Theory" is mentioned every few years, and its original intention is to create a sense of crisis for the whole group, but in the context of this year's global economic malaise, Ren Zhengfei no longer focuses on describing how the "cold winter" came into being. instead, he directly gave the contingency strategy: reducing the battle line and concentrating his forces to fight a war of annihilation.
"We do the hardest and least profitable thing in the world because people don't want to do it," Ren Zhengfei said in an interview with Xinhua six years ago. "
Now, he is trying to map out the most profitable future for Huawei.
When it comes to "survive", what's the difference?
"Survival" does not seem to be convincing for Huawei. The communications giant has a technological know-how and strategic focus that is beyond the reach of most companies in the industry, but these three words have been Huawei's main goal over the past two years.
In early 2020, as news of the chip outage spread, Xu Zhijun, Huawei's rotating chairman, said Huawei would "strive to survive in 2020 and publish an annual report next year". There is only one core job of Huawei's terminal business this year, that is, "seize all time to stock up".
Inspired by Kirin 9000, the "out-of-print chip", its mobile phone's share in the domestic high-end market was even on a par with Apple's. At the same time, at the Consumer Electronics Show in Barcelona at the beginning of the year, Huawei changed its routine and focused on the layout of the "1x 8N" strategy, and in the following year, it gradually focused on wearable devices, smart home devices and IoT ecology.
Although Huawei has never disclosed details of its revenue, combined with market performance, its consumer business has been able to maintain revenue of 243.4 billion yuan despite an 82 per cent drop in global mobile phone shipments in 2021. Huawei's ecological chain was launched in a hurry.
Until the end of 2021, Huawei's repeated reference to "living" may only be playing a cautionary role. Because in this year, Huawei's R & D investment reached an all-time high of 142.7 billion yuan, equivalent to 22.4% of the year's revenue, which is only lower than Alphabet among the global technology giants.
At this time, Huawei is not like its self-proclaimed "difficult survival", but rather "practicing behind closed doors".
But in the first half of this year, the global recession put Huawei under pressure not only from the supply chain, but also from the market. "now, due to the impact of the war and the continued blockade and crackdown by the United States, the world economy is unlikely to improve in the next three to five years. With the impact of the epidemic, no region in the world should be a bright spot." While this argument sounds pessimistic, it is basically a consensus in the industry.
In this context, the first requirement put forward by Ren Zhengfei is to increase revenue and reduce expenditure. "in 2023, the budget should maintain a reasonable pace, expand blindly, and businesses with blind investment should shrink or close." Although Ren Zhengfei has repeatedly stressed that Huawei is by no means a "diversified company", the extension of its core business has touched almost every corner of the Internet and communications industries.
For example, the XR (including VR, AR, MR, etc.) display devices that have been caught fire by the meta-universe concept in the past two years, Huawei does not seem to have much interest on the surface, but it should be noted that the founder and core members of the team are from Huawei Lab because the mobile phone business has been blocked and transferred to the black shark in VR.
In fact, Huawei is one of the first companies in the industry to follow the XR track, but it hasn't been around since the launch of a VR Glass in 2019. Maybe VR Touxian is just an attempt at Huawei's consumer business, but such exploration is likely to be less and less in the coming years.
According to Ren Zhengfei's inference, Huawei's life respite period is in 2023 and 2024. "We are not sure whether we can break through in these two years, so everyone should stop telling stories, and we must talk about realization." especially when making business predictions, don't have illusions and tell stories to deceive the company. "
If Huawei at that time needed to continuously increase its R & D investment to consolidate its technological advantage in the industry, then today's Huawei has to make "subtraction" to ensure that the premise of "survival" can be satisfied when it is under pressure from the consumer market.
It's time to talk about money.
"businesses that cannot generate value and profits in the next few years should be scaled back or closed, and manpower and material resources should be concentrated on the main waterway, so that we have to face reality and not have too distant and great ideals to cut through the chaos quickly."
In this statement, Ren Zhengfei highlighted the automotive business: "the smart car solution cannot open a complete front, it is necessary to reduce the research budget, strengthen the commercial closed loop, and take a modular approach to research and development." the focus is on several key components to be competitive, and the rest can be connected to others. "
There have been a lot of rumors about Huawei building cars over the past two years, and Huawei's official message is that its car business will adopt three models: the standardized parts model, the HI model (Huawei Inside model), and the smart car model.
Yu Chengdong has made it clear that the biggest investment in Huawei's car business is intelligent driving assistance, but there is also a view that there is only a layer of window paper between the boundary series models spawned by the smart car model and Huawei's own cars.
However, according to the position of Zhengfei, Huawei will not pierce this layer of window paper in 2-3 years.
Although the auto business has been losing money for a long time and is fully in line with Ren Zhengfei's "reduction criteria", given its long research and development cycle and the nature of the "terminal business future growth curve", it is also difficult to judge how large Huawei will cut the business. More importantly, the smart car solution, as part of Huawei's ICT infrastructure, is expected to make up for the loss of terminal business due to sanctions after the product is launched on a large scale.
As for the terminal business, Ren Zhengfei believes that it will still be the basis for Huawei's rise and breakthrough. However, at present, the potential that the terminal business can tap is very limited.
On the one hand, the scope of multiple rounds of sanctions in the United States is getting wider and wider. After the supply of chips was cut off in September 2020, Huawei proposed the "Nanniwan" project, which aims to bypass the scope of US sanctions and focus on developing smart screens, laptops and other items. However, on the Matebook 16 model released last year, there are "empty graphics card slots on the motherboard", which is enough to prove that Huawei is still constrained by the industrial chain in terms of key components.
On the other hand, there is no sign of a "bottoming out" in the consumer electronics market. Take smartphones as an example. According to the quarterly tracking report released by IDC, the Chinese smartphone market shipped about 67.2 million units in the second quarter of this year, down 14.7% from a year earlier. The news from the supply chain shows that so far, the situation of most manufacturers in the industry cutting orders to remove inventory has not been improved.
Of course, Huawei is also actively seeking changes in the consumer electronics market. A direct sign is that in April, Huawei renamed its consumer business to terminal business, which means that Huawei's terminals are no longer limited to the C-end market, but also to customers in a variety of areas, such as government and enterprises.
At the same time, Huawei is also vigorously promoting the organizational change of "regiment operation" in order to explore and establish a business model in the B-end vertical field. Although the effectiveness of the "regiment operation" has not been confirmed, a Huawei supplier engaged in sensing equipment told Hu that "at least the online information of the docking business can be exchanged."
Both the reforms that began last year and Ren Zhengfei's articles now give people an impression of "simplicity and rudeness." Government and enterprise business process is lengthy, then set up vertical departments, marginal business can not generate profits, then optimize the reduction. This seems to be very different from Huawei, which imagined the future in the past, but it also confirms that Ren Zhengfei's re-mention of the "cold winter theory" is not unfounded.
In fact, his own answer is more direct: "We used to embrace the ideal of globalization and are determined to serve all mankind, but what is our ideal now?" If you survive, you can earn some money wherever there is money. "