Huaweis ranking in this years Fortune 500 continues to rise from 11 to 61. Considering its huge size, it is not easy to improve so much.
But in terms of profit margins, Huawei is only 8%, while Alibaba is 23% and Tencent is 25%. In short, Huaweis profit margin is less than half that of Internet companies.
It is undeniable that the profit margin of hardware manufacturers is far less than that of platform-based Internet companies. Huawei is essentially a hardware company that produces and sells mobile phones or base station products of carriers with fixed costs, while Internet companies are more human resources, bandwidth and other costs.
In general, Huawei has been facing challenges in the past year. Huawei has always been one of the focuses of Sino-US trade frictions. In May, the U.S. Department of Commerce issued a statement that Huawei and its affiliates would be included in the list of regulated entities. Since then, Reuters reported on May 20 that Google has suspended part of its business with Huawei, which also means that Huawei mobile phones will face the risk of not being able to use the full Android operating system. Later, however, it was reported that companies such as Google, Qualcomm, Cisco and Intel had been pushing for the U.S. governments lifting commitment to relax restrictions on the sale of chips and other technologies to Huawei.
Last year, Huaweis total R&D reached 101.5 billion yuan, accounting for 14% of the total annual revenue. According to a report released by PricewaterhouseCoopers last year, Tencents R&D investment in fiscal year 2018 (July 1, 2017 to June 30, 2018) was $2.7 billion (RMB 18.5 billion), accounting for about 7.3% of its total revenue in that fiscal year.
In this years Fortune 500, the top two technology companies are Apple (11) and Samsung Electronics (15). In terms of R&D investment, Huawei is higher than Apple, slightly lower than Samsungs 106 billion yuan.
According to public information, in 2018, the total amount of global R&D enterprises exceeding 100 billion yuan is Huawei, Samsung, Google and Volkswagen, with R&D investment of 10.15 billion, 10.6 billion, 105.5 billion and 103.5 billion respectively.
This may be the wisdom of Ren Zhengfei: the lower profit margin in exchange for talent and technology reserves to deal with future uncertainties.