Huawei posts profit rise of 34 percent

Strong performance is attributed to improved global macroeconomy, effective corporate strategy

Chinese telecom equipment giant Huawei Technologies Co Ltd posted a net year-on-year profit increase of 34 percent in 2013, thanks to strong domestic demand for speedier mobile network equipment and a rising status as one of the world's major smartphone vendors.

However, Shenzhen-based Huawei suffered a significant setback in the North America market. Despite this, the company enjoyed robust development in both network and consumer businesses in Latin American countries, Huawei's sales in overall Americas slipped 1.3 percent year-on-year to reach 31.4 billion yuan ($5.1 billion), mainly because of the alleged "national security concerns" that prevented it from expanding to the United States.

The Americas contributed the least to Huawei's total sales, while Europe, the Middle East and Africa market was the biggest revenue engine for the company, delivering 84.7 billion yuan in sales. Huawei earned 84 billion yuan, an increase of 14.2 percent year-on-year, from the Chinese market.

Although Huawei is not listed, it has published annual reports since 2006 and aims to achieve a greater transparency. Huawei said on March 31 that it gained 239 billion yuan in sales last year, up 8.5 percent year-on-year.

Huawei's net income rose to 21 billion yuan last year from 15.6 billion yuan in 2012. It became the biggest annual net profit rise for the Chinese company over the past five years.

Eric Xu, rotating and acting chief executive officer of Huawei, attributed Huawei's strong performance to the improved global macroeconomy, a better business environment and the effective execution of corporate strategy.

"In 2014, the global economy will continue to recover," Xu says. Factors including the increased coverage of ultra-broadband and mobile broadband, greater popularity of smart devices and the transformation of IT systems indicate the year of 2014 will be "a new beginning, not just for Huawei, but for the industry as a whole", he adds.

Xu expects Huawei to grow into a $70 billion company by 2018, with sales doubling in the following four years.

According to public figures, Huawei has already overtaken Sweden-based Ericsson to become the world's biggest telecom equipment vendor. Ericsson reported 2013 annual revenue of $35.3 billion.

Another Chinese telecom equipment maker, ZTE Corp, said recently that its net profit increased by 149 percent year-on-year in 2013 to 1.36 billion yuan, after a steep loss the previous year.

Carrier network business remained the biggest revenue source for Huawei, accounting for about 70 percent of Huawei's total revenue. The formal commercial rollout of the fourth generation (4G) network in China was no doubt a big boost for Huawei's carrier business, say analysts.

Meanwhile, Huawei emerged as the world's third-largest smartphone manufacturer last year, following South Korea-based Samsung Electronics Co Ltd and US-based Apple Inc. Huawei's consumer business, mainly consisting of smartphone sales, received 57 billion yuan in revenue, a year-on-year rise of 18 percent.

"Innovation plays a critical role in Huawei's rise because it helps Huawei to gain competency, avoid price wars and respond swiftly to market demand," says Kevin Wang, China research director of iSuppli IHS, a US-based research company.

Huawei said it spent 30.7 billion yuan last year on research and development, about 13 percent of its revenue, up 3.4 percent from the 29.7 billion yuan it spent in 2012.

shenjingting@chinadaily.com.cn

(China Daily Africa Weekly 04/04/2014 page21)