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Forging Ahead to Survive and Thrive

—A New Year's Message for 2020, Eric Xu, Rotating Chairman

If not for the bone-deep bite of winter, where would we get the heady scent of plums?

Eric Xu

2019 was an extraordinary year for Huawei. Despite concerted efforts by the US government to keep us down, we've made it out the other side and continue to create value for our customers. We estimate that our sales revenue will top 850 billion Chinese yuan in 2019, an increase of roughly 18% year-on-year. These figures are lower than our initial projections, yet business remains solid and we stand strong in the face of adversity.

Our carrier business has been leading the commercial rollout of 5G networks worldwide, and our enterprise business continues to lay the foundations for the digital transformation of our customers across industries. Globally, more than 700 cities and 228 Fortune Global 500 companies have chosen Huawei as their digital transformation partner. This year we also unveiled our computing business strategy and launched two new offerings: the world's fastest AI processor, Ascend 910, and an AI cluster service for model training.

Our smartphone business continues to see robust growth, with a total of 240 million units shipped throughout the year. Additionally, we have made further progress in developing the ecosystem for an intelligent consumer experience across all scenarios and devices, including personal computers, tablets, wearables, and smart screens.

None of this came easily. At Huawei, we don't believe in miracles.

At the cusp of this New Year, on behalf of the Board of Directors, I'd like to thank all of our customers and partners for your ongoing trust and support. Thanks also to hundreds of millions of consumers around the globe for your enduring delight in Huawei and Honor products.

My sincere thanks to each and every one of our employees for your dedication, and to your loved ones for their unfailing support. And in particular, my special thanks to our employees in the front lines who have been working day and night to patch up the holes in this embattled aircraft of ours, and to their families who have stood by their side.

It's our firm belief that humankind will enter an intelligent world in the next three decades. Digital technology is reshaping the world around us, and we want to make sure that this future is inclusive – that everyone can benefit from the changes digital technology brings. Mature commercial applications of new technologies – particularly 5G, cloud computing, artificial intelligence, and blockchain – are speeding up the digital transformation of all industries. This will present enormous opportunities.

That said, the external environment is becoming more complicated than ever, and downward pressure on the global economy has intensified. In the long term, the US government will continue to suppress the development of leading technology – a challenging environment for Huawei to survive and thrive.

Moving forward, we will leverage our strengths in information and communications technology to enable the digital transformation of all industries, and ultimately bring digital to every person, vehicle, home, and organization for a fully connected, intelligent world.

This will only be possible if we keep on top of long-term trends, keep our strategy focused, and turn crises into opportunities.

In 2020, we will continue to remain on the US Entity List. We won't grow as rapidly as we did in the first half of 2019, growth that continued throughout the year owing to sheer momentum in the market. It's going to be a difficult year for us. We will have nothing to rely on but the hard work of our people, as well as the ongoing trust and support of our customers and partners.

Survival will be our first priority. To this end, we need to remain dedicated, always put our customers first, and keep creating value. Specifically, we will focus on the following four areas: sustaining growth, improving our capabilities, optimizing our organization, and controlling risks.

Sustaining growth

We need to dig deep into opportunities presented by digital transformation, enhance our operational capabilities, proactively plan for and improve the business environment, and create greater value for both our customers and society as a whole.

In our carrier business, we need to actively drive the global development of 5G and seize opportunities in network deployment.

In the enterprise domain, we need to keep fine-tuning our focus on specific industries, customers, and geographies based on changes in the macro environment, and continue to drive growth in data communications, storage, and cloud services.

In our consumer business, we need to continue working on seamless intelligence across all devices and scenarios, with an emphasis on delivering high-quality products and a superior user experience.

After years of effort, we have established solid mechanisms for growing the harvest, but have yet to develop a mechanism that nurtures a more fertile environment overall. We need to get this up and running in 2020. In the meantime, all of our operating units and rep offices need to improve their operations by further enhancing contract quality and delivery efficiency. Resources need to be allocated in a way that reflects the nature of our business, and budgeting and budget execution should be used as effective means of improving operations.

The ecosystem for Huawei Mobile Services (HMS) is the foundation of our ability to sell smart devices in markets outside China. In 2020, we need to go all out to build the HMS ecosystem, ensure that we can keep selling our smartphones in overseas markets, and support the innovation of our application partners.

The Kunpeng and Ascend ecosystems are the cornerstone of Huawei Cloud and our computing business. Our goal is to attract and empower as many pieces of software and applications that run on Kunpeng and Ascend processors as possible, and help drive their commercial success. In 2020, we need to position products powered by Kunpeng and Ascend processors as a core avenue of growth.

Our broader business environment has taken precedence over the traditional four elements of marketing, and is now a key factor that influences our growth. All of our field offices need to double down on efforts to optimize their local business environments. We need to keep working hard to earn the trust of our partners and local governments, improve our reputation in local markets, and keep creating greater value for our customers and society as a whole.

Improving capabilities

Everyone at Huawei needs to enhance their expertise and close gaps in key skillsets.

Change is everywhere: in the macro environment, in technology, and in the dynamics of our industry. We have the aspiration and the will to succeed, but there's a massive gap between our existing capabilities and what's needed to meet customer expectations – between our capabilities and the current stage of our business development, the overall business environment, and the goals we hope to achieve.

Every one of us needs to meet the moment and hone the skills specific to our jobs. Commanders in the field need to enhance their leadership capabilities, insightfulness, and general management skills. Specialist managers and experts need to improve their domain-specific expertise. Regardless of their position, every member of the Huawei team needs to upskill themselves to better meet their job requirements.

The company will optimize competency and qualification (C&Q) criteria and raise the bar for C&Q assessment. We will assign more responsibilities to experts and field employees, and at the same time raise their personal grades and delegate more authority.

We encourage everyone to work hard and go the extra mile to bring their capabilities to a new level. We also encourage high performers to go and work in the field, because generals are forged on the battlefield, not in the office.

Going forward, we remain committed to embracing and leveraging a global supply chain – including US suppliers – to hone our competitive edge. Beyond developing leading products, we need to extend our roots deep into the soil so that we can maintain supply continuity. We also need to go beyond the limits of the skies above us, striving for theoretical breakthroughs, technological inventions, and ground-breaking products and business models.

We will keep enhancing our software engineering capabilities, pressing ahead with our US$2 billion five-year budget for building quality, trustworthy products and solutions.

Optimizing our organization

We need to optimize our organizational structure and workforce to unleash our company's vitality.

By transforming the organization, our primary goals are to hone our ability to fight and cut red tape. Any teams that don't contribute to enhancing the competitiveness of operating units or improving strategic support and services will be merged or downsized. People who are made redundant during this process will be transferred to other teams to ensure focus and the company's survival.

The goal of organizational transformation in our ICT business is to support our commercial success in cloud and computing. We will do so by enhancing our expertise, efficiency, and competitiveness in these domains.

We need to steadily roll out contract reviews and conclusions at the rep office level, giving our rep offices complete autonomy in operations and contract decision-making. We need to do the same for experts, giving them more authority to make decisions in order to unlock their full potential.

Enhancing the mobility of our R&D employees is vital to keeping the organization fresh and poised for growth. We must also step up efforts to develop local talent and help them maximize their value, so they can be the mainstay of our local business and the stronghold of local operations. Professional teams are the foundation of our day-to-day operations, and we need to invest more in their stability.

We need to set the right example and continuously revitalize our organization by removing mediocre managers and complacent employees. To begin with, every one of us needs to fight inertia and rid ourselves of complacency. That goes for managers and their teams alike.

Our administrative teams (ATs) need to assume greater responsibilities and improve the way they work. If an AT isn't functioning properly, its director should be the first to blame. ATs also need to replace members who are too comfortable with the status quo to make progress or take bold management measures. ATs need to deliver on their responsibilities, including defining leadership principles, selecting managers, and incentivizing and motivating teams. ATs need to live and pass on our core values.

At Huawei, we're not looking for senior managers who design their careers based on personal whim, but those who respond to the call of duty. Managers at all levels need to put company interests above personal gain and go where they are needed most, including hardship regions.

Promotion and demotion is a fact of life for managers. This needs to be codified and incorporated into day-to-day operations. High performers who make great contributions on the front lines will be brought to the top and given the opportunity to develop faster.

We will promote those who truly help our customers succeed, who have made strong contributions in key positions, and who put long-term success ahead of short-term gains by continuously contributing value to the company. The tree-growers among us.

At the same time, we will remove mediocre managers more quickly – people who have lost their enterprising spirit, who have built their position on personal connections or empty and unactionable reporting, and those who prioritize short-term gains and pass problems on to their successors. The pit-diggers among us.

We need to more actively plan out our managerial pipeline. Every year, managers performing in the bottom 10% will be removed. Our goal is to forge capable, professional teams that brim with vitality and are primed for the fight.

Controlling risks

We need to ensure supply security and business continuity, enhance cyber security and privacy protection, and ensure compliance with all applicable laws and regulations.

We must increase supply chain diversity as this is essential to our supply security. Any risk that undermines our business continuity must be treated as a matter of life-and-death. We need to race against time and cast away all manner of unrealistic hope. In all of our regional and rep offices, we need to set up a role for managing business continuity and ensure accountability. In addition, we need to embrace bottom-line thinking: optimize our risk mitigation plans and allocate resources more flexibly so we can respond more readily to the risks of uncertainty.

At Huawei, compliance with all applicable laws and regulations has always been the tone at the top and the foundation of our global operations. Strengthening cyber security and user privacy protection is at the absolute top of our agenda, and we will continue to adhere to all related laws and regulations in the markets where we operate.

Difficulty is the prelude to greater success, and adversity the whetstone of an iron-willed team. The US government's campaign against Huawei is strategic and long-term. It's a great opportunity for us to motivate ourselves and build up some muscle. A great opportunity for us to be more united as a team, and develop the capabilities we need to better navigate future challenges.

Fortune favors the bold. With a united front, the support of our customers, partners, and consumers, and concrete effort to keep creating value, nothing can keep us from forging ahead.

Always remember: We are the bamboo stalk that stands tall and proud against wind from all directions, whether north or south, east or west.

I wish all of you a Happy New Year.

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