In the battle of inflation, entrepreneurs and the world’s wealthy seek to adopt an economic method or methodology that keeps them resilient amid the inflation battle.
Today, with the acceleration of global inflation, which has turned into a phenomenon with repercussions on advanced economies, emerging markets and developing countries, the founder of the Chinese technology giant “Huawei” believes that the secret of survival lies in achieving record profits, even at the expense of sales, to avoid the high cost bill in the battle against inflation.
Profits first
The Chinese billionaire, “Ren Cheng”, founder of the smartphone and communications company “Huawei”, said that his company should focus on surviving and reducing the size of unprofitable business lines, in light of the global economy facing recession during the next decade.
The 78-year-old Ren issued the warnings in a letter seen by Chinese local media, but he did not specify which business lines or departments would be closed.
The Chinese businessman (who made a billion-dollar fortune from the company) also urged Huawei officials to abandon expansion or achieve greater revenue growth, and instead focus on the influx of cash and increasing profits.
According to the letter from Ren, the Chinese billionaire believes that global consumption will decline significantly, and that he does not expect an improvement during the next 3-5 years due to several factors, most notably the Corona pandemic and the impact of the Russian war in Ukraine.
He commented, “Profits and cash should increase even if sales decline. I call on everyone in the company to fight for profits and a sense of responsibility.”
poor results
Earlier this August, Huawei revealed that its revenue fell 5.9% to 301.6 billion Chinese yuan ($45.03 billion), and its net profit for the first half of this year fell by more than half.
The Chinese company pointed out that pressures on the economy have reduced demand from customers, as well as exacerbated problems caused by US technological restrictions – in place since 2019.
Huawei noted that the overall performance was “in line with expectations”. “While our hardware business has been significantly affected, our ICT infrastructure business has maintained steady growth,” said Huawei’s rotating chairman, Ken Ho.
The Chinese tech company’s profit margin shrank to 5%, with net profit of 15.08 billion yuan ($2.25 billion), down from 31.39 billion yuan ($4.68 billion) in the first half of 2021.
In 2021, Huawei recorded the largest annual decline ever in its revenue.
While a company spokesman explained that the weak economy, the disruptions of the Covid-19 virus and supply chain challenges, have hurt the business of the company that sells smartphones and laptops, Archyde.com reported.
Huawei also boosted investment in technology and new business, which in turn affected profits.