Question1: Thanks very much for the presentation of your vision. What I'm most interested in is the reciprocal barrier being brought up by the US, and earlier this year there has been some unfortunate situation where Huawei was forced to drop the relationship with AT&T in the US. Could you provide some commentary around how you see the business environment developing with the USA? We both heard about the news about ZTE specifically related to the Iran export deal. So I'd be very interested in your perspective on how you see the business environment developing in that case. Thank you.
Answer: There are many stories between China and the United States. For these stories, even if we spend the next 60 minutes, we won’t be able to complete the discussion. It’s certainly beyond me to clearly explain what’s going on between China and the US, or to drive resolution of these issues. Regarding Huawei's positioning in the United States, this has been asked many times at the Analyst Conference over the past years. Every time I made it very clear, and our company also expressed our attitude and position on different occasions, so this time I don’t have more information to add. For Huawei, we still focus on doing our own things well. No matter what difficulties we encounter, we can only survive and thrive by doing our own business well and serving our customers better. There are things we cannot change its course, and it’s better not to put it on top of your mind. In this way, we have more energy and time to serve our customers, and to build better products to meet the needs of our customers. In some cases, just let it go and we’ll feel at ease.
Question2: In your previous presentation, you mentioned the progress of Huawei's consumer business, enterprise business and operator business. I would like to hear from you about Huawei Cloud BU progress in the market, including the goals for the future. In addition, Huawei has been talking about cloud alliances in the past few years. What is the development progress of Huawei's self-supported Cloud partner's joint venture? How is it considered?
Answer: With regard to Huawei Cloud, we have a clear positioning within the company. It is positioned as a foundation and platform for all our businesses to engage with customers. As we implement the All Cloud strategy, a large number of products and services for telecom operators will be offered as cloud services. We need Huawei Cloud as the platform and foundation. The cloud services we provide for our smartphone users also need Huawei Cloud, to take those services to global consumers. From an enterprise perspective, all its needs including computing, storage, networking, communications, conferencing, security, and campus networks can be addressed with cloud services. In the enterprise market, the big trend is to go for hybrid cloud, where the bulk is public cloud. And Huawei Cloud provides computing, storage and networking services for enterprises and governments. It is the underlying platform and foundation with which we provide products and services to our customers. Through our own public cloud and the joint public clouds with Deutsche Telekom, Telefonica, Orange, and China Telecom, we want to take our products and technologies, in the form of cloud services, to consumers, enterprises and governments as well as telecom operators. This is our target. Another area is our internal IT. We have more than 200,000 X86 servers that provide services to our 180,000 employees and a great number of partners. We decided last year to consolidate all the company’s cloud-related resources, including servers and networks for internal IT, and put them into the Cloud BU. It’s operated as a business unit, and following the cloud services model, to serve both external and internal customers.
Of course, the Cloud BU has its five-year plan, and this plan certainly includes a revenue target. But I’m not the right person to tell that number. It should be Zheng Yelai, president of the Cloud BU, to do that. Just like when William Xu was the president of the Enterprise BG, it was him who set the target for EBG. At Huawei, the mission of Huawei Cloud, or the Cloud BU, is not only to generate revenue, but rather it’s a significant strategic move for the company to drive All Cloud transformation and to gear up for the future intelligent world. Thank you.
Question3: As we see, Huawei already used its newly developed Kirin chips in its MATE series. What is Huawei's position of Kirin in its products and services? What kind of vision will you want to achieve in the future? As we understand only a small number of Huawei smartphones are using Kirin. Does Huawei plan to use Kirin for all its smartphones? Will Kirin be sold to external customers?
Answer: First of all, we do not position chipset as a standalone business, that is, we will not sell our chipset to external customers for revenue. It is positioned to support our hardware architecture and to achieve differentiation, competitiveness, and low cost of our products. Until now we don’t have any idea or plan to sell Kirin externally.
Second, we’ve always been clear that we adopt a multi-vendor strategy for mobile chips. We will not only use Kirin for Huawei's mobile phones; Qualcomm, MTK, and Kirin are all our suppliers. We remain committed to this multi-vendor strategy, as it is critical to ensure healthy development of the smartphone business. We cannot put all the eggs in one basket. Or otherwise if Kirin lags behind one day, what’s gonna happen to our smartphone business? So from this perspective, the three chip suppliers compete for the business opportunity. We select the right chip solutions based on the positioning of different smartphones, and work to create the smartphones and experience for that specific consumer segment.
Question4: You introduced that Huawei's new vision is to bring digitalization to every individual, family, and organization. Does Huawei say that the overall revenue structure will depend more on enterprise BG and consumer BG in the future? By 2025 whether the majority of annual revenue for the entire group will come from the enterprise BG?
Answer: Actually there is no special plan. It depends on how well each business is doing. I can't impose a limit, by saying one particular business can't exceed certain percentage in our total revenue. We encourage the carrier BG, the enterprise BG, and the consumer BG to strive to grow and create value for our customers. Each year when we check the numbers, it will be obvious to tell what’s the percentage of different businesses in the total revenue. We certainly expect the consumer BG to take a larger share in our revenue mix, but possibly this business might be gone altogether one day. This is possible. It happens to Motorola, and Nokia’s handset business. There are so many examples. Every business has to work hard to enhance their competitiveness, instead of paying attention to how much they will account for in the future revenue mix. If the business does a good job, the percentage will be high; or otherwise it’s gonna be a low percentage.
Question5: In your introduction, you mentioned a number that impressed me very much. Companies now have the ability of AI, but only account for less than 5%, and the proportion will increase to 86% in the future. How does Huawei help companies achieve such a high penetration? Where are the challenges now? We also pay attention to Huawei's full investment in AI now, from chip to ML/DL.
Answer: This question may be answered more clearly at Huawei Connect in Shanghai later this year. I can say two things to see if I can answer your question.
First, we build a full-stack AI solution, and then through the offline team that engages with enterprises and our Huawei Cloud, we bring different AI services to all of our enterprise customers and application developers (companies and individuals), so that they have access to AI capabilities to solve their problems and challenges. You’ll find out what’s included in this full stack during Huawei Connect in Shanghai.
Second, we are a global company with 180,000 employees and hundreds of thousands of partners. We use AI in every aspect of Huawei's operations to see if AI can add value. Through such internal experiment, we try to identify the possible value of AI in a company's finance, human resources, services, supply chain, and R&D etc. These capabilities and experiences are then incorporated into our AI solution, while at the same time being made available to enterprise customers. Therefore, we have been pushing the application of AI technology in every part of our internal operations to improve efficiency.
The other aspect is to use AI for all our products and solutions, to enhance competitiveness and deliver better experience.
Our founder Mr. Ren has been pushing AI for internal management improvement, as he believes that’s the best place for AI application. AI used for products and solutions is not his priority. But using AI to make our products and solutions more competitive is high on my agenda.
Overall, these are the two aspects that we’ll work on, to help over 80% of enterprises in the future use AI to support their business and to go digital and intelligent. I hope you can join us at this year’s Huawei Connect in Shanghai. I believe I can give you a better answer to this question by then. Thank you.
Question6: I would like to ask the question of supply chain. Huawei is now going to take high-end and creative products. But this year, there are serious problems in the supply chain, which is out of stock, so there are serious problems in product development. What I would like to ask is: Huawei will face future product innovation. How will the strategy of supply chain vendors be? Whether to purchase or to effectively integrate with supply chain vendors to make strategic developments for the products of the next five years.
Answer: Huawei's strategy is very clear. We take joint innovation with supply partners to meet the needs of our future products. We will not invest in screen, DRAM or flash. We focus on doing what we are good at. Each company has a different business model. If a company does it right in its own area of focus, the future could be good. Thank you.
Question7: I would like to ask about the operator business. One year ago, the CEO of a large European operator said that 5G was false news. The expectations were low. The whole industry has made a lot of progress since then, but it feels in your presentation there is little emphasis on 5G. Whether it means Huawei's expectation for 5G to drive the growth of operators and vendors is low?
Answer: We do have expectations for 5G, but the expectations are not as big as people might think. In Huawei's business portfolio, 5G is just one product. There is no big difference between 5G and 4G. It’s like moving from 2G to 3G, 3G to 4G, and 4G to 5G. Compared to 4G, 5G is just faster, carries more connections, and the latency is lower.
As for faster speed, this is something consumers can perceive. More connections cannot be perceived by consumers; operators can. Autonomous driving and connected cars can be partially supported with today’s technology, only that the future autonomous driving will use 5G.
In the past few years, the entire industry and governments around the world have deified 5G, believing that 5G is the digital infrastructure of the entire society. But I would like to tell you that R15, the release to be launched end of June this year is only for MBB use cases. Only by 2019 we’ll have a full 5G release to also cover other use cases like massive connections, low latency and ultra reliability.
And because 4G network today is very good, we don’t see clear applications that can only be supported with 5G. So 5G won’t start as a fully fledged, national network, but start in dense urban areas to solve spectrum and bandwidth challenges.
But this doesn’t mean we can afford not to invest in 5G. We have to invest. Only when you have good 5G that customers will buy 4G from you. It’s the same for operators. If one operator provides 5G service, other operators have to invest, even for branding or marketing purposes. For consumers, some tend to chase the new stuff. 4G has been there for 10 years. If 5G is available, they are certainly interested. Why not buy 5G over 4G? But those early adopters may not know what to do with 5G. Just as 50% of Chinese users buy TVs that are 4K, but even today there is no 4K TV channel.
Huawei still has to fully invest in 5G, and in the second half of this year we will be able to come up with end-to-end 5G solutions to meet the needs of certain customers. In Q3 next year, we will launch a mobile phone that supports 5G to meet the needs of early-adopter consumers. For me, for Huawei, 5G has been part of the plan, it has been advancing, and the progress is pretty good, so there is no special attention that we put on 5G. Thank you.
Question8: You just mentioned that 5G is just an evolution rather than a revolution to 4G, and what do you think the future growth of operators will come from? Is it possible for operators to allow Huawei to pursue greater market share?
Answer: Whether operators will allow Huawei to grow its market share depends on how well Huawei is doing. If we can do our job well, then it’s possible. If we don’t get our job done in the right way, there is absolutely no possibility. Operators’ revenue growth is a very challenging topic. But from our point of view, whether it’s mobile broadband or fixed broadband, you have to drive the consumption of data traffic. Therefore, we work to promote applications and allow consumers to consume more data traffic, which may help increase revenue if the traffic is well monetized.
Moreover, it is necessary to extend the connections and data traffic consumption from consumers to industries and enterprises and try to find new revenue streams as enterprises go digital and intelligent. And video in the future is very important. Operators may have to change into telcos plus media companies to ensure, from end to end, that consumers, industries and enterprises have a better video experience.
We’ve seen the experiences of operators over the years. Fixed mobile converged operators are better off compared to pure mobile operators. And operators with mobile, fixed and TV are again better off than converged operators without TV. Thank you.
Question9: You introduced the vision of Huawei's AI by 2025. Thank you very much. I have a problem. AI's ability is getting stronger and stronger. At the same time, it may also cause people to feel uncomfortable because the algorithm is getting more and more powerful. It brings a series of issues related to security and privacy. In the United States, there are also progresses on digital and information sharing. However, these two aspects are quite an opposing aspect. What do you think?
Answer: For every technology, as it emerges and progresses, the impact is two-sided. This is inevitable. With Al, there are both optimists and pessimists. Some believe AI will take humankind to the next level, while others think AI will destroy humanity. But I believe in the wisdom of mankind, to keep the good and to well manage the bad. Mankind has done it in history, and I believe we can do it again on AI. Thank you.
Question10: You just said on chip supply, Huawei does not want to have vendor lock-in. Can you tell us what’s Huawei’s consideration on vendor diversification for data center and cloud?
Answer: Intel is the major partner for processors used for data centers and public cloud. From a vendor’s perspective, we expect more diversity, but diversification here is more difficult. So we have Intel as our main partner for chipset used in our data center solutions. Thank you.