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Fire is the Test of Gold

A New Year's Message for 2019
Guo Ping, Rotating Chairman

Marcus Tullius Cicero, a Roman philosopher, once said, "The greater the difficulty, the greater the glory." Truer words were never spoken as we bring 2018 to a solid close. It has been an eventful year, to say the least. But we have never stopped pushing forward, and as a result our 2018 sales revenue is expected to reach 108.5 billion US dollars, up 21% year-on-year.

We have signed 26 commercial contracts for 5G with leading global carriers, and have already shipped more than 10,000 5G base stations to markets around the world. More than 160 cities and 211 Fortune Global 500 companies have selected Huawei as their partner for digital transformation. We have shipped more than 200 million smartphones, and have made remarkable breakthroughs in both our PC business and IoT ecosystem for smart homes. Huawei Cloud has launched over 140 cloud services in 18 categories, and we are working with our partners to serve global customers with 37 availability zones across 22 regions. This year we also announced our AI strategy and launched a full-stack portfolio of AI solutions for all scenarios. This portfolio includes the world's first all-scenario AI chips–our Ascend series–as well as related products and cloud services.

Our business performance remains strong, and this is by far the most direct form of validation that we can receive from our customers. It is also our best response to negative conjecture and market restrictions. Here I would like to thank all of our customers and partners, as well as the public, for your trust and support. Thanks to our employees for your incredible, hard work. And finally, I would like to extend my gratitude to your families for their unfailing support and understanding. No matter what changes we might face, our procurement strategy will remain unchanged. We will keep our policy consistent especially for our US suppliers and firmly collaborate with them for shared success.

In the coming year, we will see new waves of development in digitization and intelligence, and we may very well encounter even greater difficulties. In times like this, we must summon our inner strength, improve the quality of our operations, inspire passion across the organization, and continue forging ahead to satisfy customer needs and achieve strategic leadership.

In 2019, we will focus on strategic businesses and strategic opportunities and build a more resilient business structure. We will continue to optimize our product investment portfolio to achieve end-to-end strategic leadership. As part of this, we need to retain products that are competitive and appealing, and phase out those that aren't. We will cut down on the development of products that haven't been competitive for some years now, and redirect our people towards areas of strategic opportunity. If we can develop the simplest possible network architecture, make our transaction models as simple as possible, ensure the highest level of cyber security and privacy protection, produce the best products, and provide the best services, no market can keep us away.

In 2018, we successfully optimized the investment portfolio for our Carrier Software & Core Network Business Dept. A group of key people remained in the carrier software domain to help it increase profitability, while others transferred to other domains to support the company's strategic development. The Carrier Software & Core Network Business Dept has set a benchmark for other departments in terms of both organizational and business transformation. Lonely heroes are among the greatest.

In 2019, we will fully enhance our software engineering capabilities to build trustworthy, quality products. Our products and solutions have earned the trust of our customers in more than 170 countries and regions. We have a very strong track record in cyber security. Huawei has never and will never present a security threat.

Today, the trustworthiness of ICT products has become the top concern of our customers, and solid software engineering capabilities and practices are the foundation for building this trust. We will hold ourselves to the highest standards, placing cyber security and privacy protection at the very top of our agenda. We plan to systematically enhance our software engineering capabilities over the next five years, building trust and high quality into each and every one of our products and solutions.

We will inspire greater passion in the field, and focus on growing the harvest and increasing the fertility of our soil. Through a pilot project for contract approval at the rep-office level, we aim to inspire greater passion and increase the per-capita contribution of our teams in the field. We will do this while also ensuring internal and external compliance, meeting financial targets, and maintaining sustainable development. For this project, we will use working capital as a constraint and total rewards as an incentive.

Under centralized governance, we will gradually optimize our operations and establish a new operating model. HQ will loosen control and delegate more authority to field offices. It will focus on budget management while field offices make good use of the authority they're given. In essence, budgets will represent the direction of the company, and decision-making authority will be delegated to those who are closest to our customers.

By optimizing the relationship between HQ and field offices, we aim to increase productivity, and inspire our teams in the field to make greater contributions, which will naturally bring them greater returns. We will continue to use AI in our GTS, Finance, and Supply Chain to automate large amounts of highly repetitive work. This will help us drive efficiency and address practical pain points in our business departments.

We will refocus the efforts of our manager and expert teams on business success while building out stable teams of professional operations staff. The opposite of success is not failure, but mediocrity. We can't let our managers become overcautious or commonplace, and we need to prevent Huawei itself from becoming a mediocre company. Our managers must have drive, not apathy. Constant vigilance, perhaps a bit of madness even, is vital to success. We will continue to open our arms and embrace scientists from around the world, while strengthening the rotation of our own experts. Generalists and specialists at Huawei need to rotate, and we must use our examination and appraisal systems to weed out the experts who are no longer qualified. By further bolstering our professional operations staff, we will be able to build a set of stable, efficient, and quality operational systems and teams.

We will optimize individual performance management and build a more united team. When managing performance, we should not overly focus on individual results and responsibilities. Of course, we need to inspire our people to keep improving their performance and capabilities, but we also need to inspire them to do the same for their teammates. While maintaining a focus on results and responsibilities, we should also de-emphasize output as a factor of productivity. We need to look at how much value our people create for customers, how they help others maximize their contribution, and how they use the output of others to improve their own. We will learn from Google Corps and form our special forces.

We will value the most dedicated among us, and put everyone on equal footing when rewarding contribution. We should explore incentive structures that better match the characteristics of different businesses while ensuring the consistency of our HR policies. We need to combine different kinds of incentives to reflect different responsibilities and contributions, both for teams and individual employees. This will give people the extra motivation they need to push themselves and achieve more. Naturally, those who contribute more will earn more. Bonuses should serve as an incentive for short-term contributions, and also as a guide for future investment. We should reward those who work to grow the harvest, as well as those who work to increase the fertility of our soil for future growth.

We will look out for others, collaborate for shared success, and build a favorable business ecosystem. As the dynamic between world powers becomes more intense, we will see even greater uncertainty in the macro business environment. We aren't equipped to change the macro environment, but what we can do is keep our feet on the ground and improve the business ecosystem for our own industry.

We must step up efforts to establish our global presence and increase investment, making tangible contributions to local communities and working to secure opportunities for fair competition. We need to establish fields, both internally and externally, where we can proactively engage with stakeholders like governments, media outlets, our partners and suppliers, and industry standards organizations. Every Huawei employee is an ambassador of our core values and a representative of the Huawei brand. We also need to understand different value systems around the world and use a more global mindset to resolve the issues we encounter in western countries.

We will remain calm and composed in the face of adversity, and use the certainty of legal compliance to deal with the uncertainty of international politics. Going global means complying with the laws of all countries and regions where we operate. This is the most important basis for us to survive, serve, and contribute to the world at large. We must continue to incorporate compliance requirements into all business activities through carefully aligned policy, systems, organizations, processes, culture, training, and communications. These requirements must be ingrained in the awareness and behavior of each and every Huawei employee. We must not be discouraged by malicious incidents or temporary setbacks, and must remain determined to achieve global leadership. Setbacks will only make us more courageous, and incredibly unfair treatment will drive us to become the world's number one.

Over the past three decades, we have served our customers with religious devotion, working closely with them and our partners to bring telecommunications technology beyond the confines of ivory towers and labs and give it practical application in cities and remote regions the world over. By doing this, we are bridging the digital divide between developed and underdeveloped countries and regions, and connecting more than three billion people around the world. We can proudly say that we have left a profound impact on the course of human civilization.

Today, as an important leader and contributor in the ICT industry, Huawei is now a member of more than 380 industry organizations, where we serve in 300+ key positions and submit more than 6,000 proposals each year.

We are ahead of others in domains like wireless, optical, data communications, and smart devices. For 5G markets that choose to not work with Huawei–they will be like an NBA game without star players: the game will go on, but with less deftness, flair, and expertise. As for new developments in technologies like AI, big data, and cloud, we are in sync with the industry and primed to take the lead.

In the years ahead, the ICT industry will continue to overflow with excitement and promise. Building on 30 years of experience, Huawei will accomplish great things. Each and every Huawei employee will accomplish great things, too.

Digital transformation is in full swing, and we find ourselves at the cusp of an intelligent world. Consumers are actively looking for more advanced, more trustworthy digital technologies and services. Going digital and intelligent will be a long process, so we need to keep innovating and delivering cutting-edge results.

Always remember that the journey is hard, but joyful. Fire is the test of gold. Hardship and pressure will only make us more united and stronger. I have no doubt that we will achieve what we've set out to do: to bring digital to every person, home and organization for a fully connected, intelligent world.

A thousand ships sailed past the shipwreck; our day to brave the winds and waves will come. No hardships or difficulties can stop us sailing forward.

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