Good morning, ladies and gentlemen!
Welcome to Shenzhen and welcome to Huawei's Global Analyst Summit 2018. I see many old friends here and a lot of new friends as well. I hope that you enjoy your stay here in Shenzhen.
First, let me brief you on our business performance in 2017. Our performance was basically in line with expectations. We achieved robust growth. Our sales revenue was 603.6 billion RMB, representing a year-on-year growth of 15.7% and a five-year compound annual growth rate (CAGR) of 26%. Our net profit was 47.5 billion RMB, for a five-year CAGR of 23%. Cash flow from operating activities rose to 96.3 billion RMB, with a five-year CAGR of 44%.
Next let's look at the performance of each business group. Revenue from our carrier business was 297.8 billion RMB, up 3% over 2016. Revenue from our enterprise business was 54.9 billion RMB, up 35% over the previous year. Our consumer business earned 237.2 billion RMB in revenue, representing a year-on-year growth of 32%. Our consumer business and enterprise business were our two major growth engines, driving Huawei's ongoing rapid growth.
Over the past several years, we have emphasized the importance of innovation to future growth. Last year, we invested 89.7 billion RMB in R&D. That was 14.9% of our total revenue. From 2008 to 2017, our total R&D investment amounted to 394 billion RMB. We forecast that, over the next decade, we will continue to invest about 15% of our annual revenue back into R&D every year. This will fuel ongoing innovation and, in turn, drive our future growth.
The world is changing rapidly. These changes have a profound impact on every person, home, and organization. They have brought new experiences, greater efficiency, and a new level of convenience in study, life, and work. I'm sure that all of you here have enjoyed the benefits of these changes. However, this is not the case for every individual, every home, and every organization around the world.
First let's look at individuals. Smartphones and the mobile Internet have produced a ton of value for everyone. These days we enjoy healthier lives and better entertainment. However, a lot of people still don't have access to these things.
Right now there are 3.8 billion smartphones in use around the world. In spite of this, five billion people still don't have smartphones. Four billion don't have access to mobile networks, and 40% of people who do have access to mobile networks do not have access to mobile broadband. In many countries, mobile traffic per user per day may reach 10 to 20 gigabytes. But if we take a step back and look around the world, the global average is only 0.03 gigabytes of mobile data consumption per user per day. This is far from enough to meet everyday needs in life, work, and entertainment.
Many innovative technologies like wearables, connected cars, augmented reality (AR), and virtual reality (VR) have not been widely applied. According to our forecasts, by 2025 there will be over eight billion smartphones in use. The number of mobile users will exceed 6.5 billion, and 80% of them will have mobile broadband. There will be 440 million AR/VR users and 40% of cars will be connected.
Now, let's move on to homes. Home broadband and home networks enable people to better interact with their families, receive better education, and enjoy more convenience in their daily lives. But many homes still don't have access to any of this. So far, only 40% of homes around the world have broadband access, less than 1% of homes enjoy a Gbit/s broadband experience, and many home devices remain unconnected.
Smart home solutions are not mature enough. The penetration rate of smart robots is only 1.5%. Most of the robots in use are only able to do things like vacuum the floor. They're unable to provide at-home healthcare or satisfy the many other needs that users might have.
By 2025, it's our goal to see 75% of homes with broadband access, and at least 30% within range of a Gbit/s experience. The number of connected home devices will reach 20 billion and the penetration rate of smart robots will grow from 1.5% to 12%.
Next, I'd like to take a look at the organizations. Digital technology helps organizations work more efficiently and speed up innovation, but there are huge gaps in digital adoption between different industries.
On the whole, digital uptake is relatively low in most industries, especially in traditional ones. Huawei is taking action to address this. For example, we worked with the Shenzhen municipal government to roll out a safe city project that greatly enhances safety across the city. We have helped many enterprises and cities deploy intelligent innovations for preventive maintenance, flexible manufacturing, smart manufacturing, smart transportation, and smart city initiatives. These solutions are already delivering tangible benefits. And yet a huge number of organizations still aren't embracing these solutions. Why is that?
To start with, there is uneven development of network infrastructure worldwide. For 90% of enterprises, their private lines are slower than 10 Mbit/s. This type of bandwidth can't support digital and cloud services.
Second, the majority of organizations only have office networks. They haven't connected their production networks, products, and customers, let alone embraced digital production and smart manufacturing, or used digital for sales, service, and marketing.
IT infrastructure is also unevenly developed. Less than 10% of enterprise applications are in the cloud. Only 13% of data is fully utilized. If we don't use our data, it doesn't produce value, and it will only become an extra cost, not the fuel of new business opportunities in the digital age. AI is not widely used by enterprises either: Only 5% have experimented with the technology, and less than 1% have used it in a meaningful capacity.
We estimate that, by 2025, the majority of organizations will experience explosive growth in digital adoption. By then, 85% of enterprise applications will be in the cloud, 80% of data will be put to use, and 86% of enterprises will have experimented with AI.
It's clear that digital and AI technologies have created real benefits for people, for our lives at homes, and for organizations. It's also clear that we face many challenges ahead. Despite all these gaps and challenges, our industry is in the midst of a great opportunity.
We are in a great age where ICT and digital are rapidly changing every person, home, and organization, redefining how we live, work, learn, and stay healthy. In this age of greatness, Huawei aspires to become a great company. We want to help mankind take its next step forward.
This is the basis of our new vision, our new mission: Bring digital to every person, home and organization for a fully connected, intelligent world.
Huawei is committed to making this intelligent world a reality and extending the benefits of digital and AI to every person, home, and organization. We are working to make the value of digital and AI accessible to all, whether it's in life, work, education, or fitness.
In this fully connected, intelligent world, all people will be more empowered. For example, with connected smart helmets, blind people can move around with complete freedom. Smart translation services will remove language barriers. AI-powered cameras will allow inexperienced photographers to create masterpieces.
In this fully connected, intelligent world, home life will become more fulfilling: There will be a diverse array of home services such as robots for at-home healthcare and education. Ultra-broadband and AR/VR technology will make holographic communications possible: No matter where you are, your family will be within reach.
In the intelligent world, organizations will become more innovative. Businesses will deliver scalable, customizable products to meet unique user needs. Governments will have smart solutions for administration and will be able to make our cities safer.
Looking ahead, we will position ourselves as a pioneer of the intelligent world. Our strategy is to focus on ICT infrastructure and smart devices.
We will bring digital to every person by investing in smart devices to improve user experience across all scenarios, including life, work, entertainment, and fitness. Just imagine, when every person on earth has a smartphone linking all of our smart devices, we will all have full access to the digital world. This will bring whole new experiences and value in life, work, education, and fitness.
To bring digital to every home, we will continue to invest in broadband and home network solutions. When you are at home, learning, playing, or just enjoying life, you will be able to experience the entire digital world through smart devices in your home. You will have access to all the benefits it brings to healthcare, entertainment, and other areas of your life.
To bring digital to every organization, we will invest in networks, cloud, big data, and IoT to continue to boost the digital transformation of all industries, enabling all enterprises and governments to go digital and embrace intelligence.
We will build a fully connected, intelligent world through ongoing investment in connecting the unconnected and AI. This will help drive the convergence of the digital and physical worlds, unlock new potential, and cultivate greater intelligence for all.
These were some of our considerations throughout the process of defining our new vision and mission last year. We want to work with the entire industry to enrich these ideas so that we can continue to make the most of our investment, and ultimately make our vision and mission a reality.
At the past couple of summits I have talked about some of Huawei's key strategies. I have talked about our ALL Cloud strategy for products and solutions, as well as our services strategy. Last year, I shared Huawei's approach to AI. We consider AI to be an enabling technology, and are integrating it into our products and solutions.
Over the past year we have taken our ideas and solutions to a new level. Generally speaking, we want to apply artificial intelligence to our smart devices, cloud offerings, and networks to make our solutions more competitive, improve customer experience, and create more business value.
In 2014, I spoke about carrier network architecture – the data center-centric architecture of the future. We call this architecture SoftCOM. At its core, it's about the complete cloudification of telecom networks. It was the natural evolution from ALL IP to ALL Cloud. Today, we are introducing AI to our SoftCOM architecture and solutions to develop a next-generation architecture. We call it SoftCOM AI.
At last year's summit, I talked about how the telecom industry was in an unhealthy state of affairs. By adopting AI technology, we aim to build "self-driving", self-evolving networks with zero faults. We want to use architectural innovation to fundamentally address the structural issues facing the telecom industry. By making telecom networks automated, autonomous, self-healing, and self-optimizing, we will significantly improve network utilization and O&M efficiency.
This new network architecture will create tremendous value for end users, carriers, and equipment vendors alike. We believe that only innovation that benefits the entire value chain can promote the healthy development of the telecom industry as a whole. Specifically, end users will enjoy a Real-time, On-demand, All-online, DIY, and Social (ROADS) experience that can be delivered in minutes. They will be ensured the best connection, always, and will always be within range of a network.
Carriers will see a huge leap in O&M efficiency, resource utilization, and energy efficiency. We expect this leap to be upwards of 10x existing rates.
In the meantime, equipment vendors will benefit from intelligent new product features. They will see a leap in service efficiency, and can provide new services to tap into the value of their installed base throughout the network lifecycle.
We are working to incorporate AI throughout our entire network solution portfolio. We will continue advancing towards "self-driving" networks and addressing the industry pain points, including inefficiency and high costs. Ultimately, we hope to help the industry extract itself from a state of ill health and get back on the path to robust growth.
For mobile phones, as we've mentioned before, we are working hard to make the leap from smart to truly intelligent devices. In December 2016, we released a phone with intelligent functions – Honor Magic. Last year, we released the Kirin 970, a mobile phone chipset with an embedded neural processing unit (NPU). This chipset is now being used in all our flagship smartphones, including the Mate 10 and the recently-launched P20 series. Today, our mobile phones can understand consumers better than ever before, with greater capacity to see, hear, and feel. This has significantly improved experience across a number of user scenarios, including photography and voice processing.
To enable our partners and developers around the world to leverage the AI processing power of our chips and develop all kinds of new applications, we built the HiAI platform that opened up our AI capabilities across three layers: cloud, devices, and chipsets. This platform enables all of our industry partners to develop a limitless array of AI applications, delivering a better user experience and giving the entire industry access to the benefits of truly intelligent phones.
In the cloud domain, we officially launched Huawei Cloud in 2016. In 2017, we integrated all of our cloud resources to form a dedicated Cloud Business Unit. The mission of this BU is to provide a robust cloud platform – or "fertile soil", so to speak – that fosters the growth of governments and enterprises throughout their digital transformation process.
In the meantime, we have opened up Huawei Cloud to our partners around the world. The idea is to provide them with an platform on which they can develop and deploy applications directly in the cloud to help organizations of all shapes and sizes resolve the issues they face as they go digital and intelligent.
We are working hard to make Huawei Cloud into a platform that is technologically strong, has a solid future, and that earns the trust of our customers around the world. It will be the gathering point for 30 years of Huawei's experience, technology, and services, making them all available to our customers and partners.
We have also introduced AI-enabled services to Huawei Cloud, which form the basis of our EI (enterprise intelligence) platform. On this platform, all types of organizations, including enterprises and governments alike, can use AI to develop new products and services. It's simple and convenient, and will help organizations improve efficiency and generate greater value.
To sum up, last year we clarified our position on AI as an enabling technology. Our aim was to use it to improve the competitiveness of the products and solutions we provide to our customers. After another year of exploration, we've decided to integrate AI into our smart devices, networks, and cloud, to deliver a better customer experience and create greater customer value.
We will continue investing in AI, which brings me to a small announcement. At this year's HUAWEI CONNECT, we will announce our complete AI strategy, along with a set of full-stack AI solutions for all scenarios. We'll see you in Shanghai.
Thank you for joining us at the Huawei Global Analyst Summit 2018.