A revenge on fate. Monday, March 28, Huawei staged the presentation of its annual results in Shenzhen like never before: bombarded on the front of the stage, in a setting reminiscent of the splendor of a European palace, Meng Wanzhou, the group’s financial director and daughter of the founder Ren Zhengfei, did not hide his pleasure. Not so much the return of face-to-face events, after two years of a pandemic, as his regained freedom.
“Nice to see you,” said the leader soberly, wearing a black dress with a butterfly-shaped brooch. Meng Wanzhou has returned to China after three years of house arrest with an electronic bracelet in Canada. The one who has just taken the lead by accessing the rotating general management of Huawei was arrested at the end of 2018 in Vancouver, at the request of the American authorities who accused her of having lied in order to suspend the sanctions against the Iranian regime.
Since her return to the country, the fifties had not appeared publicly. His presence therefore symbolizes in itself the state of mind of the Chinese group. As much as the image projected during the presentation: an icebreaker splitting a frozen sea. Three years after the American sanctions which strongly hinder the giant, the former herald of Chinese technology intends to pursue his path at all costs.
Meng Wanzhou had come to deliver good news. It revealed a record profit of 16.2 billion euros for 2021, which jumped 76% year on year. Despite the sanctions, “our ability to make profits and generate cash flow has increased,” boasted the chief financial officer. Except that these very good results leave a misleading impression. They are for the most part exceptional, due to the sale of Ho-nor smartphones and a drastic cost reduction policy. And Huawei’s turnover is gray, down 28.6% in 2021, to 87 billion euros.
Unhooking smartphones
Above all, the American sanctions had a lasting impact on the activity of Huawei’s smartphone, while the group was close to the first place in the world. The impossibility of using 5G chips or the ban on using Google’s Android system prevents the group from playing on equal terms with its competitors. The turnover of its consumer activity is in replication of 50%. An unmistakable sign, Huawei did not communicate the number of smartphones sold last year. Its market share has fallen from 13.5% to 3% globally in 2021, according to Gartner, and there is no indication that it will be able to regain its former glory. At the Mobile World Congress in Barcelona at the end of February, Huawei preferred to deny the obvious: “We will not abandon the smartphone market, defended William Tian, head of the group’s consumer division for Western Europe. . Despite the challenges granted, we are coping.”
To counter this stampede, Huawei has multiplied the outputs of connected watches, in-ear headphones, speakers or even computers. With very relative success. “Despite a brand considered to be very good technologically, consumers have turned away from it for a long time, notes Annette Zimmermann, analyst for Gartner. Even if the strategy of creating an ecosystem is relevant, users will prefer to invest in brands that can use Android .”
High-end partnership
In order to improve its brand image in these new categories, Huawei has developed partnerships with experts in their fields. At the stage of what it had achieved for its high-end cameras in smartphones with Leica, Huawei is increasing collaborations with the French brand of its Devialet: speakers of course, but also televisions and even laptops in Spine. “The contract had been signed before the American sanctions, specifies Franck Lebou-chard, boss of Devialet. company of engineers and they come for our technology.”
Devialet uses this way to finance its R&D expenses and increase its notoriety in China, when Huawei buys audio know-how and a luxurious positioning. If the strategy in the enclosures proves to be relevant, the transplant does not seem to have taken hold in France for laptops. “When launching their first MateBook X two and a half years ago, we identified a great danger, confides a competitor.
The product was really impressive and very well finished. But they never took off in terms of market share.” In the first two months of this year, Huawei even fell, with 2% market share in the ultraportable category according to GfK, when they were at 3 % last year at the same period. In 2021, no significant trace either of the Chinese manufacturer on the market for wireless Bluetooth headphones in France.
Thoroughly on R&D
As a result, the company has significantly increased its research expenditure, to its highest level for ten years. In order to quickly find a new disruptive technology. It is thus more than 20 billion euros which were invested last year in R&D, that is to say 22% of the turnover. Huawei wants to accelerate in its own Cloud, especially in the Middle Kingdom.
“It’s relevant because there is enough room for them, alongside Alibaba and Tencent, judge Peter Liu, analyst for Gartner. Huawei has already joined the Top-5 Chinese Cloud players and it will benefit from markets for companies close to the state. The group opts for a form of strategic response while waiting for better days. “One of their exit doors is to accelerate in B to B and the autonomous car”, summarizes Thomas Husson, analyst for Forrester. Even if Huawei dramatizes the situation, the Chinese dragon does not yet live its swan song.
An unexpected Russian opportunity
The Russian invasion of Ukraine risks indirectly benefiting Huawei. The European telecom infrastructure groups Nokia and Ericsson have announced their departure from Russia. Thus, Moscow is forced to turn to Huawei and ZTE in order to acquire telecommunications equipment, such as for the deployment of 5G. According to the Financial Times, the Shenzhen group even plans to increase its presence in its four Russian R&D centers and recruit sales staff in Moscow. In the smartphone market, with the withdrawal of Samsung and Apple, Huawei also has an unprecedented opportunity to regain its splendor. However, the United States could increase its sanctions, in particular if the services that Huawei provides to Moscow use American technologies.