China’s Huawei to boost expansion with tech partners like Leica

Telecommunications equipment giant rings up record earnings last year

PUBLISHED : Saturday, 02 April, 2016, 2:03am
UPDATED : Saturday, 02 April, 2016, 10:22am

Huawei Technologies, China’s largest manufacturer of telecommunications equipment, plans to increase collaboration with its technology partners to drive business expansion after posting record earnings last year.

Senior management at Shenzhen-based Huawei said on Friday the company expected to post total revenue of US$75 billion this year, which would mark a new high.

Deputy chairman Guo Ping, who served as acting chief executive at Huawei the past six months, said in a statement the company “owes its long-term growth to the sheer size of the information and communications technology market”, as well as “an open and collaborative approach”.

Data from the privately held company showed that it pursues various projects with major technology allies, including Intel, IBM, Accenture and SAP, across 36 joint innovation centres worldwide.

“We will work closely with our customers and partners to maximise industry development opportunities,” Guo said.

The World Intellectual Property Organisation in Geneva announced last month that Huawei topped the list of international patent filers for the second straight year. Huawei applied for 3,898 patents, 456 more than the previous year and more than those filed by Qualcomm, Samsung Electronics, Sony and Hewlett-Packard.

The organisation tracks applications filed under the Patent Cooperation Treaty, an agreement that gives a filer patent protection in 148 countries with a single application.

Huawei, which has operations in about 170 countries, estimated that it made investments of about 240 billion yuan (US$37 billion) in research and development from 2006 to last year. It funded more than 100 new projects last year.

The company posted a 32 per cent increase in net profit to 36.9 billion yuan last year, up from 27.9 billion yuan in 2014, on the back of strong sales at its enterprise and consumer businesses.

Total revenue jumped 37 per cent to 395 billion yuan from 288 billion yuan in 2014.

That bested revenue growth in 2008, when Huawei’s 12-month sales surged 33 per cent year on year.

Sabrina Meng Wanzhou, Huawei’s chief financial officer, said revenue was driven by massive deployments of 4G mobile networks and greater smartphone penetration around the world.

She pointed out that the company’s carrier equipment business made up 59 per cent of total sales. Its consumer business contributed 33 per cent, while enterprise business had a seven per cent share.

Unfazed by the slowdown in China and the prevailing uncertainty in the global economy, Meng said

Huawei “will press ahead with management transformation projects to better prepare ourselves for the future”.

Meng, the daughter of Huawei founder Ren Zhengfei, said the company wrapped up last year “in a robust financial position, with stable cash flow from operating activities, increased cash availability and effective risk control”.

Huawei had cash and cash equivalents totaling 96.2 billion yuan at the end of December, compared with 77.9 billion yuan in the same period in 2014.

Huawei forecast its consumer business to reach US$30 billion in revenue this year on the back of growing smartphone sales.

Guo said a steady increase in overseas sales of its smartphones will fuel that growth.

Shenzhen-based Huawei aims to become one of the industry’s best smartphone makers in the next five years, Guo said.

The company’s consumer business includes smartphones, tablets, wearable devices like smartwatches, mobile broadband routers, new smart home products and accessories.

“It is very competitive in terminal business. To offer best products and best user experience to the market, we need to cooperate with strong partners in the industry,” he added.

Data from research firm IDC showed Huawei was the third-largest global smartphone supplier last year, behind Samsung Electronics and Apple and ahead of Lenovo Group and Xiaomi.

It said Huawei, with shipments of 106.6 million smartphones last year, became the fourth mobile-phone supplier in history to ship more than 100 million such devices in a year.

Guo said Huawei’s own estimates showed that it shipped 108 million smartphones around the world last year.

Huawei reported its consumer business sales rose 73 per cent last year to 129 billion yuan (about US$20 billion), up from 74.7 billion yuan in 2014.

That made up 33 per cent of Huawei’s record-high revenue of 395 billion yuan last year.

“In 2015, we had breakthroughs in market share in the middle and high-end mobile phone market [segments]. That’s why we had good growth last year,” Guo said.

The company’s large-screen P8 and Mate 7 smartphones compete directly against the Galaxy S6 of Samsung Electronics and Apple’s iPhone 6s models.

Guo pointed out that there was no plan for Huawei’s consumer business to be spun off as a separate company amid its success in a highly competitive market.

“Sustainable profitability is our priority ... in the consumer business,” he said. “To offer the best products and user experience in the market, we need to cooperate with strong partners in the industry.”

In February, Huawei announced that it was teaming up with Germany’s Leica Camera in an initiative that they claim will reinvent smartphone photography.

Guo said Huawei will launch it latest flagship smartphone, the P9, in London next week with advanced camera technology from Leica.

The alliance with the German optics and digital imaging giant would appear to benefit Huawei in its bid to differentiate its Android smartphones from those of other Chinese mobile device brands.

A Huawei spokesman said the company started collaborating with Leica more than a year ago to address the premium segment of the smartphone market.