By using effective business strategies, such as research and product diversification, Huawei recorded its strongest growth in four years in 2023.
You probably remember the Huawei handsets that dominated the market in recent years. They seemed to be everywhere. In fact, it has become so popular that it has captured over 30% market share in Bangladesh.
But almost suddenly, the brand disappeared.
In May 2019, citing national security concerns, the administration of former US President Donald Trump announced sanctions, after which Google suspended Huawei’s access to Android; which means users could not access Gmail, YouTube, Google Drive and even the Google Play Store on new Huawei products.
Sales plummeted and these “imposed restrictions” were responsible for the demise of Chinese telecom giant Huawei in Bangladesh. In 2020, Huawei’s well-paid employees in Bangladesh lost their jobs due to the company’s closure in the local market.
At the time, it was widely believed that US sanctions would harm Huawei’s global business. But the company’s 2023 annual report says otherwise. And a recent visit to Huawei’s headquarters in Shenzhen, China, also changed my impression.
Zero point
Walking into Huawei’s headquarters in Shenzhen, China, I felt like I was entering a very different world. Instead of the high-rise buildings and metropolitan features that make up China’s major cities, the multibillion-dollar company’s headquarters resembled a hotel resort. Its green, calm and calm environment pleasantly surprised me.
The Chinese Embassy office in Dhaka recently organized a trip for a group of journalists to visit Huawei headquarters. I was one of the visitors.
We crossed by bus through a garden of almost a kilometer, inside the enclosure, to reach the main building where the journalists were welcomed in a large room. This room is used to meet business clients. The whole building looked like a small forest.
A Huawei executive explained how founder Ren Zhengfei planned to build the headquarters on a large resort-like plot of land because he likes working in a quiet and peaceful environment. Thus, he also wanted his employees to work in a calm and natural environment, the executive said.
Zhengfei, who still holds the title of CEO at 80, comes into the office regularly and walks around the grounds for physical exercise, we’re told. I could understand why; On the one hand, black swans on a large lake inside the resort were reason enough.
Outside the headquarters, when I visited smartphone stores in two cities – Guangzhou and Shenzhen – I could see that Huawei still holds a special place in the hearts of Chinese people despite Google’s restrictions. This is understandable, since local users rely on an alternative search engine developed by Huawei.
However, on the global stage, the business situation is different. Although Huawei smartphone sales declined, this had little impact on the company as the main revenues come from its diversified business segments, including ICT infrastructure (accounting for 55%) and digital services segment (accounting for 30%), a senior Huawei executive told the visiting delegation of journalists.
Product diversification and research as an antidote
The presentation by the Huawei executive explained how the company diversified its activities to conquer the international market.
Citing its engagement with bKash, the second largest mobile financial services provider in Bangladesh, the executive explained how the company has continued to expand its business in the global market through diversified digital solutions.
The Huawei authority said it signed a memorandum of understanding with bKash in 2023 to develop a digital payment ecosystem for the company.
Huawei has diversified its businesses into ICT infrastructure, new energy, automotive solutions, cloud services, digital financial solutions and carbon emissions elimination, abandoning smartphone businesses. This was a strategic decision aimed at conquering international markets by defying the effects of US sanctions imposed in 2019.
Additionally, the company has invested heavily in research and innovation to explore new businesses, which has enabled it to continue its business growth in the international market.
In 2023, the company invested 23.4% of its total turnover in research and innovation, the highest figure in 36 years since its founding. Usually the company invests a maximum of 10%.
A total of 114,000 employees, or 55% of the workforce, worked in research and innovation in 2023, according to the company’s annual report.
Huawei’s annual report for 2023 shows that its share of consumer business, including sales, fell to 35.7% of total revenue. In 2019, when US sanctions were imposed, this figure was 54.4%.
Although the share of consumer businesses has declined, new business shares, including ICT infrastructure and other new business segments, dominated revenue with a share of 60% in 2023, according to the annual report.
Additionally, Huawei officials said it has digital money management solutions for banks. The company provides core banking solutions, digital infrastructure and data center services to global banks.
Cloud network services are a new and steadily growing business segment, seeing revenue growth of 17.3% in 2023, according to the annual report.
The share of cloud computing, including servers, storage, databases, networking, software, analytics and intelligence, on the Internet accounted for 7.8% of the total revenue of the telecommunications company in 2023.
Towards a green future?
Huawei is now focusing on new business segments, including smart cities, smart transportation, smart industries and renewable energy, according to the presentation.
Authorities said they are building ultra-fast charging stations for electric vehicles across China in line with the government’s carbon emissions roadmap.
Electric vehicles are slowly catching up with the traditional car market as the government subsidizes users who use electric cars in the city of Shenzhen, they said.
The company has also developed carbon neutrality solutions to reduce carbon emissions.
The Chinese market accounted for 67% of the company’s total revenue, up from more than 59% in 2019, according to Huawei’s annual report.
The company also offers smart household solutions – a complete system to generate electricity for a household. It has the second largest solar power system, the largest single-site photovoltaic plant in the world, and a solar power supply system.
The company has also seen success in the 5G sector through innovative applications, even after the UK government committed to removing Huawei from 5G infrastructure by 2027 due to similar concerns raised by UNITED STATES.
By the end of 2023, the number of 5G users worldwide exceeded 1.5 billion, and the 5G networks built by Huawei continued to deliver leading experiences. The firm provides 46% of the global 5G network, the Huawei authority said.
Despite a slowdown in consumer business after U.S. sanctions, the company’s profits have grown steadily thanks to diversified businesses.
The company saw a surprising 144% growth in net profit, reaching CNY 86,950 million in 2023. This comes after two years of falling profits following US restrictions.
In the 2023 annual report, Huawei cited the words of its president Hu Houkun: “We have been through a lot in recent years. But through challenges one after another, we managed to grow.
We closed 2023 with a turnover of CNY 704.2 billion. Our ICT infrastructure businesses remained strong and our consumer businesses met expectations. Our cloud computing and digital energy businesses have seen steady growth and our intelligent automotive solutions business has started to be delivered at scale. »
