--In the latter half of 2020, Huawei's smartphone shipments will decline sharply in the Chinese market as well. How do you see the future of the consumer business, especially in the smartphone business, while the supply of chips is being narrowed down? Is it possible to respond to the global factors surrounding parts supply and Huawei's smartphone business?
Mr. Hu Huawei's consumer business has always been the focus of attention, especially in the smartphone business. Over the past few years, Huawei has become one of the world's leading smartphone brands, and today hundreds of millions of people are using our mobile phones. Supply restrictions have certainly had a major impact on our smartphone business over the past year.
In the future, we cannot say for sure about the results of the smartphone business because the outcome of supply restrictions is uncertain. However, we will continue to launch new products every year and introduce new flagship products as planned. Most recently, we announced the second generation of foldable smartphones, the Mate X2. It has become one of the most sought after products since its launch. This means that our smartphones are driving the market and we are confident that we can maintain this position in the future.
Smartphones are just one part of Huawei's consumer business. To answer your question in a little more detail, let's talk about Huawei's consumer business plan. Simply put, Huawei employs a user-centric strategy to deliver a seamless AI life experience to consumers in five key and generic application scenarios.
To realize this strategy, we must work on deep innovation in some key technologies such as HarmonyOS, HMS, and AI. This is what we have been working on for the past few years and will continue to do so. These are our core competencies.
In addition, we will actively integrate the service ecosystem into the hardware ecosystem. As a real experience for consumers, it will be possible to access various terminals with a unique user ID. You will be able to experience a wide range of services seamlessly and intelligently across various terminals.
Consumer businesses should be based on consumers and their hands-on experience, and hardware is just the means to achieve this. Smartphones are no exception and have been adopting this strategy for years. Last year, smartphone sales declined, while other hardware and services saw rapid growth. That's why we're more confident in our strategy, and it's in line with the future consumer market.
In summary, smartphones are part of our future-oriented consumer strategy, but not all of it. As of now, we already have a lot of support for this strategy from our partners such as channel partners, service partners and other ecosystem partners. As we continue to implement this consumer strategy, we are confident that Huawei will offer more consumer-centric hardware, software and services.
--With HiSilicon, Huawei has historically had a huge advantage in chip design. Please tell us if you are still working on technology development through HiSilicon, and if you are willing to enter chip manufacturing or research chip manufacturing.
Mr. Hu The HiSilicon division is very stable and we have many goals in innovation, so the team is dedicated to the work.
Regarding chips, I would like to re-emphasize that Huawei's position is an ICT system and equipment provider. We still rely heavily on our global chip supply chain. HiSilicon has acquired strong chip design capabilities and is also affiliated with the global semiconductor industry. We are convinced that global partnerships will continue to be mainstream and should continue to be the mainstream for the semiconductor industry to develop further.
For this reason, we will continue to take an open and collaborative approach to innovation. We look forward to helping governments, especially global political leaders, restore their semiconductor supply chains and further strengthen their global cooperation.
--Last year, Huawei managed to respond to US sanctions, but the sanctions will not stop soon, and Washington's policy after the change of power is likely to deepen the disconnection between the US and China. I would like to ask about. What are the long-term implications? And in particular, it is reported that Huawei has a stock of chips, but how long do you think it will take to be able to manufacture high-performance chips for 5G and smartphones in China?
Huawei's experience over the past two years shows that these frictions can cause serious damage to the global supply chain for multinational companies like us.
I can't imagine who would benefit from this turmoil. From an industrial point of view, all parties upstream and downstream of the supply chain are suffering. As a direct result of this disruption of the global supply chain, some of Huawei's business revenues declined last year.
Our upstream suppliers are suffering from this friction. As we all know, Huawei has been making US $ 10-20 billion purchases annually from US suppliers for many years. This severance is a major loss to these US suppliers.
When Huawei's procurement was banned, these companies couldn't quickly find a replacement customer. Of course, we can find a buyer who can cover some of the losses. However, Huawei's business has not disappeared. Most of the procurement was directed to suppliers outside the United States.
In addition, many US sanctions are high-impact national strategies that require suppliers to minimize the impact of US-made parts on future supply capacity. As you can see, it has a negative impact on the industry as a whole.
Obviously, Huawei is one of the companies that have been seriously affected and sees the sequence as very unfair. However, in reality, the suppliers upstream of our company, which are mainly US suppliers, are also in pain. In addition, consumers at the end of the supply network are also painful. If political decisions are damaging so many people in the industrial supply chain, why not try to improve the situation?
Over the past two years, we have invested heavily in parts inventory for unjustified sanctions on chip supply. Especially for corporations, we have sufficient inventory to meet customer demand for a long period of time. Whether or not the chip supply itself will improve will depend on how collaboration in the global semiconductor supply chain is restored.
Digitization will continue to evolve and the world will become more dependent on chips. This is true in many areas. For example, the supply of chips for automobiles has run out in recent months. It has a huge impact on the entire automotive industry. I would like to say that the globalized semiconductor supply chain is, to some extent, the cornerstone of the development of society throughout the world. To address this fundamental issue, we need to rethink global collaboration.