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Focusing on ICT Infrastructure and Smart Devices to Enable and Drive the Intelligent World

At the 14th annual Huawei Global Analyst Summit held in Shenzhen on April 11, 2017, Eric Xu, Huawei's Rotating CEO, opened the summit with an in-depth overview of the company's strategy. "The journey to an intelligent world has already begun," he said. "Many years of exploration and innovation in technology are driving industry development, presenting huge business opportunities. Huawei will remain committed to building more connections, enlarging data pipes, and driving digital transformation. By focusing on ICT infrastructure and smart devices, we will enable this intelligent world and drive its ongoing progress."

Xu went on to discuss how providing cloud services has already become a basic business model. "Beginning in 2017, Huawei will focus on public cloud services. We will invest heavily in building an open and trusted public cloud platform, which will be the foundation of a Huawei cloud family. This family will include public clouds we develop together with operators, and public clouds that we operate on our own."

Below is the full text of Eric Xu's speech:

Ladies and gentlemen, good morning.

Before we take a look at Huawei's strategy, let me provide you with an update of our business performance last year. In 2016, our total revenue was CNY521.6 billion. Our operating profit was CNY47.5 billion, and cash flow from operating activities was CNY49.2 billion. Growth in all of our businesses was quite good in 2016. Last year, one of our key priorities was to increase our investment for the future. Our aim was to turn this investment into tomorrow's competitive edge, so we spent 14.6% of our annual revenue on R&D. This investment helped make our products and solutions more competitive, while driving progress and technological advancement across the industry.

Over the past 10 years, Huawei's total R&D investment adds up to CNY310 billion. Our R&D headcount is more than 80,000. This investment has helped us maintain a leadership position in many domains. In the future, we plan to invest US$10–20 billion in R&D annually. This intensity of investment will support the company's ongoing growth, which will remain steady, though perhaps not as fast as it has been in the past.

Over the past two years, we increased our investment in basic research. This was a rather large adjustment. We raised the percentage of our budget spent on research and innovation in the hopes of exploring key future technologies, laying a better foundation for us to enable the intelligent world.

The world of the future will be an intelligent world. We are confident in this. And this intelligent world has three major characteristics:

These are the characteristics of the future intelligent world. As humanity evolves, Huawei is positioning itself as an enabler and driver of the intelligent world. We hope that, through our efforts, we can work together with the industry to make this world a reality.

This journey to an intelligent world isn't one that we just began today. It began many, many years ago. Many years of exploration and innovation in technology are driving industry development, presenting huge business opportunities.

If we look back, as early as 1995, Siemens achieved the very first machine-to-machine connection. That was 22 years ago. Now, there are over eight billion IoT connections around the world. As early as 1999, Video Networks in the UK launched the world's first IPTV service. That was 18 years ago. Today, more than 150 million homes have IPTV services. The first mobile video service was launched by DOCOMO in 2001, 16 years back. Nowadays, there are over two billion mobile video subscribers worldwide. Amazon offered the first cloud services to enterprises in 2006, 11 years ago. Today, all types of cloud services are used by over 40 million businesses.

These trends will undoubtedly press forward. Each of these opportunities came up against all manner of problems and challenges along the way, but there's no stopping them today: they are the primary drivers behind the next wave of growth. With such a massive buildup in progress and experience over the years, we are convinced that an inflection point to new growth is upon us. On the journey to an intelligent world, how can companies seize the huge range of opportunities that arise? This is something we've been thinking about, and it's precisely where we hope to make our contribution.

To seize these opportunities – to not fall behind – we believe the answer is for enterprises to become digital enterprises. All organizations have to become digital organizations, including businesses, government agencies, non-profit organizations, and schools. Only by going digital can they keep up as we move towards an intelligent world. But what exactly is a digital organization? Our definition and objectives must be clear, otherwise there's nothing to work towards.

We need to continue discussing and exploring the objectives of digital organizations over time because, as I mentioned earlier, only through further clarification of our target will we have a clear direction, and only with a clear direction can we make fewer mistakes.

Let's talk smart devices. Nobody knows what form future smartphones or smart devices will take. But one thing we know for sure is that they will evolve from smart to intelligent, and will become a sort of personal assistant. Looking at the progress of phones over the years, in the past, we primarily used them to make calls. These days, phones enable us with all sorts of apps that make life easier and work more efficient. In the future, phones will go from enabling us to intelligent assistants that understand us. Huawei has been doing some experiments along these lines. Last year we launched our own intelligent phone as part of a greater exploration effort. Through this process of exploration, we have come to believe that the direction of smart devices is quite clear.

As Huawei positions itself as an enabler and driver of the intelligent world, we need to define what we do and what we don't do – what we focus on ourselves, and where we need to work with others. This has been the subject of internal discussion for years, and now our strategy is fairly clear-cut. It's threefold: Building More Connections, Enlarging Data Pipes, and Enabling Digitization.

Building more connections is about connecting the unconnected, including both people and things. It's also about increasing bandwidth and delivering a better experience.

Our second strategic initiative is enlarging data pipes. We want to make video pervasive to empower work and life. Whether it's used in communication, troubleshooting, education, or healthcare, we want to make video an active part of our lives. People want to do these things through video, and not simply rely on voice and data services of the past.

The third is enabling digitization. We aim to help the ICT industry fully embrace the cloud and enable all organizations to go digital. Cloud services will be a basic business model in the future. So part of our strategy is to drive cloud services as the ONE platform for customer engagement and customer service.

A little more on building more connections. Huawei has been working in this area for the past 30 years. Our mission is to build a Better Connected World. It's about connecting people to people, people to things, and things to things. At the same time, we want to provide seamless connections across all scenarios, so people can have a smooth and continuous experience whether they are at work, at home, or in the car. And we won't stop there. The next step is to drive continuous improvement in connected experience.

As for enlarging data pipes, we increasingly find that video has become the primary or basic medium of information exchange in life, work, management, decision-making, and public safety. So how can we enable video to play a bigger role – empower people's lives, their work, and all sorts of different industries? This is a question we should actively explore. More specifically, we want to enable telecom operators to succeed in their video business, to position video as an important means of driving data traffic growth and monetization. At the same time, for all industries and businesses, we want to build a video-based production system to help them improve the efficiency and quality of their production and decision-making.

When it comes to enabling digitization, we have been working in a couple of areas. One is building All-Cloud ICT infrastructure that enables all organizations to go digital. Second, we are working to help telcos serve their enterprise customers with cloud services. Third, we will help telcos build cloud-based, intelligent, fully digital operations systems that deliver a ROADS experience. Fourth, we will start with building a digital Huawei. We are keenly aware that, only by addressing a broad range of challenges and problems, gaining the right experience, and drawing lessons from that experience, will we stand a better chance in helping other industries and organizations succeed in their digital transformation process.

Next, I'd like to touch on some areas of widespread interest. Specifically, some of our thoughts in these areas and what we've been working.

The first is public cloud. Many people have doubts about Huawei's commitment to public cloud. They wonder if Huawei is determined to stick with it, or if we will give up halfway like other companies out there. In fact, we have taken a two-pronged approach to our work in public cloud:

Cloud services have become a basic business model. They are a crucial part of what we do, as we provide ICT infrastructure for operators and enterprise customers, and as we help launch mankind into an intelligent world. Cloud is the essential component here; it is a fundamental model in engaging with customers. For this reason, we are determined to build an open and trusted public cloud platform, and work with partners to provide customers with public cloud services.

To this end, this year Huawei has established a dedicated Cloud Business Unit (BU) with one single mission: to get a solid public cloud business up and running. And we're going to invest in it heavily to achieve our goals. Our strategy here is a bit different. We would like to build a Huawei public cloud family. This family will include public cloud(s) independently operated by Huawei, and public clouds developed with telcos, where we combine telco strengths with our own to tap into the public cloud market. Examples of this approach include the Open Telekom Cloud with DT and eCloud with China Telecom.

We will also work with telcos to serve key industries and, cooperating with partners, build an entire public cloud ecosystem. We want to help customers in different verticals migrate their applications to the cloud, and further develop cloud-native applications on our public cloud. The greatest advantages we have here are our global service presence, our ecosystem of partners worldwide, and our strong customer base in the enterprise market. By bringing together our online and offline capabilities, and building upon years of partnership with telcos, we hope to explore a different way of doing public cloud.

Next, artificial intelligence. It's a popular topic. At Huawei, we do not position AI as a new business in itself, or a new industry we are about to create; rather, it is an enabling technology that we use to improve our existing products, solutions, and services so that we can create better value for our customers. We will also use AI to increase efficiency and make our phones intelligent.

We've had a pretty clear IoT strategy for years. We are clear about what we do and what we don't do. In the IoT domain, we position ourselves as a provider of products and components. Traditional networking is naturally part of our business. That, combined with enterprise IoT gateways and home IoT routers, will ensure that all things get connected. 

At the same time, we provide a cloud-based IoT connection management platform, which builds on our years of experience in communications technology. This platform can help operators and our partners realize secure, reliable, and efficient IoT connections. It also provides scenario-specific APIs with which our partners can develop industry-specific applications. 

IoT chipset, with built-in LiteOS, is also something we do, and the idea is to make communication and connection in the IoT environment much easier. In a nutshell, in order to capture the value of IoT, we will work to develop a cohesive IoT ecosystem, which all partners and telcos can leverage as they address the IoT needs of different vertical industries.

This is what Huawei does. What we don't or can't do is also clear. We don't do industry-specific IoT applications. We don't develop or resell IoT devices. And we don't do end-to-end integration for different industries or enterprises.

This whole issue around strategic positioning is something we've been thinking about for years. Now it's very clear. We focus on ICT infrastructure and smart devices, and we strive to become an enabler and driver of the intelligent world.

That's all for my presentation. Thank you.