Huawei Investment & Holding Co., Ltd. 2017 Annual Report Bring digital to every person, home and organization for a fully connected, intelligent world Who is Huawei? Founded in 1987, Huawei is a leading global information and communications technology (ICT) solutions provider. We provide telecom carriers, enterprises, and consumers with competitive ICT solutions, products, and services. We work in more than 170 countries and regions, serving over one-third of the world’s population. Among our 180,000 employees, there are more than 160 different nationalities with a localization rate of almost 70%. What do we offer the world? We create value for our customers. Together with telecom carriers, Huawei has built more than 1,500 networks, helping connect over one-third of the world’s population. Together with our partners, we serve government and public utilities, as well as enterprise customers in sectors like finance, energy, transportation, and manufacturing. We help organizations and industries go digital by providing them with open, flexible, and secure ICT infrastructure platforms that promote greater synergy between devices, networks, and the cloud. We also provide enterprise customers with stable, reliable, and secure cloud services that evolve with their needs. With our smartphones and other smart devices, we are improving people’s digital experience in work, life, and entertainment. We promote industry development. Huawei advocates openness, collaboration, and shared success. Through joint innovation with our customers, partners, and peers, we are expanding the value of information and communications technology in service of a more robust and symbiotic industry ecosystem. Huawei is an active member of more than 360 standards organizations, industry alliances, and open source communities, where we work together on mainstream standards and lay the foundation for shared success. We have also joined forces with industry partners to innovate in emerging domains like cloud computing, software-defined networking (SDN), network functions virtualization (NFV), and 5G. Together, we are driving the industry forward. We drive economic growth. Huawei generates tax revenues, provides local employment opportunities, and stimulates the development of the ICT value chain in every country where we operate. Furthermore, we deliver innovative ICT solutions that drive the digital transformation of all industries, fostering economic growth and greatly improving quality of life. We enable sustainable development. As a responsible corporate citizen, Huawei has made a significant contribution to bridging the digital divide, leaving our mark in places as remote as Mount Everest and the Arctic Circle. We are keenly aware of the importance of telecommunications in emergency response situations. Having faced Ebola-affected areas in West Africa, nuclear contamination after the Japanese tsunami, and the massive earthquake that struck Sichuan, China, we hold fast to restore communications networks and ensure the reliable operation of essential telecoms equipment in disaster zones. To further promote sustainability, we prioritize low-carbon and environmental protection throughout all planning, design, R&D, manufacturing, delivery, and O&M activities, providing our customers with top-of-the-line products and solutions that save energy and reduce environmental impact. As for people, we help develop the next generation of local ICT talent with our global Contents Seeds for the Future program, where we work with young talent across 108 countries and regions to transfer knowledge, cultivate understanding and 02 Message from the Rotating and greater interest in the ICT industry, and encourage Acting CEO broader involvement in the digital community. 08 Business Highlights in 2017 We provide dedicated people with a strong growth 10 Five-Year Financial Highlights platform. Inspiring dedication is one of Huawei’s 11 Message from the Chairs core values, and it manifests itself in many ways. We assess employees and select managers based on their contribution, as well as the extent of their responsibilities. We provide our teams with a global 15 Industry Trends development platform, giving young team members 18 Management Discussion and Analysis the opportunity to shoulder greater responsibilities 62 Independent Auditors’ Report and accelerate their careers. In this way, we have enabled over 100,000 Huawei people to yield ample 63 Consolidated Financial Statements returns and gain memorable life experience. Summary and Notes 104 Risk Factors What do we stand for? 107 Corporate Governance Report For the past 30 years we have maintained an 127 Sustainable Development unwavering focus, rejecting shortcuts and easy opportunities that don’t align with our core business. 137 Abbreviations, Financial Terminology, and Exchange Rates With a practical approach to everything we do, we concentrate our efforts and invest patiently to drive technological breakthroughs. This strategic focus is a reflection of our core values: staying customer-centric, inspiring dedication, persevering, and growing by reflection. The digital era has been generous. We will make the most of this historic opportunity, and boldly forge ahead to build a fully connected, intelligent world. Message from the Rotating and Acting CEO As we embark on a new journey of growth and transformation, our vision and mission are clear: We will bring digital to every person, home and organization to help build this fully connected, intelligent world. Our new journey: This shift from connecting people to Building a fully connected, connecting all things will give rise to new possibilities in large-scale data analysis intelligent world and application. With cloud data centers spanning the earth and pervasive edge Huawei is entering a new stage of computing, ambient intelligence will turn development. Through ongoing innovation data into new business opportunities. It in technology and business, we have what will drive innovation in applications across it takes to create greater value for our all industries, helping them unleash their customers – and for society as a whole. full potential. This new stage of development is the Emerging technology is propelling the product of a rapidly evolving world where world forward, driving nonstop change technology changes in the blink of an eye. in consumer preferences and business From billions of devices for human use needs. New experiences and business to ubiquitous industrial sensors, when models are popping up all around us, and all things have the ability to sense and with them, a whirlwind of opportunities and perceive, the boundaries between the challenges. physical and digital worlds will dissolve, producing an endless surge of data. 02 Huawei Investment & Holding Co., Ltd. At the heart of this change is the evolution we can more effectively enable the digital of information and communications transformation of all industries. technology, which has grown from a simple vertical industry to a broad enabling Building ubiquitous connectivity. In platform that serves society as a whole. addition to connecting people, our ICT is the primary force behind the digital digitization efforts are shifting towards the and intelligent transformation of industry, industrial IoT. Through advancements in and it’s the catalyst of a new industrial technology like 5G, we are helping telecom revolution. It will eventually open the doors networks connect more people, more to a fully connected, intelligent world. homes, and more organizations. Ultimately, we aim to position telecom networks as the Huawei will lead the way across this basic infrastructure of the digital world. threshold, not just embracing change, but innovating ahead of it. We will On the standards front, we are working to help the world go digital. We will help drive consensus between the ICT industry it go intelligent. And we will seize new and other verticals to bring the benefits of opportunities along the way. general-purpose connection technology to more domains. We aim to replace As we embark on a new journey of growth proprietary protocols and technology for and transformation, our vision and mission local area networks with open frameworks are clear: We will bring digital to every and standards that can be shared between person, home and organization to help all industries. This will enable greater build this fully connected, intelligent world. synergy between different sectors and serve as the basis for a new digital industry To do this, we will create greater value ecosystem. for our customers, build better platforms for our partners, provide our employees Creating a better experience with with more opportunities, and promote the broadband. Video is playing an entirely new balanced growth of communities the world role in the digital transformation process. over. We will work hard to ensure that the As the richest means of sharing data, its fruits of innovation are readily available to applications know no bounds. all people, all homes, and all organizations. We will do our part to promote economic A thriving video industry is essential to growth that is not only sustainable, push broadband requirements to a new but inclusive, and challenge ourselves level, and create more room for growth. to generate more substantial value for We believe that video is the key to growing society. and monetizing telecom networks, and we are helping our carrier customers succeed Our focus: ICT in this market by providing the network