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Huawei 2019 Annual Report Who is Huawei? Founded in 1987, Huawei is a leading global provider of information and communications technology (ICT) infrastructure and smart devices. We are committed to bringing digital to every person, home and organization for a fully connected, intelligent world. We have more than 194,000 employees, and we operate in more than 170 countries and regions, serving more than three billion people around the world. Who owns Huawei? Huawei is a private company wholly owned by its employees. Through the Union of Huawei Investment & Holding Co., Ltd., we implement an Employee Shareholding Scheme involving 104,572 employees. Only Huawei employees are eligible to participate. No government agency or outside organization holds shares in Huawei. Who controls and manages Huawei? Huawei has a robust corporate governance system. Shareholding employees elect 115 representatives to form our Representatives’ Commission. This Commission then elects the Chairman of the Board and the remaining 16 board directors. The Board of Directors elects four deputy chairs and three executive directors. Three deputy chairs take turns serving as the company’s rotating chairman. The rotating chairman leads the Board of Directors and its Executive Committee while in office. The board exercises decision-making authority for corporate strategy and operations management, and is the highest body responsible for corporate strategy, operations management, and customer satisfaction. Meanwhile, the Chairman of the Board chairs the Representatives’ Commission. As Huawei’s highest decision-making body, the Commission makes decisions on major company matters, like profit distribution, capital increases, and the elections of members of the Board of Directors and the Supervisory Board. Who does Huawei work with? Externally, we rely on our customers and partners. Customers are at the center of everything we do, and we create value for them with innovative products. Internally, we rely on our hard-working and dedicated employees. At Huawei, those who contribute more get more. We work with stakeholders including suppliers, partners, industry organizations, open source communities, standards organizations, universities, and research institutes all over the world to cultivate a broader ecosystem that thrives on shared success. In this way we can help drive advancements in technology and grow the industry as a whole. We create local employment opportunities, pay taxes, and comply with all applicable laws and regulations in the countries where we operate. We also help local industries go digital, and openly engage with governments and the media. What do we offer the world? Contents We create value for our customers. Together with our partners, we provide telecom carriers with network products and solutions that are innovative, simplified, intelligent, secure, and 02 Message from the Rotating Chairman trustworthy. We also open up our ICT capabilities for industry customers, providing them with products and services that are 07 Business Highlights in 2019 intelligent, secure, and trustworthy. With our smart devices, 08 Openness & Transparency we improve people’s digital experience in work, life, travel, and entertainment. 10 Five-Year Financial Highlights 11 Message from the Chairman We ensure secure and stable network operations. Cyber security and privacy protection are and will always remain our top priorities. We believe strongly in the power of openness and 15 Industry Trends transparency. We will keep working to improve our software engineering capabilities and business continuity management 19 Management Discussion and Analysis systems, while enhancing the resilience of our networks. 89 Independent Auditors’ Report For more than 30 years, we have worked closely with our carrier 90 Consolidated Financial Statements customers to build over 1,500 networks in more than 170 Summary countries and regions. Together, we have connected more than 142 Risk Factors three billion people around the world, and we have maintained a solid track record in security throughout. 145 Corporate Governance Report We promote industry development. Huawei advocates 158 Sustainable Development openness, collaboration, and shared success. Through joint innovation with our customers and partners, we are expanding 173 Abbreviations, Financial Terminology, and Exchange Rates the value of ICT to foster a healthy and symbiotic industry ecosystem. Huawei is an active member of more than 400 standards organizations, industry alliances, and open source communities, where we work with our peers to develop mainstream standards and lay the foundation for shared success. Together, we are driving the industry forward. We enable sustainable development. Huawei is committed to bridging the digital divide and promoting digital inclusion. We have helped connect places as remote as the highest peaks in the Himalayas and the frigid depths of the Arctic Circle. We are keenly aware of the importance of telecommunications during emergency situations. In response to cataclysmic events like the massive earthquake in Wenchuan, China, the nuclear accident triggered by a tsunami in Japan, and Ebola in West Africa, our people hold fast in disaster zones to restore communications networks and ensure the reliable operations of essential telecom equipment. To further promote sustainability, we prioritize a low-carbon footprint and environmental protection. We are also helping develop the next generation of local ICT talent to boost the digital economy. Message from the Rotating Chairman Over the past year, we have faced unprecedented challenges across the board. It’s been difficult. But thanks to the unfailing trust and support of our customers and partners, backed by the solidarity and dedication of our employees, we have managed to stay afloat. The external environment will only get more complicated going forward. We need to keep enhancing the competitiveness of our products and services, promoting open innovation, and creating greater value – both for our customers and society at large. This is the only way we can seize the historic opportunities presented by the digital and intelligent transformation of industries, and maintain robust growth in the long run. 2019 was an extraordinary year for Huawei. Our carrier business has been leading Despite enormous outside pressure, our the commercial rollout of 5G networks team forged ahead with a singular focus on worldwide. In 2019, in order to further creating value for our customers. This helped commercial adoption and promote new us earn their respect and trust, as well as innovation in 5G applications, we established that of our partners around the globe. In 5G joint innovation centers together with 2019, our sales revenue rounded off at 858.8 carriers in Europe. At the same time, our billion Chinese yuan, up 19.1% year-on-year. RuralStar base station solutions are now Our net profits reached 62.7 billion Chinese being used in over 50 countries and regions, yuan, and our operating cash flow topped bringing mobile Internet to more than 40 91.4 billion Chinese yuan. Business remains million people living in remote areas. solid. 02 Huawei Investment & Holding Co., Ltd. Our enterprise business continues to support the Mankind is poised to enter an intelligent world digital transformation of customers across industries within the next two or three decades. Digital and as we help lay the foundations for the digital world. intelligent transformation, now in full swing across Globally, more than 700 cities and 228 Fortune Global all industries, will open up abundant opportunities 500 companies have chosen Huawei as their digital for growth. At the same time, the global community transformation partner. also faces an enormous set of challenges in areas like climate change, uneven social development, and Our consumer business continues to see robust cyber security. It’s safe to say that, moving forward, growth, with more than 240 million smartphones the global macro environment will become more shipped throughout the year. We have made further uncertain than ever before, and downward pressure progress in optimizing the Seamless AI Life strategy on the global economy will continue to intensify. across all scenarios and devices, including personal computers, tablets, wearables, and smart screens. And yet, as people, we all want a better life. Prosperity is an innate human pursuit. We need I want to take this opportunity to thank every one to put development first, embrace global, open of our customers, partners, and Huawei employees. collaboration, and rely on technological innovation to Your trust means the world to us; we will keep on address the myriad challenges before us. This is how providing more competitive products and services to we create greater prosperity. create greater value for everyone. At Huawei, we are looking to the distant future as we The intelligent world is fast set up our business to fully harness the opportunities brought about by the digital and intelligent approaching, bringing both transformation of industries. challenges and opportunities Digital technology is reshaping everything. It’s setting Driving technological the stage for a world where all things can sense, all breakthroughs to advance the things are connected, and all things are intelligent. By industry and create greater value 2025, 5G will serve 58% of the global population, and it will combine with technologies like 4K and higher- for customers and society definition video, VR/AR, AI, and cloud
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