Huawei(HUAWEI)2023-03-31 10:00Intangible Assets and Amortization - Intangible assets such as software, patents, and trademarks are amortized over their useful lives ranging from 2 to 20 years[1] Research and Development Costs - Research and development costs are generally expensed as incurred, with capitalization only occurring in the later stages of project development[1] Lease Liabilities and Measurement - Lease liabilities are initially measured at the present value of lease payments, using either the implicit interest rate or the incremental borrowing rate[1] Impairment of Non-Financial Assets - The company assesses potential impairment of non-financial assets, including property, plant, and equipment, at each reporting period[4] Financial Assets and Liabilities - Financial assets classified as FVOCI are re-measured at fair value at each reporting period, with gains/losses recognized in other comprehensive income[12] - Financial liabilities are classified as either amortized cost or fair value through profit and loss, with interest expenses recognized in financial costs[13] Derivative Financial Instruments - Derivative financial instruments are measured at fair value and re-measured at each reporting period, with changes recognized in profit and loss[14] - The company uses certain derivative instruments as hedging tools to mitigate foreign exchange risk on net investments in foreign operations[14] Construction in Progress - Construction in progress is transferred to property, plant, and equipment when it reaches the intended usable state[16] Operating Lease Income - Operating lease income is recognized on a straight-line basis over the lease term[18] Technological Innovations - The company's new flagship smartphone, HUAWEI Mate 50 series, leads multiple technological innovations, inheriting the Mate series' decade-long legacy and delivering cutting-edge technological experiences to consumers[35] Smart Life Strategy - The company adheres to the "1+8+N" strategy, focusing on five major scenarios: smart office, fitness and health, smart home, smart travel, and audio-visual entertainment, providing consumers with a rich all-scenario smart life experience[38] - The company's "1+8+N" strategy drives continuous innovation across five major scenarios, bringing a fully connected smart life experience[34] Energy Solutions - The company's iPV technology and light-storage synergy technology enhance photovoltaic power generation and utilization, helping green electricity become the main power source for ICT[30] - The company's intelligent lithium battery energy storage system, combined with intelligent peak-shifting technology, helps operators optimize the value of site energy storage assets, saving electricity costs and reducing carbon emissions[33] - The company's investment in data center energy solutions continues to drive innovation and efficiency in energy management[32] Automotive Innovations - The company's high-torque output capability and precise intelligent oil cooling system enable a 3-second 0-100 km/h acceleration, providing a sports car-level driving experience[29] - Huawei's DriveONE power domain products and solutions focus on key performance areas such as charging, range, power, and safety in the automotive electrification field[56] Financial Assets and Impairment - The company's financial assets, contract assets, and lease receivables are subject to impairment based on expected credit losses, with changes in impairment provisions recognized in profit or loss[19] Deferred Tax Assets and Liabilities - The company's deferred tax assets and liabilities are recognized when they relate to the same tax authority and are part of the same taxable entity[24] Investment Properties - The company's investment properties are measured at cost less accumulated depreciation and impairment losses, with rental income recognized in accordance with accounting policies[28] HarmonyOS Ecosystem - HarmonyOS ecosystem has over 2,300 partners, with new ecosystem product shipments exceeding 181 million units in 2022, covering various aspects of smart home[39] - The number of Huawei terminals equipped with HarmonyOS reached 330 million, with over 2 million developers and more than 2,300 partners in the Hongmeng ecosystem[84] - Huawei has over 300 million developers and 2,300 partners in the Hongmeng ecosystem[84] R&D Expenditure and Patents - Huawei's R&D expenditure in 2022 was approximately RMB 161.5 billion, accounting for 25.1% of annual revenue, with cumulative R&D investment over the past decade exceeding RMB 977.3 billion[53] - Huawei holds over 120,000 valid authorized patents globally as of the end of 2022, leading in multiple mainstream standard patent fields such as mobile communication and short-range communication[53] - Huawei's R&D employees exceeded 114,000 by the end of 2022, representing 55.4% of the total workforce[53] Computing and Software Innovations - Huawei's heterogeneous computing cluster software platform improves computing resource utilization by over 35%, with performance improvements exceeding 100% in deep big data analysis and retrieval scenarios[58] - The company contributed over 30 core subsystems and more than 10 million lines of core code to the OpenHarmony community, with over 5,000 community code contributors and 220+ software and hardware products passing compatibility tests by the end of 2022[110] - The company's OpenEuler community attracted over 12,000 developers and 770+ enterprise members, with partners launching nearly 20 commercial distribution versions based on the community edition, exceeding 3 million commercial deployments[110] Cybersecurity and Compliance - The company has obtained more than 30 cybersecurity certifications in 2022, including 5G base stations and core network components[70] - The company collaborates with China Mobile to deepen innovation in 5G application security, leveraging the 5G Application Security Innovation Promotion Center[71] - The company has partnered with Thailand's National Cybersecurity Agency (NCSA) to enhance local cybersecurity talent and awareness, earning the "Cybersecurity Excellence Award"[72] - In the UAE, the company collaborates with the National Cybersecurity Committee (CSC) to build a cybersecurity ecosystem and received the "Cybersecurity Industry Achievement Award"[72] - The company has been awarded the "Prime Minister's Award of the Republic" in Tunisia for contributions to knowledge sharing, talent development, and ecosystem building in cybersecurity[72] - The company has received the "Data Protection Trustmark" from Singapore's Infocomm Media Development Authority, affirming its commitment to privacy protection[72] - The company has developed a "security cloud brain" platform to enhance security operations efficiency, leveraging cloud architecture for rapid threat detection and response[94] - The company has upgraded the privacy and security centers in HarmonyOS 3, introducing an application control center to manage risky apps[94] - The company has established a cross-functional trade compliance management organization, with global teams ensuring compliance in procurement, R&D, sales, and supply chain operations[82] - The company has implemented a comprehensive anti-bribery compliance system, with dynamic risk identification and monitoring to ensure effective management of compliance risks[82] - The company has strengthened its logistics network resilience by developing "self-controllable" logistics solutions with partners to address supply chain uncertainties[86] - The company invested in over 4,000 global suppliers for cybersecurity risk assessment and management, and signed data processing or protection agreements with over 5,000 privacy-related suppliers in 2022[95] - The company strengthened its supply chain cybersecurity by enhancing security design specifications, vulnerability management, and end-to-end security protection systems, linking billions of data points[95] Financial Performance - The company achieved sales revenue of RMB 642,338 million in 2022, a year-on-year increase of 0.9%, with a net profit of RMB 35,562 million[112] - Net financial income in 2022 was RMB 10,180 million, an increase of RMB 5,250 million compared to 2021, primarily due to an increase in other net financial gains[133] - Total assets at the end of 2022 reached RMB 1,063,804 million, an 8.2% year-on-year increase, with current assets accounting for 72.8% of total assets[150] - Cash and short-term investments balance at the end of 2022 totaled RMB 373,452 million, effectively managing liquidity risk[134] - Customer contract revenue in 2022 was RMB 641,420 million, compared to RMB 636,080 million in 2021[153] - Net financial income increased by 106.5% to RMB 1,018 million in 2022 compared to RMB 493 million in 2021[157] - Total assets grew by 8.2% to RMB 1,063,804 million in 2022 from RMB 982,971 million in 2021[157] - Cash and short-term investments decreased by 10.3% to RMB 373,452 million in 2022 from RMB 416,334 million in 2021[157] - Long-term borrowings increased by 12.9% to RMB 183,183 million in 2022 from RMB 162,276 million in 2021[157] - Operating cash flow declined by 70.2% to RMB 17,797 million in 2022 from RMB 59,670 million in 2021[163] - Sales revenue increased slightly by 0.9% to RMB 642,338 million in 2022 from RMB 636,807 million in 2021[169] - Net profit decreased significantly by 68.7% to RMB 35,562 million in 2022 from RMB 113,718 million in 2021[169] - Sales gross margin dropped by 4.4 percentage points to 43.9% in 2022 from 48.3% in 2021[169] - Operating profit margin fell by 12.5 percentage points to 6.6% in 2022 from 19.1% in 2021[169] - Enterprise business revenue grew by 30.0% to RMB 133,151 million in 2022 from RMB 102,444 million in 2021[167] - ICT infrastructure business revenue reached RMB 353,978 million in 2022, accounting for the largest share of the company's total revenue[176] - Terminal business revenue was RMB 214,463 million in 2022, representing a significant portion of the company's overall revenue[176] - Cloud computing business generated RMB 45,342 million in revenue in 2022, showing growth potential in this sector[176] - Digital energy business contributed RMB 50,806 million to the company's revenue in 2022[176] - China remained the largest market, generating RMB 403,999 million in revenue in 2022[177] - Europe, Middle East, and Africa region contributed RMB 149,206 million to the company's revenue in 2022[177] - Total assets increased to RMB 1,063,804 million in 2022, up from RMB 982,971 million in 2021[196] - Property, plant, and equipment assets grew to RMB 137,024 million in 2022, compared to RMB 124,134 million in 2021[196] - Cash and cash equivalents increased to RMB 147,269 million in 2022, up from RMB 128,395 million in 2021[196] - Total liabilities rose to RMB 626,728 million in 2022, compared to RMB 568,319 million in 2021[196] Foreign Currency Transactions - The company uses the exchange rate at the transaction date to convert foreign currency transactions into the functional currency of each company within the group[75] - Monetary foreign currency assets and liabilities are translated into the functional currency at the exchange rate at the reporting date[75] - Non-monetary foreign currency assets and liabilities measured at historical cost are translated at the exchange rate at the transaction date[75] - Non-monetary foreign currency assets and liabilities measured at fair value are translated at the exchange rate at the date the fair value is determined[75] Credit Risk Assessment - The company assesses the credit risk of customers regularly, focusing on their payment ability and willingness, which is reflected in the estimated expected credit loss for receivables and contract assets[78] - The company evaluates the recoverability of consideration based on the assessment of the customer's ability and willingness to pay at the time of contract formation[77] - The company estimates the expected credit loss by considering historical payment records, customer-specific information, and forward-looking information[78] - The company conducts individual assessments for receivables and contract assets that meet pre-set criteria, such as financial distress of customers or risk mitigation arrangements[79] - For remaining receivables and contract assets, the company estimates impairment provisions based on customer credit risk ratings and aging analysis[79] - The company may need to recognize or reverse impairment provisions in future periods if the financial condition of customers deteriorates or improves[79] Ecosystem and Partnerships - The company has developed over 43,000 ecosystem partners, with more than 10,000 cloud market products, 12,000 certified Kunpeng application software solutions, and 2,000 Ascend innovation solutions[155] - The company has contributed nearly 300 cybersecurity proposals to international standards organizations 3GPP and GSMA, maintaining industry leadership for several years[139] - The company has over 2,000 employees who have obtained industry-recognized certifications such as CISSP, CCSK, and CIPM, with over 140 MOOC courses launched and more than 200,000 participants[138] - The company has contributed to the Linux Kernel 6.1, ranking first in contributions[135] - The company has initiated multiple heavyweight open-source projects, with hundreds of enterprises joining the project communities, including openEuler and OpenHarmony, which have been contributed to the OpenAtom Foundation[130] - The company has established deep-level communication and strategic cooperation with nearly 800 global industry organizations, holding over 450 important positions[140] - The company collaborated with over 30 leading industry organizations in the past five years, focusing on digital economy growth and intelligent world development, and released the "Industry Digital Platform Ecosystem White Paper" in 2022[100] - The company submitted over 68,000 standard proposals in more than 200 standard organizations, contributing to 5G-Advanced and other key technology standards[125] - The company actively participated in global standard organizations such as ETSI, IEEE, ITU, and IEC, contributing to F5G, Wi-Fi 7, 5G sustainability, and zero-carbon energy standards[103][104][105][106] Developer Programs and Training - The company invested RMB 1.94 billion in 2022 through various developer programs, supporting 365,000 developer training sessions and certifying 220,000 developers[111] Flagship Stores and Consumer Services - Huawei's flagship stores have become urban living rooms for over 2 million consumers, offering a variety of activities and services, including coffee services and accessibility features[43] - Huawei's HarmonyOS 3 upgraded image recognition function allows visually impaired users to identify objects and environments through the phone camera[44] - Huawei's official certified second-hand phone business achieved a complete closed-loop from recycling to refurbishment and resale, promoting the reuse of second-hand phones[46] Data Center Energy Solutions - The company's data center energy sector released the Global Ecosystem Partner Policy 1.0 in November 2022, enabling partners and building a new industrial ecosystem[57] AI Governance and Business Intent - The company has formulated and published AI business intent and six AI governance principles to guide research, planning, and implementation across relevant business areas[65] Network and Digital Transformation - The company has built over 1,500 networks with operators, aiding millions of enterprises in digital transformation and connecting over 3 billion people globally[67] Vulnerability Management - New high-risk vulnerabilities can be traced to products and customers within minutes, with solutions provided within 3 days and patches within 30 days, supporting timely risk reduction for customers[65] Trade Compliance and Financial Control - The company has established a comprehensive trade compliance management organization, with a global professional team tracking external legal changes and implementing compliance policies[82] - The company has implemented a robust financial compliance control system, managing compliance risks across sales, procurement, supply, service, and HR processes[82] Open Source Contributions - The company has initiated multiple heavyweight open-source projects, with hundreds of enterprises joining the project communities, including openEuler and OpenHarmony, which have been contributed to the OpenAtom Foundation[130] Global Industry Collaboration - The company has established deep-level communication and strategic cooperation with nearly 800 global industry organizations, holding over 450 important positions[140]