Monday, April 17, 2017

Huawei's Target of $150bn Revenue by 2020 - Part 1

Preamble - Huawei little recognised or understood in western circles of power

Huawei is not very well-known in the U.S. for many historical and political reasons and yet it is already a major, and sometimes the leading, player in most geographical and sectoral electronics equipments markets outside of the U.S. Moreover, if it meets the targets it has set itself (and it has a very good record in that respect) it could be close to becoming the world's largest electronics company within the next five years. There are several reasons for this possibly rather dangerous state of ignorance or denial in the U.S. including the following.

Very low level of business in the U.S.

In its latest 2016 report published March 31st Huawei says that geographical sales last year for a region described as The Americas were just over RMB 44 billion, which is roughly $6.35 billion and only about 8% of its global total. Given that all the countries involved in the Americas, other than the U.S., i.e. Canada, Central America, South America and the Caribbean, contribute almost 14% of global GDP it is easy to see that the figure is quite low even for those countries and sales in the U.S. must indeed be very small, probably just a few hundreds of millions of dollars.


Preamble - Huawei little recognised or understood in western circles of power

Huawei is not very well-known in the U.S. for many historical and political reasons and yet it is already a major, and sometimes the leading, player in most geographical and sectoral electronics equipments markets outside of the U.S. Moreover, if it meets the targets it has set itself (and it has a very good record in that respect) it could be close to becoming the world's largest electronics company within the next five years. There are several reasons for this possibly rather dangerous state of ignorance or denial in the U.S. including the following.

Very low level of business in the U.S.

In its latest 2016 report published March 31st Huawei says that geographical sales last year for a region described as The Americas were just over RMB 44 billion, which is roughly $6.35 billion and only about 8% of its global total. Given that all the countries involved in the Americas, other than the U.S., i.e. Canada, Central America, South America and the Caribbean, contribute almost 14% of global GDP it is easy to see that the figure is quite low even for those countries and sales in the U.S. must indeed be very small, probably just a few hundreds of millions of dollars.

2016 financial results

Core numbers from the Huawei 2016 report (RMB millions) except first column in US$ millions:


2016 ($m)  2016 2015 2014 2013 2012
Revenue  75,103 521,574 395,009 288,197 239,025 220,198
Operating Profit  6,842 47,515 45,786 34,205 29,128 20,658
Net profit  5,335 37,052 36,910 27,866 21,003 15,624
Cash flow from ops  7,087 49,218 52,300 41,755 22,554 24,969
Cash/short term inv  20,973 145,653 125,208 106,036 81,944 71,649
Working capital  16,736 116,231 89,019 78,566 75,180 63,837
Total assets  63,880 443,634 372,155 309,733 244,091 223,348
Total borrowings  6,451 44,799 28,986 28,108 23,033 20,754
Owner's equity  20,178 140,133 119,069 99,985 86,266 75,024
Liability ratio  68.40% 68.40% 68.00% 67.70% 64.70% 66.40%

(NB: it is worth noting that while the Huawei 2016 accounting results use the standard practice of converting from local currency to dollars at the average rate on December 31, 2016 (defined as RMB 6.9448 to the dollar), the average monthly exchange rate for all of 2016 was actually about RMB 6.643 to the dollar and at that rate Huawei's sales for the year in dollars would have been $78.51 billion, only slightly behind IBM's revenue for the year of $79.9 billion.)

0 comments:

Post a Comment

See also