.[G]KO/T\KYZSKTZ .URJOTM)U2ZJ 'TT[GR8KVUXZ Who is Huawei? transformation of all industries, thereby fostering economic growth and greatly improving the quality of Huawei is a leading global information and people's lives. communications technology (ICT) solutions provider. Driven by responsible operations, ongoing innovation, We drive sustainable development. As a responsible and open collaboration, we have established a corporate citizen, Huawei has made a significant competitive ICT portfolio of end-to-end solutions in contribution to bridging the digital divide. We are telecom and enterprise networks, devices, and cloud keenly aware of the importance of telecommunications computing. Our ICT solutions, products, and services in emergency response situations: Facing Ebola-affected are used in more than 170 countries and regions, areas in West Africa, nuclear contamination after the serving over one-third of the world's population. With Japanese tsunami, and the massive earthquake that more than 170,000 employees, Huawei is committed to struck Sichuan, China, we hold fast in disaster zones enabling the future information society, and building a to help restore communications networks and ensure Better Connected World. the reliable operation of critical telecom equipment. To further promote sustainability, we develop the next What do we offer the world? generation of ICT talent with our global Seeds for the Future program, in which we give university students We create value for our customers. Together with the opportunity to visit China, receive training, and gain telecom carriers, Huawei has built over 1,500 networks, first-hand experience in the ICT industry. helping over one-third of the world's population connect to the Internet. Together with our enterprise customers, We provide dedicated employees with a strong we employ agile enterprise networks, including open growth platform. Inspiring dedication is one of cloud networks, to drive efficient operations and agile Huawei's core values, and it manifests itself in many innovation across domains like Safe City, finance, ways. We assess employees and select managers transportation, and energy. With our smart devices based on their results, as well as the extent of their and smartphones, we are improving people's digital responsibilities. We provide our teams with a global experience in work, life, and entertainment. development platform, giving young team members the opportunity to shoulder greater responsibilities and We promote industry development. Huawei accelerate their careers. In this way, we have enabled advocates openness, collaboration, and shared more than 170,000 employees to yield ample returns success. Through joint innovation with our partners for their individual efforts, and gain memorable life and peers we are expanding the value of information experience. and communication technology to establish a robust and symbiotic industry ecosystem. Huawei actively What do we stand for? participates in over 300 standards organizations, industry associations, and open source communities, For the past 28 years, hundreds of thousands of Huawei having submitted over 43,000 proposals to drive people have maintained an unwavering focus on our standardization and pave the way for more effective core business, refusing to cut corners or pursue other collaboration. We have joined forces with industry forms of short-sighted opportunism. With a solid, partners to innovate in emerging domains like cloud practical approach to everything we do, we have computing, software-defined networking (SDN), invested patiently, amassing the long-term, focused network functions virtualization (NFV), and 5G. effort that leads to great moments of technological Together, we are promoting ongoing, collaborative breakthrough. Our ability to maintain this strategic industry development. focus boils down to our core values of staying customer- centric, inspiring dedication, persevering, and growing We boost economic growth. Huawei generates by self-reflection. tax revenues, boosts employment, and stimulates the development of the ICT value chain in the countries The digital era has been generous. We will make the where we operate. Perhaps more importantly, we most of the historic opportunities it has presented us, deliver innovative ICT solutions that drive the digital and boldly forge ahead to build a Better Connected World. Contents 2 Message from the Rotating and Acting CEO 100 Corporate Governance Report 6 Business Highlights in 2015 120 Sustainable Development 9 Five-Year Financial Highlights 140 Abbreviations, Financial Terminology, 10 Message from the Chairwoman and Exchange Rates 14 Industry Trends 19 Management Discussion and Analysis 51 Independent Auditor's Report 52 Consolidated Financial Statements Summary and Notes 97 Risk Factors Message from the Rotating and Acting CEO Ideals are not enough. We also need new theory. Ideals give us a vision, and theory gives us the means to achieve it. Over the next 10 to 20 years, we must boldly explore new technological concepts, mathematical models, and algorithms, and in doing so provide society with new theoretical approaches in these areas. In the future, networks will be standardized, simplified, and easy to use. We must broaden our horizons, have a global view, and work together to create value. We must build networks on globally unified standards. And we need to make our contribution to the concepts, theory, and architecture of future data transmission. 2015: Focusing on pipe produced remarkable results In 2015, Huawei's revenue reached CNY395 billion (US$60.8 billion based on the year-end exchange rate), an increase of 37% year-on-year. Our carrier, enterprise, and consumer businesses all met the sustainable growth targets set by our Board of Directors at the beginning of 2015. While creating value for our customers, we have also increased the value of our company. And since the adoption of our pipe strategy, this year in particular has produced remarkable results. In our carrier business, our 4G equipment was widely deployed around the world and is now being used in the capital cities of over 140 countries. We recently launched our 4.5G solution to meet consumer demand for a better experience while protecting carrier investment in 4G. We have built over 280 commercial networks with our 400G core routers. Having implemented our Product + Service strategy, we now support the operations of over 1,500 networks globally, serving more than one-third of the world's population in over 170 countries and regions. More and more carriers now recognize Huawei as a trusted strategic partner. In our enterprise business, we applied our guiding principle of Business-Driven ICT Infrastructure (BDII) to lead the transformation of enterprise IT towards cloud architecture, and the transformation of enterprise networks towards SDN. We remain open to being integrated, and continue innovating jointly with our customers and partners. Globally, we are setting the pace for IT systems based on cloud architecture. Many Fortune Global 500 companies, such as the Industrial and Commercial Bank of China, the China Construction Bank, Deutsche Bahn, Mercedes-Benz, and Volkswagen, have selected Huawei as their partners. We have participated in the construction of over 660 data centers, including 255 cloud data centers. In the future, we will continue to work with our partners to create a sustainable ecosystem for the cloud computing industry. 2 In our consumer business, annual revenue grew by over 70%, securing a position for Huawei among the top three global device companies in terms of market share. This revenue growth is attributable to the robust growth of our mid-range and high-end products, our rapid development in high-end overseas markets, and the great strides we have made with our Honor business model. Following the success of our premium Mate 7 and P7 smartphones, the P8 and Mate 8 further solidified our position in the mid-range and high-end consumer markets. Owing to its approachability and vitality, our Honor brand doubled its revenue in 2015, connecting more consumers than ever before. We have made remarkable achievements in developing our overseas channel, retail, and service capabilities. Our smart watches and fitness bands have hit the fashion world like a storm. In the Internet of Vehicles (IoV), we have partnered with leading global automotive brands. We have made rapid progress in software UX and cloud services, and have effectively satisfied user experience needs across all usage scenarios. Equipping ourselves with ideals and theory to embrace new opportunities Information has always been an important driving factor in the progress of human civilization. From letters, images, and voice, to today's HD video, we generate and consume information at all times. Our pursuit of high-quality information knows no bounds. Today, 4K video is no longer the talk of the town, and Virtual Reality (VR) has taken its place as the hot new trend. There is one thing that we need to understand, however: VR aims to simulate the sensory system of the human brain to deliver a near-perfect experience. This requires the ability to process about 5.2 gigabytes of data every second, which is 200 times the 25 Mbit/s standard defined by the US Federal Communications Commission (FCC) for future broadband networks. We no longer have to take out a second mortgage to pay off a night's worth of 4G download fees. But we need to consider the possibility that a 360-degree VR movie might