Focus on cash flow and profitability amid an economic downturn, Huawei founder t...

Focus on cash flow and profitability amid an economic downturn, Huawei founder told employeesHuawei

Focus on cash flow and profitability amid an economic downturn, Huawei founder told employees

Rebbeca Ren

posted on 17 hours ago

Ren Zhengfei wrote an internal letter outlining three key business areas he believes will propel the company into the future.

Huawei founder Ren Zhengfei recently spoke to company employees, emphasizing the importance of adjusting strategies amid a global economic downturn.

"During the next three years, the company will shift its focus from scaling to profitability and cash flow in order to weather the crisis," Ren wrote in an email to staff on Monday, the financial news outlet Yicai reported. 

"With survival the main principle, marginal businesses will be shrunken and closed, and the chill will be felt by everyone," the founder said.

In the letter, Ren mentioned that the company's future growth will come from "cloud computing," "digital power," and "smart automobile" sector.

“Cloud computing should prioritize supporting the growth of Huawei and pursue the path of empowering the Industrial Internet," Ren said in the letter. 

For “digital power”, investment should be raised in value-creating strategic opportunities. Huawei's digital power business refers to providing tailor-made smart energy services and solutions to clients.

Ren pointed out that for "smart automotive" business, the corporation must first establish itself as the indisputable market leader in many important areas, and then collaborate with others in other areas.

The Chinese telecommunication giant has been under pressure from US sanctions over the past few years, clouding the development of its overseas business. According to the company's most recent earnings report, revenue in the second quarter was 170.6 billion yuan ($25.5 billion), up 1.4% from a year earlier.

Revenue from its enterprise unit, which includes cloud and business services, grew the fastest, rising about 28% to 54.7 billion yuan in the first half.

The company's carrier business remains by far the largest, growing 4% year-on-year to 142.7 billion yuan in the first six months of 2022.

The device business continued to be impacted by declining smartphone sales. In the first half of the year, the segment's revenue plunged by 25% to 101.3 billion yuan.

Huawei said in its earnings report that it plans to increase investment in automotive-related businesses this year, with an increase of 2,000 engineers over last year and an increase of $500 million in investment.