2005 Huawei

HUAWEI TECHNOLOGIES CO., LTD.
Annual Report 2005

To enrich life through communication
Annual Report 2005

Huawei Industrial Base
Bantian Longgang
Shenzhen 518129, P.R. China
www.huawei.com
Contents
About Huawei Technologies

Huawei Technologies is a leader in providing next generation
2 Financial Highlights
telecommunications network solutions for operators around
3 The Year
the world. The company is dedicated to providing innovative
5 Message from the Company and customized products, services and solutions to create
8 Vision, Mission and Strategy long-term value and potential growth for
9 2005 Driving Forces its customers. Huawei’s products and
solutions are deployed in over 100
17 Performance in Business
countries and serve 28 of the world’s top
Wireless Network: quickly becoming a world leading supplier
50 operators, as well as over
Fixed Network: leading network transformation
one billion users worldwide.
Optical Network: a leading global supplier
Data Communications: leading in carrier-class IP network
Application & Software: exploring new models for the future
Wireless Terminals: building an end-to-end solution
24 Looking Forward
29 Corporate Citizenship
Contents
2 Financial Highlights About Huawei Technologies

Huawei Technologies is a leader in providing next generation
3 The Year
telecommunications network solutions for operators around
5 Message from the Company
the world. The company is dedicated to providing innovative
8 Vision, Mission and Strategy and customized products, services and solutions to create
9 2005 Driving Forces long-term value and potential growth for
17 Performance in Business its customers. Huawei’s products and
solutions are deployed in over 100
Wireless Network: quickly becoming a world leading supplier
countries and serve 28 of the world’s top
Fixed Network: leading network transformation
50 operators, as well as over
Optical Network: a leading global supplier
one billion users worldwide.
Data Communications: leading in carrier-class IP network
Application & Software: exploring new models for the future
Wireless Terminals: building an end-to-end solution
24 Looking Forward
29 Corporate Citizenship
30 Financial Report
Financial Highlights The Year Message from the Company Vision, Mission and Strategy 2005 Driving Forces Performance in Business Looking Forward Corporate Citizenship Financial Report
Financial Highlights
Huawei Technologies Corporation
and Subsidiary Companies
USD in millions
Year Ended December 31 2005 2004 2003 2002 2001(*)
Revenue 5,982 3,827 2,694 2,128 2,290
Net Income 681 624 384 108 258
Cash Flow From Operations 708 396 385 311 204
Operating Profit Margin 14% 18% 19% 10% 17%
Return on Net Assets 30% 31% 23% 7% 20%
Note: (*) Excluding discontinuing operations.
Unit: USD’000,000 Unit: USD’000,000 Unit: USD’000,000
7,000 800 800
708
6,000
5,982 700 681 700
624
CAGR:27% CAGR:28% 600 CAGR:36%
600
5,000
500 500
4,000 3,827
396
400 384 400 385
3,000 311
2,694
300 300
2,290 2,128 258
2,000 204
200 200
1,000 108
100
100
2001
2002
2003
2004
2005
2001
2002
2003
2004
2005
2001
2002
2003
2004
2005
0 0 0
REVENUE NET INCOME CASH FLOW FROM OPERATIONS

(USD in millions) (USD in millions) (USD in millions)
1 Huawei Technologies Annual Report 2005 Huawei Technologies Annual Report 2005 2
Financial Highlights
USD in millions
Year Ended December 31 2005 2004 2003 2002 2001(*)
Revenue 5,982 3,827 2,694 2,128 2,290
Net Income 681 624 384 108 258
Cash Flow From Operations 708 396 385 311 204
Operating Profit Margin 14% 18% 19% 10% 17%
Return on Net Assets 30% 31% 23% 7% 20%
Note: (*) Excluding discontinuing operations.
Unit: USD’000,000 Unit: USD’000,000 Unit: USD’000,000
7,000 800 800
708
6,000
5,982 700 681 700
624
CAGR:27% CAGR:28% 600 CAGR:36%
600
5,000
500 500
4,000 3,827
396
400 384 400 385
3,000 311
2,694
300 300
2,290 2,128 258
2,000 204
200 200
1,000 108
100
100
2001
2002
2003
2004
2005
2001
2002
2003
2004
2005
2001
2002
2003
2004
2005
0 0 0
REVENUE NET INCOME CASH FLOW FROM OPERATIONS

(USD in millions) (USD in millions) (USD in millions)
The Year
Jan
supporting the new WiMAX / IEEE On June 9, the UMTS 3G network enabled Huawei to become the the InfoVision Awards Ceremony at On November 14, Huawei signed a
802.16 standards and specifications. built by Huawei Technologies for major supplier for KPN in the optical the Broadband World Forum Europe Strategic Partnership Agreement
On January 27, CAT Telecom Public SUNDAY of Hong Kong was put into market. (BBWF) in Madrid, Spain. with Telefonica for 3G and broad-
Company Limited, one of the two On April 29, MTN and Huawei commercial application. The network band innovations. The two parties
largest state-owned telecom carriers signed an equipment purchasing and consists of more than 1300 base On October 18, Huawei launched its will also develop the Latin American
in Thailand, awarded Huawei a
contract worth US$187 million to
service provisioning framework
contract. MTN will purchase
stations covering the entire Hong
Kong region.
Jul leading 40Gbps per wavelength
DWDM transmission system for
market together.
On July 1, Huawei Technologies was
expand its nationwide CDMA 2000 Huawei’s mobile communications awarded 'Honorary Investment global telecom carriers. The new On November 21, Huawei signed a
3G network. equipment, SDH products and On June 15, Huawei was selected by Advisor' at the Thailand-China system allows operators to transmit Global Framework Agreement with
services for the entire southern Frost & Sullivan as 'Wireless Investment Seminar held in Beijing, large-capacity and long-haul DWDM Vodafone and became an Approved
African region. Infrastructure Vendor of the Year signals securely and flexibly. Supplier for Vodafone’s Global
Feb
for its continuous investment in
2005', 'NGN Infrastructure Vendor of Thailand. Supply Chain.
On February 9, the eve of China’s the Year 2005', and 'Optical Vendor On October 19, Huawei opened its
Spring Festival, the softswitch May of the Year 2005', for its outstanding first inTouch Lab Experience Center
network that Huawei constructed for On May 16, Huawei established its performance in the telecommunica-
tions and broadband industry in the
Aug dedicated to creating a dynamic
marketplace of services and applications
Dec
China Mobile successfully handled UK training center to provide overall On August 22, Huawei won China On December 22, Huawei signed a
peak traffic of more than three times training services across Europe, Asia Pacific market. Mobile’s CNGI project to build the for telecom operators. In addition, contract with British Telecom (BT) for
its usual traffic and delivered together with its existing training world’s largest IPv6 commercial Huawei developed the Huawei the deployment of its multi-service
communications for 200 million centers in France, Romania and On June 18, Huawei ranked in the network. inTouch Lab Partnership Plan. access network (MSAN) and
users, proving its stability, quality, Germany. Huawei now has training top five with 5% of the total number transmission equipment for BT’s
and reliability. centers in all of its global regions. of UMTS Essential Patents, according On August 24, China Telecom, At the PT/EXPO COMM China 2005 21CN network.
to ETSI statistics. Zhejiang announced that Huawei in Beijing, Huawei launched its
At the 24th 3GPP GERAN conference Technologies was chosen for its end-to-end HSDPA commercial On December 29, Huawei won one
held in Ireland in May, four proposals switching network intelligence solution. million ADSL lines in China Telecom’s
submitted by Huawei and three project for the entire province. The 2006 framework contract with its
other members (Siemens, Sagem, project is the largest of its kind in leading SmartAX MA5600, DSLAM
and the Standard Institute of MII) China to establish network intelligence equipment based on the full GE
related to GSM trunking were using softswitch. architecture.
accepted without objection.
On December 29, Huawei signed a
Jun Oct Strategic Partnership Agreement
On June 9, Huawei University was On June 24, Royal KPN signed a

On October 4, Huawei’s MSAN Nov with Sonaecom in Portugal. Huawei
was chosen as Sonaecom’s strategic
HONET UA5000 won the InfoVision On November 10, the second largest
Apr formally registered to focus on commercial contract with Huawei for partner in wireless network, fixed
Award 2005 in honor of its innovative fixed network operator in Germany,
technical, management and cultural a CWDM/DWDM project, which network, optical transmission and
contribution to progress in the Arcor, chose Huawei to build its next
On April 19, Huawei Technologies included access layer CWDM value-added services and applications.
training for customers, Huawei information industry, which was generation SDH transmission
and Intel announced that they would covering the whole of the Nether- Together, the two parties will
management executives and employees presented by the International network.
cooperate in building carrier-class lands and the national backbone develop the Portuguese telecoms
worldwide. Engineering Consortium (IEC) during
wireless broadband networks DWDM. The success of this project market.
The Year
Jan
supporting the new WiMAX / IEEE On June 9, the UMTS 3G network enabled Huawei to become the the InfoVision Awards Ceremony at On November 14, Huawei signed a
802.16 standards and specifications. built by Huawei Technologies for major supplier for KPN in the optical the Broadband World Forum Europe Strategic Partnership Agreement
On January 27, CAT Telecom Public SUNDAY of Hong Kong was put into market. (BBWF) in Madrid, Spain. with Telefonica for 3G and broad-
Company Limited, one of the two On April 29, MTN and Huawei commercial application. The network band innovations. The two parties
largest state-owned telecom carriers signed an equipment purchasing and consists of more than 1300 base On October 18, Huawei launched its will also develop the Latin American
in Thailand, awarded Huawei a
contract worth US$187 million to
service provisioning framework
contract. MTN will purchase
stations covering the entire Hong
Kong region.
Jul leading 40Gbps per wavelength
DWDM transmission system for
market together.
On July 1, Huawei Technologies was
expand its nationwide CDMA 2000 Huawei’s mobile communications awarded 'Honorary Investment global telecom carriers. The new On November 21, Huawei signed a
3G network. equipment, SDH products and On June 15, Huawei was selected by Advisor' at the Thailand-China system allows operators to transmit Global Framework Agreement with
services for the entire southern Frost & Sullivan as 'Wireless Investment Seminar held in Beijing, large-capacity and long-haul DWDM Vodafone and became an Approved
African region. Infrastructure Vendor of the Year signals securely and flexibly. Supplier for Vodafone’s Global
Feb
for its continuous investment in
2005', 'NGN Infrastructure Vendor of Thailand. Supply Chain.
On February 9, the eve of China’s the Year 2005', and 'Optical Vendor On October 19, Huawei opened its
Spring Festival, the softswitch May of the Year 2005', for its outstanding first inTouch Lab Experience Center
network that Huawei constructed for On May 16, Huawei established its performance in the telecommunica-
tions and broadband industry in the
Aug dedicated to creating a dynamic
marketplace of services and applications
Dec
China Mobile successfully handled UK training center to provide overall On August 22, Huawei won China On December 22, Huawei signed a
peak traffic of more than three times training services across Europe, Asia Pacific market. Mobile’s CNGI project to build the for telecom operators. In addition, contract with British Telecom (BT) for
its usual traffic and delivered together with its existing training world’s largest IPv6 commercial Huawei developed the Huawei the deployment of its multi-service
communications for 200 million centers in France, Romania and On June 18, Huawei ranked in the network. inTouch Lab Partnership Plan. access network (MSAN) and
users, proving its stability, quality, Germany. Huawei now has training top five with 5% of the total number transmission equipment for BT’s
and reliability. centers in all of its global regions. of UMTS Essential Patents, according On August 24, China Telecom, At the PT/EXPO COMM China 2005 21CN network.
to ETSI statistics. Zhejiang announced that Huawei in Beijing, Huawei launched its
At the 24th 3GPP GERAN conference Technologies was chosen for its end-to-end HSDPA commercial On December 29, Huawei won one
held in Ireland in May, four proposals switching network intelligence solution. million ADSL lines in China Telecom’s
submitted by Huawei and three project for the entire province. The 2006 framework contract with its
other members (Siemens, Sagem, project is the largest of its kind in leading SmartAX MA5600, DSLAM
and the Standard Institute of MII) China to establish network intelligence equipment based on the full GE
related to GSM trunking were using softswitch. architecture.
accepted without objection.
On December 29, Huawei signed a
Jun Oct Strategic Partnership Agreement
On June 9, Huawei University was On June 24, Royal KPN signed a

On October 4, Huawei’s MSAN Nov with Sonaecom in Portugal. Huawei
was chosen as Sonaecom’s strategic
HONET UA5000 won the InfoVision On November 10, the second largest
Apr formally registered to focus on commercial contract with Huawei for partner in wireless network, fixed
Award 2005 in honor of its innovative fixed network operator in Germany,
technical, management and cultural a CWDM/DWDM project, which network, optical transmission and
contribution to progress in the Arcor, chose Huawei to build its next
On April 19, Huawei Technologies included access layer CWDM value-added services and applications.
training for customers, Huawei information industry, which was generation SDH transmission
and Intel announced that they would covering the whole of the Nether- Together, the two parties will
management executives and employees presented by the International network.
cooperate in building carrier-class lands and the national backbone develop the Portuguese telecoms
worldwide. Engineering Consortium (IEC) during
wireless broadband networks DWDM. The success of this project market.
For the first time, sales from international markets
Message from the Company represented the majority of our contract sales,
accounting for US$4.8 billion, or 58% of our
total sales.
Dear customers, partners and peers,
Through the hard work of our employees worldwide, coexistence and jointly create maximum value for our
Huawei‘s contract sales reached US$8.2 billion in 2005, a customers.
47% year on year increase. 2005 also marked the first year
that Huawei’s international sales exceeded domestic sales, Given our achievements and progress thus far, we feel a
comprising 58% (US$4.8 billion) of our total contract greater sense of obligation toward our customers. We will
sales. As a result, the international market is becoming embrace the challenges ahead in order to meet our
increasingly important to us, giving more balance to the customers’ expectations and strengthen our relationships
company’s revenue distribution. Huawei is now a major with them. Huawei will also continue to develop and
global mobile equipment provider, with the proportion of improve, while sustaining the operation of our customers’
revenue from our mobile product line steadily on the rise. existing networks and ensuring their evolution.
By the end of 2005, Huawei’s products and solutions had In the midst of convergence and transformation, the
been deployed in over 100 countries with 28 of the global telecoms industry is faced with great challenges
world’s top 50 operators choosing Huawei as their and opportunities. We will continue to innovate in order
partner. Moreover, Huawei’s products and solutions now to support network transformation and offer competitive
serve more than one billion users around the world. services to our customers. In addition, we will be increasingly
Huawei has also successfully passed strict authentication focused on our customers and globalization efforts,
procedures from leading operators including BT, Vodafone maintaining our sustainable development and accumulating
and FT, winning their recognition and in turn demonstrating our expertise. By growing together with our customers
that Huawei’s corporate governance is on a par with and partners, we hope to create a harmonious business
international best practices. For the progress that Huawei environment.
has made so far, we would like to extend our sincere
gratitude for your support throughout our development. In 2006, Huawei will continue to innovate and invest,
focusing on ALL IP and FMC solutions. We will also carry
When Huawei was established 18 years ago, we had on with management transformation to establish
minimal technology, talent and resources to leverage on. process-driven structures, refine our marketing system to
But we had a belief. Our belief in always putting our better meet customers’ requirements and improve our
customers first with an emphasis on continuous innovation service network while upgrading our service capabilities to
has kept our growth on the fast track. Undeterred by the provide our customers with quality delivery of products
difficulties and challenges that we encountered along the and solutions.
way, we persevered and increasingly won the trust of
customers and partners around the world. We firmly believe that serving our customers is the only
reason Huawei exists. Customer demand is the fundamental
In 1996, we embarked on our globalization strategy. driving force of our development. Together with our
Despite encountering many challenges and setbacks, we customers, we will embrace the future with an unwavering
were determined to succeed in our global efforts. After spirit of hard work. Through our quality products and
ten years of hard work and perseverance, our efforts have services, we aim to continuously create long-term value
paid off with breakthrough achievements. Throughout for you and enrich people’s life through communication.
our international expansion, we have continued refining
processes within our company by cooperating with top
consultancies to introduce best practices guided by
customer demand. By learning from the West with an Executive Management Team
open mind, we try to build a future-oriented, win-win Huawei Technologies Co., Ltd.
business model that is based on the oriental wisdom of
“harmony with diversity” to nurture harmonious
Research & Development Centre, Huawei Industrial Base, Shenzhen
For the first time, sales from international markets
Message from the Company represented the majority of our contract sales,
accounting for US$4.8 billion, or 58% of our
total sales.
Dear customers, partners and peers,
Through the hard work of our employees worldwide, coexistence and jointly create maximum value for our
Huawei‘s contract sales reached US$8.2 billion in 2005, a customers.
47% year on year increase. 2005 also marked the first year
that Huawei’s international sales exceeded domestic sales, Given our achievements and progress thus far, we feel a
comprising 58% (US$4.8 billion) of our total contract greater sense of obligation toward our customers. We will
sales. As a result, the international market is becoming embrace the challenges ahead in order to meet our
increasingly important to us, giving more balance to the customers’ expectations and strengthen our relationships
company’s revenue distribution. Huawei is now a major with them. Huawei will also continue to develop and
global mobile equipment provider, with the proportion of improve, while sustaining the operation of our customers’
revenue from our mobile product line steadily on the rise. existing networks and ensuring their evolution.
By the end of 2005, Huawei’s products and solutions had In the midst of convergence and transformation, the
been deployed in over 100 countries with 28 of the global telecoms industry is faced with great challenges
world’s top 50 operators choosing Huawei as their and opportunities. We will continue to innovate in order
partner. Moreover, Huawei’s products and solutions now to support network transformation and offer competitive
serve more than one billion users around the world. services to our customers. In addition, we will be increasingly
Huawei has also successfully passed strict authentication focused on our customers and globalization efforts,
procedures from leading operators including BT, Vodafone maintaining our sustainable development and accumulating
and FT, winning their recognition and in turn demonstrating our expertise. By growing together with our customers
that Huawei’s corporate governance is on a par with and partners, we hope to create a harmonious business
international best practices. For the progress that Huawei environment.
has made so far, we would like to extend our sincere
gratitude for your support throughout our development. In 2006, Huawei will continue to innovate and invest,
focusing on ALL IP and FMC solutions. We will also carry
When Huawei was established 18 years ago, we had on with management transformation to establish
minimal technology, talent and resources to leverage on. process-driven structures, refine our marketing system to
But we had a belief. Our belief in always putting our better meet customers’ requirements and improve our
customers first with an emphasis on continuous innovation service network while upgrading our service capabilities to
has kept our growth on the fast track. Undeterred by the provide our customers with quality delivery of products
difficulties and challenges that we encountered along the and solutions.
way, we persevered and increasingly won the trust of
customers and partners around the world. We firmly believe that serving our customers is the only
reason Huawei exists. Customer demand is the fundamental
In 1996, we embarked on our globalization strategy. driving force of our development. Together with our
Despite encountering many challenges and setbacks, we customers, we will embrace the future with an unwavering
were determined to succeed in our global efforts. After spirit of hard work. Through our quality products and
ten years of hard work and perseverance, our efforts have services, we aim to continuously create long-term value
paid off with breakthrough achievements. Throughout for you and enrich people’s life through communication.
our international expansion, we have continued refining
processes within our company by cooperating with top
consultancies to introduce best practices guided by
customer demand. By learning from the West with an Executive Management Team
open mind, we try to build a future-oriented, win-win Huawei Technologies Co., Ltd.
business model that is based on the oriental wisdom of
“harmony with diversity” to nurture harmonious
Research & Development Centre, Huawei Industrial Base, Shenzhen
Vision
• To enrich life through communication
Mission
• To focus on our customers’ challenges and needs by providing
excellent communications network solutions and services in
order to consistently create maximum value for customers.
Strategy
• Serving our customers is the only reason Huawei exists;
Customer demand is the fundamental driving force of our
Customer Focus Steady and Sustainable development
• The radiating shapes of our logo are focused toward the Growth
center of the icon, indicating Huawei's customer-centric • High quality, excellent service, low operating costs, and giving top
strategy and commitment to creating long-term value for • A confident and optimistic symbol, the new logo conveys
our customers. a sense of maturity and steadiness in a professional and priority to meeting customer requirements to enhance their
international manner. competitiveness and profitability
Innovation Harmony • Continuously performing management transformation to realize

• Vivacious and contemporary, the new logo indicates that • Adopting a graduated tone while keeping symmetrical, efficient process-based organization operation for ensuring high
Huawei will continue to provide innovative, customized the new logo looks more natural and compatible, and
and competitive products and solutions for our customers acts as a metaphor for Huawei’s open-minded attitude
quality end-to-end delivery
with an enterprising spirit, and jointly face the challenges and partnership strategy, indicating that Huawei will
and opportunities in the future together with our customers. maintain a healthy growth by creating a harmonious
• Developing with our peers in the industry as both competitors and
business environment.
partners to jointly create a favorable environment and share the
benefits of the value chain
Vision
• To enrich life through communication
Mission
• To focus on our customers’ challenges and needs by providing
excellent communications network solutions and services in
order to consistently create maximum value for customers.
Strategy
• Serving our customers is the only reason Huawei exists;
Customer demand is the fundamental driving force of our
Customer Focus Steady and Sustainable development
• The radiating shapes of our logo are focused toward the Growth
center of the icon, indicating Huawei's customer-centric • High quality, excellent service, low operating costs, and giving top
strategy and commitment to creating long-term value for • A confident and optimistic symbol, the new logo conveys
our customers. a sense of maturity and steadiness in a professional and priority to meeting customer requirements to enhance their
international manner. competitiveness and profitability
Innovation Harmony • Continuously performing management transformation to realize

• Vivacious and contemporary, the new logo indicates that • Adopting a graduated tone while keeping symmetrical, efficient process-based organization operation for ensuring high
Huawei will continue to provide innovative, customized the new logo looks more natural and compatible, and
and competitive products and solutions for our customers acts as a metaphor for Huawei’s open-minded attitude
quality end-to-end delivery
with an enterprising spirit, and jointly face the challenges and partnership strategy, indicating that Huawei will
and opportunities in the future together with our customers. maintain a healthy growth by creating a harmonious
• Developing with our peers in the industry as both competitors and
business environment.
partners to jointly create a favorable environment and share the
benefits of the value chain
• Customer Focus
• Continuous Innovation
2005 Driving Forces • Management Transformation
• Partnership
Customer Focus
Serving our customers is the only reason Huawei exists. At Huawei, we strongly believe in being customer oriented
Customer demand is the fundamental driving force of our and ensuring a service culture of integrity. We work closely
development. Huawei focuses on our customers’ with and continuously strive to satisfy our customers, and
challenges and needs by providing competitive communications support our market development in order to achieve
network solutions and services in order to consistently long-term mutual gains. By constantly stressing our belief
create maximum value for our customers. that “serving our customers is the only reason Huawei
exists,” we encourage our employees to provide excellent
In 2005, we reinforced our strategy and marketing system customer service. By creating an evaluation system that
to enhance its ability to guide Huawei’s overall development. includes a positive incentive system and takes into some of them already in upper-management level
We established process-based, systematic management consideration our employees’ responsibilities and achieve- positions, supervising local branch offices and areas such
systems that allow us to gain deeper insight into customers’ ments, we aim to achieve goals that are in line with our as sales and services.
requirements. Our marketing framework has been customers’ requirements. Through a series of process-based
extended to our regional offices, enabling us to have more training capabilities, which gives us differentiated service organizational frameworks and standardized operations, As a result of these efforts, our products and solutions
interaction with the strategy & planning, R&D and procurement advantages. Huawei has already established 72 technical Huawei takes every measure to guarantee customer have achieved wide success in international markets, for
departments of support platforms satisfaction, thereby creating a customer-focused and example:
our customers in and 85 country- highly-efficient professional culture which strengthens our • 19 UMTS commercial networks had been deployed by
order for us to We emphasize a culture of sincerity and customer level spare parts core competitive edge. the end of 2005
understand their orientation, working closely with customers to centers worldwide, • Huawei is the No.1 NGN provider in the global VoIP
needs more precisely providing our Huawei achieved a breakthrough in terms of our international market with 29.3% of market share in terms of port
and rapidly. This
realize long-term mutual gains, striving to meet customers with business in 2005, with international sales occupying 58% shipments (Dittberner, 3Q05)
is done with the customer needs and achieve market development. round-the-clock of our total contract sales. We successfully passed strict • No.2 in the global DSLAM market with 16.9% of market
help of processes service while strictly and thorough authentication procedures from top-tier share, and No.1 in the global IP DSLAM market with
such as IPD complying with operators such as BT (British Telecom), Vodafone, Italia 32% market share (Infonetics, 3Q05)
(Integrated Product Development), MM (Marketing customers’ service level agreements (SLA) to successfully Telecom, Royal KPN, and Telefonica, enabling us to • No.1 provider in MSAN with 32.3% of market share in
Management), OR (Offering Requirement) and CCM fulfill the diverse and specific needs of our customers. become their partners in both European and global terms of port shipments (Infonetics, 3Q05)
(Customer Commitment Management). By integrating Support systems including logistics, procurement, and markets. Our products and solutions have been commercially • No.2 in the global optical network market with 10.3%
customer requirements into our product development and finance are also being adopted rapidly by our regional deployed in over 100 countries, and serve 28 of the of market share (Ovum-RHK, 4Q04-3Q05)
business roadmap planning, Huawei is able to help offices in order to provide better service to our customers. world’s top 50 operators, as well as over one billion • No.1 in the global long-haul DWDM market with 15.9%
customers swiftly roll out new products and services. subscribers worldwide. of market share (Ovum-RHK, 4Q04-3Q05)
We fully understand that our relationship with our • No.3 in the global carrier-router market (Gartner, 2Q05)
Huawei has established an inclusive sales and service customers is not merely contractual in nature. Rather, our Huawei has also made great progress in our localization • No.1 in terms of the number of users of intelligent
system which includes 8 regional headquarters, 85 branch customers need complete end-to-end services, consulting endeavors, and our local employees are a strong driving network products with 21.6% of market share (Ovum-RHK)
offices worldwide, and a three-tier service system services in particular. Huawei has already formed our own force of Huawei’s service culture. Out of over 10,000
(headquarters, regional & local). This comprehensive marketing management consulting team which provides overseas Huawei employees, more than 60% were
system allows us to deliver stronger technical support and services including business consultation, network recruited locally. Through a variety of training programs
services. We also have a dedicated and professional planning, solutions, special maintenance, management of and cross-cultural exchanges, Huawei helps our local
service team committed to providing quality service. In daily operations, database design and management, and employees understand and adapt to our customer-centric
addition, we have set up an excellent integrated service joint marketing. Furthermore, we research OPEX and corporate culture. The company also provides local
platform armed with professional maintenance and develop corresponding solutions to enable customers to employees with favorable career development paths, with
reduce their OPEX.
• Customer Focus
• Partnership
Customer Focus
Serving our customers is the only reason Huawei exists. At Huawei, we strongly believe in being customer oriented
Customer demand is the fundamental driving force of our and ensuring a service culture of integrity. We work closely
development. Huawei focuses on our customers’ with and continuously strive to satisfy our customers, and
challenges and needs by providing competitive communications support our market development in order to achieve
network solutions and services in order to consistently long-term mutual gains. By constantly stressing our belief
create maximum value for our customers. that “serving our customers is the only reason Huawei
exists,” we encourage our employees to provide excellent
In 2005, we reinforced our strategy and marketing system customer service. By creating an evaluation system that
to enhance its ability to guide Huawei’s overall development. includes a positive incentive system and takes into some of them already in upper-management level
We established process-based, systematic management consideration our employees’ responsibilities and achieve- positions, supervising local branch offices and areas such
systems that allow us to gain deeper insight into customers’ ments, we aim to achieve goals that are in line with our as sales and services.
requirements. Our marketing framework has been customers’ requirements. Through a series of process-based
extended to our regional offices, enabling us to have more training capabilities, which gives us differentiated service organizational frameworks and standardized operations, As a result of these efforts, our products and solutions
interaction with the strategy & planning, R&D and procurement advantages. Huawei has already established 72 technical Huawei takes every measure to guarantee customer have achieved wide success in international markets, for
departments of support platforms satisfaction, thereby creating a customer-focused and example:
our customers in and 85 country- highly-efficient professional culture which strengthens our • 19 UMTS commercial networks had been deployed by
order for us to We emphasize a culture of sincerity and customer level spare parts core competitive edge. the end of 2005
understand their orientation, working closely with customers to centers worldwide, • Huawei is the No.1 NGN provider in the global VoIP
needs more precisely providing our Huawei achieved a breakthrough in terms of our international market with 29.3% of market share in terms of port
and rapidly. This
realize long-term mutual gains, striving to meet customers with business in 2005, with international sales occupying 58% shipments (Dittberner, 3Q05)
is done with the customer needs and achieve market development. round-the-clock of our total contract sales. We successfully passed strict • No.2 in the global DSLAM market with 16.9% of market
help of processes service while strictly and thorough authentication procedures from top-tier share, and No.1 in the global IP DSLAM market with
such as IPD complying with operators such as BT (British Telecom), Vodafone, Italia 32% market share (Infonetics, 3Q05)
(Integrated Product Development), MM (Marketing customers’ service level agreements (SLA) to successfully Telecom, Royal KPN, and Telefonica, enabling us to • No.1 provider in MSAN with 32.3% of market share in
Management), OR (Offering Requirement) and CCM fulfill the diverse and specific needs of our customers. become their partners in both European and global terms of port shipments (Infonetics, 3Q05)
(Customer Commitment Management). By integrating Support systems including logistics, procurement, and markets. Our products and solutions have been commercially • No.2 in the global optical network market with 10.3%
customer requirements into our product development and finance are also being adopted rapidly by our regional deployed in over 100 countries, and serve 28 of the of market share (Ovum-RHK, 4Q04-3Q05)
business roadmap planning, Huawei is able to help offices in order to provide better service to our customers. world’s top 50 operators, as well as over one billion • No.1 in the global long-haul DWDM market with 15.9%
customers swiftly roll out new products and services. subscribers worldwide. of market share (Ovum-RHK, 4Q04-3Q05)
We fully understand that our relationship with our • No.3 in the global carrier-router market (Gartner, 2Q05)
Huawei has established an inclusive sales and service customers is not merely contractual in nature. Rather, our Huawei has also made great progress in our localization • No.1 in terms of the number of users of intelligent
system which includes 8 regional headquarters, 85 branch customers need complete end-to-end services, consulting endeavors, and our local employees are a strong driving network products with 21.6% of market share (Ovum-RHK)
offices worldwide, and a three-tier service system services in particular. Huawei has already formed our own force of Huawei’s service culture. Out of over 10,000
(headquarters, regional & local). This comprehensive marketing management consulting team which provides overseas Huawei employees, more than 60% were
system allows us to deliver stronger technical support and services including business consultation, network recruited locally. Through a variety of training programs
services. We also have a dedicated and professional planning, solutions, special maintenance, management of and cross-cultural exchanges, Huawei helps our local
service team committed to providing quality service. In daily operations, database design and management, and employees understand and adapt to our customer-centric
addition, we have set up an excellent integrated service joint marketing. Furthermore, we research OPEX and corporate culture. The company also provides local
platform armed with professional maintenance and develop corresponding solutions to enable customers to employees with favorable career development paths, with
reduce their OPEX.
• Customer Focus
• Partnership
Continuous Innovation
hold leading positions in areas such as mobile softswitch, of our broad and shared platforms. Through the
UMTS, super-long-haul DWDM, MSTP, NGN, MSAN, IP Marketing-PMT-IPMT-IRB framework, Huawei changed
telecom network, IP DSLAM, intelligent network and our product development and planning process, and
Not only do customers need products and technology, but signaling network. Huawei has also become one of the gradually solved challenges involving the effectiveness of
more importantly, they need solutions that can bring them leading providers in CDMA, 3G terminals, intelligent decision-making. Using CBB (a hardware and software
success in their business. Huawei has already made the optical network ASON, core routers and switching. In sharing module), we established a technology sharing
transition from being technology-oriented to being driven addition, we have invested heavily in the development of system that comprises various layers such as system
by customer requirements, from solely providing products our ASIC chips. At present, we have developed over 100 design, platform, modules and components. With the
to offering complete end-to-end solutions, allowing the types of ASIC chips including UMTS baseband and HSDPA experience gained from eight years of CMM implementation,
development of our products to be driven by our customers’ chips, optical network chips, router chips, and broadband we established a large and sophisticated software
success. access chips, greatly improving the system’s capabilities engineering management system. Meanwhile, we also
team, we are able to make our international R&D strategy and thus enabling us to offer unique advantages at a introduced the fundamental ideas of CMM into our
We continuously work towards improving our ability to a reality. In fact, our R&D institutes in Bangalore, Nanjing, lower cost. hardware quality management system. Most of our
innovate based on our customers’ needs. Huawei has Shenzhen and Shanghai have all achieved CMM-level 5 software development research institutes have already
been investing a minimum of 10% of our annual revenue certification, demonstrating that Huawei’s software Huawei has formed numerous partnerships with leading passed CMM level-5 certification.
into R&D, with 10% of that investment used for management and quality control have already reached the companies, and cooperates with them on the foundation
pre-research to stay at the forefront of new technologies highest level in the industry. of our self-developed technologies. We work closely with Huawei also promotes standardized, component-based
and breakthroughs. leading multinationals such as TI, Motorola, IBM, Intel, and platform-specific management in our research and
At present, Huawei By the end of Agere, ADI, Altera, SUN, Microsoft, Oracle and HP to development, and simplified the structure of our systems
has already success-
We have a global R&D strategy. Huawei has set up 2005, Huawei had improve the time to market of our products, and to and organizational framework to prevent the leakage of
fully rolled out research institutes in Stockholm in Sweden, filed over 11,000 incorporate the latest technologies and best management technology. With an asynchronous development method,
products and
solutions in areas
Bangalore in India, Dallas and the Silicon Valley in patent applications, practices into our company. we coordinate development progress at various levels,
1,844 of which manage the time-to-market of our products and speed up
including FMC, the USA and Moscow in Russia, as well as had been approved. We are introducing the world’s best R&D management our response time to market demands.
IMS, WiMAX and China-based institutes. In 2005, Huawei models into our company and strengthening the support
IPTV. applied for over Data Centre, Huawei Industrial Base, Shenzhen
3,600 patents. By the end of 2005, we had applied for
In addition, we have re-structured the organizational over 3,000 UMTS patents and held 5% (69 patents) of the
framework of our product line, in anticipation of future world’s UMTS essential patents, ranking amongst the top
network convergence and industry transformation. five in the world. Huawei actively participates in over 70
Huawei provides complete end-to-end solutions in areas international standardization organizations including ITU,
including the service and application layer, core layer, 3GPP, 3GPP2, IEEE, IETF, ETSI, OMA, TMF, FSAN and DSLF,
bearer layer, access layer, and terminals, thereby offering and contributed over 1,000 articles in 2005 alone. Mean-
our customers distinct advantages to face network while, Huawei’s representatives have been elected to
convergence. positions in various organizations, including vice president
of ITU-T SG11, president of ITU-R 8F Technology Group, vice
Furthermore, Huawei has a global R&D strategy. We have president of 3GPP TSG SA2, vice president of OMA MCC as
set up research institutes in Stockholm in Sweden, Bangalore well as vice president of OMA GS.
in India, Dallas and the Silicon Valley in the USA and
Moscow in Russia, as well as China-based institutes in By focusing on key network technologies, Huawei has
Shenzhen, Shanghai, Beijing, Nanjing, Xi’an, Chengdu, formed core technology systems for systems architecture,
and Wuhan. Through the cooperation of our multicultural hardware, software and ASIC design. Also, we currently
• Customer Focus
• Partnership
Continuous Innovation
hold leading positions in areas such as mobile softswitch, of our broad and shared platforms. Through the
UMTS, super-long-haul DWDM, MSTP, NGN, MSAN, IP Marketing-PMT-IPMT-IRB framework, Huawei changed
telecom network, IP DSLAM, intelligent network and our product development and planning process, and
Not only do customers need products and technology, but signaling network. Huawei has also become one of the gradually solved challenges involving the effectiveness of
more importantly, they need solutions that can bring them leading providers in CDMA, 3G terminals, intelligent decision-making. Using CBB (a hardware and software
success in their business. Huawei has already made the optical network ASON, core routers and switching. In sharing module), we established a technology sharing
transition from being technology-oriented to being driven addition, we have invested heavily in the development of system that comprises various layers such as system
by customer requirements, from solely providing products our ASIC chips. At present, we have developed over 100 design, platform, modules and components. With the
to offering complete end-to-end solutions, allowing the types of ASIC chips including UMTS baseband and HSDPA experience gained from eight years of CMM implementation,
development of our products to be driven by our customers’ chips, optical network chips, router chips, and broadband we established a large and sophisticated software
success. access chips, greatly improving the system’s capabilities engineering management system. Meanwhile, we also
team, we are able to make our international R&D strategy and thus enabling us to offer unique advantages at a introduced the fundamental ideas of CMM into our
We continuously work towards improving our ability to a reality. In fact, our R&D institutes in Bangalore, Nanjing, lower cost. hardware quality management system. Most of our
innovate based on our customers’ needs. Huawei has Shenzhen and Shanghai have all achieved CMM-level 5 software development research institutes have already
been investing a minimum of 10% of our annual revenue certification, demonstrating that Huawei’s software Huawei has formed numerous partnerships with leading passed CMM level-5 certification.
into R&D, with 10% of that investment used for management and quality control have already reached the companies, and cooperates with them on the foundation
pre-research to stay at the forefront of new technologies highest level in the industry. of our self-developed technologies. We work closely with Huawei also promotes standardized, component-based
and breakthroughs. leading multinationals such as TI, Motorola, IBM, Intel, and platform-specific management in our research and
At present, Huawei By the end of Agere, ADI, Altera, SUN, Microsoft, Oracle and HP to development, and simplified the structure of our systems
has already success-
We have a global R&D strategy. Huawei has set up 2005, Huawei had improve the time to market of our products, and to and organizational framework to prevent the leakage of
fully rolled out research institutes in Stockholm in Sweden, filed over 11,000 incorporate the latest technologies and best management technology. With an asynchronous development method,
products and
solutions in areas
Bangalore in India, Dallas and the Silicon Valley in patent applications, practices into our company. we coordinate development progress at various levels,
1,844 of which manage the time-to-market of our products and speed up
including FMC, the USA and Moscow in Russia, as well as had been approved. We are introducing the world’s best R&D management our response time to market demands.
IMS, WiMAX and China-based institutes. In 2005, Huawei models into our company and strengthening the support
IPTV. applied for over Data Centre, Huawei Industrial Base, Shenzhen
3,600 patents. By the end of 2005, we had applied for
In addition, we have re-structured the organizational over 3,000 UMTS patents and held 5% (69 patents) of the
framework of our product line, in anticipation of future world’s UMTS essential patents, ranking amongst the top
network convergence and industry transformation. five in the world. Huawei actively participates in over 70
Huawei provides complete end-to-end solutions in areas international standardization organizations including ITU,
including the service and application layer, core layer, 3GPP, 3GPP2, IEEE, IETF, ETSI, OMA, TMF, FSAN and DSLF,
bearer layer, access layer, and terminals, thereby offering and contributed over 1,000 articles in 2005 alone. Mean-
our customers distinct advantages to face network while, Huawei’s representatives have been elected to
convergence. positions in various organizations, including vice president
of ITU-T SG11, president of ITU-R 8F Technology Group, vice
Furthermore, Huawei has a global R&D strategy. We have president of 3GPP TSG SA2, vice president of OMA MCC as
set up research institutes in Stockholm in Sweden, Bangalore well as vice president of OMA GS.
in India, Dallas and the Silicon Valley in the USA and
Moscow in Russia, as well as China-based institutes in By focusing on key network technologies, Huawei has
Shenzhen, Shanghai, Beijing, Nanjing, Xi’an, Chengdu, formed core technology systems for systems architecture,
and Wuhan. Through the cooperation of our multicultural hardware, software and ASIC design. Also, we currently
• Customer Focus
• Partnership
Management
Transformation
For years, Huawei has been working with leading development. With the help of the Investment Review Financial Management
consultancies such as IBM, the Hay Group, PwC and FhG Board (IRB), Marketing Management Team, Product Huawei has established a financial management and
to carry out management transformation in order to keep System Management Team, Operation & Delivery monitoring system, implemented and unified financial
abreast with international industrial benchmarks. In terms Management Team and various other supporting teams, regulations, procedures, codes and monitoring, and
of Integrated Product Development (IPD), Integrated Huawei has ensured the efficient implementation of an established a system for worldwide financial monitoring
Supply Chain (ISC), human resources management, financial overall strategy that is driven by customer needs. and management. We have built the Shenzhen Capital
management and quality control, we have undergone Management Center and Hong Kong Capital Management
comprehensive transformation, introduced the industry’s Quality Control and Production Center, and have also established partnerships with
best practices, and established IT-supported management Process more than 20 banks to meet the capital requirement
platforms. Huawei’s production process system including the 3D for our company’s business development. In addition,
continuous development of our business, it has also warehouse, the automatic warehouse and the entire Huawei has created an independent auditing system,
Through consistent implementation of management gained worldwide recognition from our global customers production line layout was designed by FhG of Germany. and we are currently constructing a 3-level monitoring
transformation, and partners, thereby The new system reduced the need for transportation of system that covers external auditing, internal control
we have gradually Through many years of development, we have gradually providing strong materials and decreased production time, thereby increasing and business auditing to minimize our financial and
perfected our support for our the all-round efficiency and quality of production. operation risks.
operation and perfected our operation and management processes in company’s global
management accordance with international standards. endeavors.
Human Resource Management
processes. In
In addition to setting up a cohesive and efficient human
addition, we have
resource team, Huawei is gradually working towards
managed to strike a balance between our company’s size,
business profitability, and cultivating our expertise.
Process Realignment developing an impeccable HR system. Through cooperation
With the introduction of practical industry benchmarks with the Hay Group, we improved our methods for evaluating
that are implemented through processes such as Marketing employee performance, set up a remuneration framework
Business Model Management (MM), Integrated Product Development which includes remuneration regulation, and introduced
In Huawei’s macro business model, product development (IPD), Integrated Supply Chain (ISC) and Customer the KPI system. We continuously improved performance
is inspired by our customers’ needs, and the goal of Relationship Management (CRM), complemented by the management by introducing the caliber model to refine
management is to establish a process-based organization transformation of our financial management and human the process of staff recruitment and development. In
structure. We have worked with IBM, Hay Group, KPMG, resources management (Hay Group), we have completely addition, we set up management systems in terms of
PwC, FhG, Mercer and Gallup to implement the best industry transformed our business processes and established an IT positions, remuneration, performance, competency, and
practices in terms of management and methodology. Moreover, platform to support such transformation. staff training. We also developed hierarchical performance
we have carried out thorough and organized transformation management systems such as the work reporting system,
in business processes, organization, quality control, Organization Transformation PBC system and an appraisal system. These systems are
human resources, financial management, and customer Starting from the product lines, Huawei’s Executive inspired by our customers’ requirements and measured by
satisfaction in order to create value for our customers. Management Team and “Strategy and Customer Standing responsibility results, key events and behavior processes.
Through continuous improvement, our management Committee” strengthened the decision-making ability of
system has now reached international standards. Not only the marketing system for understanding customer requirements
has our management system withstood the rapid and and planning Huawei’s strategic direction and business
• Customer Focus
• Partnership
Management
Transformation
For years, Huawei has been working with leading development. With the help of the Investment Review Financial Management
consultancies such as IBM, the Hay Group, PwC and FhG Board (IRB), Marketing Management Team, Product Huawei has established a financial management and
to carry out management transformation in order to keep System Management Team, Operation & Delivery monitoring system, implemented and unified financial
abreast with international industrial benchmarks. In terms Management Team and various other supporting teams, regulations, procedures, codes and monitoring, and
of Integrated Product Development (IPD), Integrated Huawei has ensured the efficient implementation of an established a system for worldwide financial monitoring
Supply Chain (ISC), human resources management, financial overall strategy that is driven by customer needs. and management. We have built the Shenzhen Capital
management and quality control, we have undergone Management Center and Hong Kong Capital Management
comprehensive transformation, introduced the industry’s Quality Control and Production Center, and have also established partnerships with
best practices, and established IT-supported management Process more than 20 banks to meet the capital requirement
platforms. Huawei’s production process system including the 3D for our company’s business development. In addition,
continuous development of our business, it has also warehouse, the automatic warehouse and the entire Huawei has created an independent auditing system,
Through consistent implementation of management gained worldwide recognition from our global customers production line layout was designed by FhG of Germany. and we are currently constructing a 3-level monitoring
transformation, and partners, thereby The new system reduced the need for transportation of system that covers external auditing, internal control
we have gradually Through many years of development, we have gradually providing strong materials and decreased production time, thereby increasing and business auditing to minimize our financial and
perfected our support for our the all-round efficiency and quality of production. operation risks.
operation and perfected our operation and management processes in company’s global
management accordance with international standards. endeavors.
Human Resource Management
processes. In
In addition to setting up a cohesive and efficient human
addition, we have
resource team, Huawei is gradually working towards
managed to strike a balance between our company’s size,
business profitability, and cultivating our expertise.
Process Realignment developing an impeccable HR system. Through cooperation
With the introduction of practical industry benchmarks with the Hay Group, we improved our methods for evaluating
that are implemented through processes such as Marketing employee performance, set up a remuneration framework
Business Model Management (MM), Integrated Product Development which includes remuneration regulation, and introduced
In Huawei’s macro business model, product development (IPD), Integrated Supply Chain (ISC) and Customer the KPI system. We continuously improved performance
is inspired by our customers’ needs, and the goal of Relationship Management (CRM), complemented by the management by introducing the caliber model to refine
management is to establish a process-based organization transformation of our financial management and human the process of staff recruitment and development. In
structure. We have worked with IBM, Hay Group, KPMG, resources management (Hay Group), we have completely addition, we set up management systems in terms of
PwC, FhG, Mercer and Gallup to implement the best industry transformed our business processes and established an IT positions, remuneration, performance, competency, and
practices in terms of management and methodology. Moreover, platform to support such transformation. staff training. We also developed hierarchical performance
we have carried out thorough and organized transformation management systems such as the work reporting system,
in business processes, organization, quality control, Organization Transformation PBC system and an appraisal system. These systems are
human resources, financial management, and customer Starting from the product lines, Huawei’s Executive inspired by our customers’ requirements and measured by
satisfaction in order to create value for our customers. Management Team and “Strategy and Customer Standing responsibility results, key events and behavior processes.
Through continuous improvement, our management Committee” strengthened the decision-making ability of
system has now reached international standards. Not only the marketing system for understanding customer requirements
has our management system withstood the rapid and and planning Huawei’s strategic direction and business
• Customer Focus
• Partnership
Supply Chain
Huawei has developed a flexible supply chain, which has enhanced our
Partnership
competitiveness in terms of providing fast, cost-effective and quality supply.
Huawei believes that cooperating with customers, suppliers Together with 3Com, we have established a data
We have also formulated pertinent supply guarantee strategies and built
and leading players in the industry to face challenges communications joint venture and developed a distribution
flattened manufacturing organizations that allow us to meet market
together through a win-win strategy is essential in today’s system which has helped our data communications
demands efficiently and flexibly. In addition, we carried out transformation
business world. We strive to build more stable partnerships services grow rapidly. In 2005, based on the joint venture
of the Integrated Supply Chain (ISC) to ensure that new processes and
with our customers and suppliers and reinforce strategic agreement, 3Com bought an additional 2% worth of
systems were implemented effectively, and also introduced quality
cooperation with international and domestic mainstream shares from Huawei, resulting in 3Com holding 51% of
engineering technologies to continuously improve supply chain capabilities
operators. Furthermore, we will enhance our position in the stock. The joint venture is currently making good
and customer service. We have also developed partnerships with principal
key international markets, strengthen partnerships with progress.
suppliers, enhanced purchase performance management, and carried out
major suppliers, and improve our response speed and
supplier certification procedures based on the industrial benchmark,
service advantages in our supply chain. We have also set up a joint venture with Siemens which
TQRDCE.
focuses on the research, production, sales and services of
In addition, we will further cooperate with our industry TD-SCDMA in order to further advance its development.
Internal Staff Shareholding System peers on many levels to set up a future-oriented, secure,
At Huawei, we have an internal staff shareholding system. With the help of and win-win development framework. Through this, we We have also announced the establishment of a joint
international human resource consulting firms, we implemented the virtual aim to create greater value for our global customers. venture with Nortel to combine our expertise in products
limited share system, virtual share option plan and MBO virtual share plan, and technology in order to develop ultra-broadband
which have enhanced our incentive plan. Our staff shareholding system has In the past few years, we have also initiated multi-level access solutions for the global market and provide better
helped to support the company’s development through the provisioning of cooperation in several fields including technology, products service to our customers.
effective, long-term incentives for our staff. and marketing in order to face risks and challenges
together.
• Customer Focus
• Partnership
Supply Chain
Huawei has developed a flexible supply chain, which has enhanced our
Partnership
competitiveness in terms of providing fast, cost-effective and quality supply.
Huawei believes that cooperating with customers, suppliers Together with 3Com, we have established a data
We have also formulated pertinent supply guarantee strategies and built
and leading players in the industry to face challenges communications joint venture and developed a distribution
flattened manufacturing organizations that allow us to meet market
together through a win-win strategy is essential in today’s system which has helped our data communications
demands efficiently and flexibly. In addition, we carried out transformation
business world. We strive to build more stable partnerships services grow rapidly. In 2005, based on the joint venture
of the Integrated Supply Chain (ISC) to ensure that new processes and
with our customers and suppliers and reinforce strategic agreement, 3Com bought an additional 2% worth of
systems were implemented effectively, and also introduced quality
cooperation with international and domestic mainstream shares from Huawei, resulting in 3Com holding 51% of
engineering technologies to continuously improve supply chain capabilities
operators. Furthermore, we will enhance our position in the stock. The joint venture is currently making good
and customer service. We have also developed partnerships with principal
key international markets, strengthen partnerships with progress.
suppliers, enhanced purchase performance management, and carried out
major suppliers, and improve our response speed and
supplier certification procedures based on the industrial benchmark,
service advantages in our supply chain. We have also set up a joint venture with Siemens which
TQRDCE.
focuses on the research, production, sales and services of
In addition, we will further cooperate with our industry TD-SCDMA in order to further advance its development.
Internal Staff Shareholding System peers on many levels to set up a future-oriented, secure,
At Huawei, we have an internal staff shareholding system. With the help of and win-win development framework. Through this, we We have also announced the establishment of a joint
international human resource consulting firms, we implemented the virtual aim to create greater value for our global customers. venture with Nortel to combine our expertise in products
limited share system, virtual share option plan and MBO virtual share plan, and technology in order to develop ultra-broadband
which have enhanced our incentive plan. Our staff shareholding system has In the past few years, we have also initiated multi-level access solutions for the global market and provide better
helped to support the company’s development through the provisioning of cooperation in several fields including technology, products service to our customers.
effective, long-term incentives for our staff. and marketing in order to face risks and challenges
together.
Huawei specializes in the R&D, production, marketing and

service provisioning of technologies, products and solutions in
Performance in Business the information and communications fields, covering wireless
network, fixed network, optical network, data communications
network, application & software, and terminals.
Wireless Network: quickly becoming a leading

global supplier
Huawei’s wireless network solutions now serve 140 but also adopts the latest technology in multi-carrier and
million subscribers worldwide and have become a key low-consumption digital power-amplifiers, greatly reducing
area of revenue growth for the company. carriers’ CAPEX and OPEX, thereby enhancing their
competitive edge. In addition, Huawei rolled out UMTS
In wireless network, Huawei has become a mainstream Cell Multi-media Broadcasting, effectively implement-
global equipment supplier. By the end of 2005, Huawei ing the industry’s most economical mobile TV solution.
had already served 22 of the top 50 mobile carriers in the
world. In the area of 3G, Huawei established partnerships Recognizing the importance of protecting carriers’ investment,
with many leading carriers including Vodafone, Orange Huawei launched the EnerG GSM solution, which adopts
Group, and KPN. We also won 19 UMTS commercial 3G technology for 2G systems to improve the system’s
contracts, 12 of which were achieved in 2005, ranking capabilities and integration abilities. Delivering 3G services
Huawei No.2 worldwide in terms of the number of on a 2G network enriches users’ experience. The core
contracts won in 2005. Huawei’s GSM products have network supports both 2G/3G access and adopts a unified
maintained fast growth, having doubled its market share 2G/3G platform for BTS controllers, paving the way for
each year for the past three consecutive years. Huawei’s smooth evolution from GSM to 3G.
GSM products are now widely deployed in over 60 countries,
serving more than 100 million subscribers, with over Meanwhile, Huawei contributed actively to the development
400,000 TRXs of GSM BTS. Huawei’s CDMA products now of TD-SCDMA in its joint venture with Siemens, TD-Tech,
serve over 30 million subscribers globally, and have won by strongly promoting the commercial application of TD-SCDMA.
15 CDMA2000 1xEV-DO commercial contracts, ranking
Huawei No.3 in the newly-added CDMA market. In 2006, Huawei will further invest in wireless communications.
Driven by our customers’ requirements, Huawei will
In addition, Huawei is now the world’s largest mobile continue to provide innovative and leading solutions. In
softswitch equipment supplier. By the end of 2005, terms of UMTS, Huawei will take the lead in launching the
Huawei’s mobile softswitch had been deployed in over 40 Hybrid IP RAN solution, and maintain its leading position
countries, and served more than 50 million subscribers. in distributed base stations and indoor coverage. As for
Furthermore, Huawei launched the world’s first commercial GSM, Huawei will launch 2G/3G dual band BTS and a full
mobile softswitch network based on an IP bearer network. series of Dual Density BTS in order to deliver a complete
Huawei’s packet core network was deployed in over 30 GSM solution to meet the needs of 3G. In the area of
countries, served over 40 million subscribers worldwide CDMA, Huawei will launch an advanced CDMA-series
and ranked No.2 in terms of port shipments in 2005. enhanced BTS and CDMA 2000 1xEV-DO Rev. A solution.
To face the oncoming fixed mobile convergence, Huawei’s
As a pioneer and leader for new-generation base stations, IMS solution will be put into commercial application in
Huawei took the lead in launching the new-generation Europe in 2006.
UMTS base station in 1995. The current new-generation
UMTS base station not only supports full-performance
HSDPA networks with a maximum data rate of 14.4Mbps,
Huawei specializes in the R&D, production, marketing and

service provisioning of technologies, products and solutions in
Performance in Business the information and communications fields, covering wireless
network, fixed network, optical network, data communications
network, application & software, and terminals.
Wireless Network: quickly becoming a leading

global supplier
Huawei’s wireless network solutions now serve 140 but also adopts the latest technology in multi-carrier and
million subscribers worldwide and have become a key low-consumption digital power-amplifiers, greatly reducing
area of revenue growth for the company. carriers’ CAPEX and OPEX, thereby enhancing their
competitive edge. In addition, Huawei rolled out UMTS
In wireless network, Huawei has become a mainstream Cell Multi-media Broadcasting, effectively implement-
global equipment supplier. By the end of 2005, Huawei ing the industry’s most economical mobile TV solution.
had already served 22 of the top 50 mobile carriers in the
world. In the area of 3G, Huawei established partnerships Recognizing the importance of protecting carriers’ investment,
with many leading carriers including Vodafone, Orange Huawei launched the EnerG GSM solution, which adopts
Group, and KPN. We also won 19 UMTS commercial 3G technology for 2G systems to improve the system’s
contracts, 12 of which were achieved in 2005, ranking capabilities and integration abilities. Delivering 3G services
Huawei No.2 worldwide in terms of the number of on a 2G network enriches users’ experience. The core
contracts won in 2005. Huawei’s GSM products have network supports both 2G/3G access and adopts a unified
maintained fast growth, having doubled its market share 2G/3G platform for BTS controllers, paving the way for
each year for the past three consecutive years. Huawei’s smooth evolution from GSM to 3G.
GSM products are now widely deployed in over 60 countries,
serving more than 100 million subscribers, with over Meanwhile, Huawei contributed actively to the development
400,000 TRXs of GSM BTS. Huawei’s CDMA products now of TD-SCDMA in its joint venture with Siemens, TD-Tech,
serve over 30 million subscribers globally, and have won by strongly promoting the commercial application of TD-SCDMA.
15 CDMA2000 1xEV-DO commercial contracts, ranking
Huawei No.3 in the newly-added CDMA market. In 2006, Huawei will further invest in wireless communications.
Driven by our customers’ requirements, Huawei will
In addition, Huawei is now the world’s largest mobile continue to provide innovative and leading solutions. In
softswitch equipment supplier. By the end of 2005, terms of UMTS, Huawei will take the lead in launching the
Huawei’s mobile softswitch had been deployed in over 40 Hybrid IP RAN solution, and maintain its leading position
countries, and served more than 50 million subscribers. in distributed base stations and indoor coverage. As for
Furthermore, Huawei launched the world’s first commercial GSM, Huawei will launch 2G/3G dual band BTS and a full
mobile softswitch network based on an IP bearer network. series of Dual Density BTS in order to deliver a complete
Huawei’s packet core network was deployed in over 30 GSM solution to meet the needs of 3G. In the area of
countries, served over 40 million subscribers worldwide CDMA, Huawei will launch an advanced CDMA-series
and ranked No.2 in terms of port shipments in 2005. enhanced BTS and CDMA 2000 1xEV-DO Rev. A solution.
To face the oncoming fixed mobile convergence, Huawei’s
As a pioneer and leader for new-generation base stations, IMS solution will be put into commercial application in
Huawei took the lead in launching the new-generation Europe in 2006.
UMTS base station in 1995. The current new-generation
UMTS base station not only supports full-performance
HSDPA networks with a maximum data rate of 14.4Mbps,
Fixed Network: leading network transformation Optical Network:

In 2005, the trend towards network convergence resulted
in many mainstream carriers taking the initiative to accelerate
telecom network transformation from broadband access
to broadband content and service.
a leading global supplier
their strategic transformation. To address their needs, In 2005, Huawei’s optical network gained increasing Huawei is also a pioneer for
Huawei persisted in continuous innovation and led the Due to its excellent performance in NGN, Huawei won the recognition and affirmation from global carriers with its optical network technologies
industry in providing innovative applications and end-to-end “NGN Infrastructure Vendor of the Year” award at the quality products and services. Huawei’s overseas market in terms of research,
solutions. Frost & Sullivan’s Asia Pacific Technology Awards in June, share grew rapidly, and the company established partnerships standards and commercial
2005. Huawei’s MSAN also won the InfoVision Award by with world-renowned carriers including BT, Telefonica, application. In 2005, during
In 2005, Huawei achieved recognition from numerous IEC in 2005 for its innovation in broadband. KPN, Vodafone and MTN, gradually becoming a China Telecom’s evaluation
global carriers in the area of fixed network. Many Western mainstream optical equipment vendor for more developed of its intelligent optical
carriers adopted Huawei’s fixed network products, which In 2006, Huawei will continue to strengthen our expertise nations around the world. By the end of 2005, Huawei’s network, the routing capability
now serve countries including China, the UK, France, and upgrade our solutions. We will further promote IMS OptiX optical network products had served over 80 countries of Huawei’s optical equipment
Germany, Spain, Portugal, Italy, Austria, Greece, and broadband multi-media applications, network evolution, across the world, with over 410,000 sets applied on the was deemed the best in the
Canada. In the area of NGN, Huawei rolled out a series of value-added service deployment, the establishment of the network. According to an Ovum-RHK report, Huawei has industry. In the inter-connectivity
NGN products based on IMS architecture and contributed value chain for information service, as well as the research ranked No.2 in the global optical network market, and tests organized by OIF,
greatly to NGN’s development by introducing an and development for the commercial application of IP No.1 in the Asia Pacific market for the past five consecutive Huawei’s products also
industry-leading network intelligence model. In the field access technology, wireless access technology and optical years. Huawei has also ranked No.1 in the global market excelled. Huawei is also
of broadband, Huawei launched end-to-end broadband access technology to provide better service for the in terms of long-haul DWDM products. Thanks to an currently a member of many standardization organizations
solutions featuring IPTV and Triple Play, as well as its construction of next generation networks. In addition, we excellent performance in optical network, Huawei was including ITU-T, ETSI, IETF, MEF, OIF and CCSA. In 2005,
industry-leading IP DSLAM SmartAX MA5600 broadband will continue to work together with carriers to promote also awarded “Optical Vendor of the Year” at Frost & Huawei’s optical expert was elected president of the
access platform and access products including FTTx, the transformation of networks and services. Sullivan’s Asia Pacific Technology Awards in June, 2005. Inter-connectivity Group of OIF.
wireless and xDSL, thereby ensuring the success of
Huawei has also received widespread recognition for its In 2006, Huawei will continue to collaborate more
full series of unique ASON products and solutions, and extensively with global telecom carriers on network
successfully constructed intelligent transmission networks planning, equipment supply and bandwidth operation of
in China, Brazil, Russia, Romania, and Saudi Arabia. transmission networks. In addition, we will focus on our
Huawei’s unique Super WDM technology has successfully customers’ key areas of concern such as IPTV, enterprise
enabled low-cost super-long-haul transmission, with over VPN, leased line, VoIP, and 3G transmission networks.
400,000 kilometers of DWDM backbone network built for Huawei will also pay close attention to the development
customers around the world. Huawei’s GE-ADM technology of carrier Ethernet technology and further optimize our
and Metro WDM technology have also jointly helped products and solutions to help rapidly construct and
provide a new solution for Metro Ethernet service deploy flexible networks for our customers to serve them
transmission, the preferred choice of many Chinese and as a reliable strategic partner in the course of their
European carriers for the construction of high-efficiency development.
transmission networks for IP DSLAM, IPTV and GE VPN.
Huawei’s OptiX BWS1600G DWDM system can realize
hybrid transmission of 10Gbps and 40Gbps per
wavelength, providing carriers with an increased capacity
and improved long-haul transmission solution.
Fixed Network: leading network transformation Optical Network:

In 2005, the trend towards network convergence resulted
in many mainstream carriers taking the initiative to accelerate
telecom network transformation from broadband access
to broadband content and service.
a leading global supplier
their strategic transformation. To address their needs, In 2005, Huawei’s optical network gained increasing Huawei is also a pioneer for
Huawei persisted in continuous innovation and led the Due to its excellent performance in NGN, Huawei won the recognition and affirmation from global carriers with its optical network technologies
industry in providing innovative applications and end-to-end “NGN Infrastructure Vendor of the Year” award at the quality products and services. Huawei’s overseas market in terms of research,
solutions. Frost & Sullivan’s Asia Pacific Technology Awards in June, share grew rapidly, and the company established partnerships standards and commercial
2005. Huawei’s MSAN also won the InfoVision Award by with world-renowned carriers including BT, Telefonica, application. In 2005, during
In 2005, Huawei achieved recognition from numerous IEC in 2005 for its innovation in broadband. KPN, Vodafone and MTN, gradually becoming a China Telecom’s evaluation
global carriers in the area of fixed network. Many Western mainstream optical equipment vendor for more developed of its intelligent optical
carriers adopted Huawei’s fixed network products, which In 2006, Huawei will continue to strengthen our expertise nations around the world. By the end of 2005, Huawei’s network, the routing capability
now serve countries including China, the UK, France, and upgrade our solutions. We will further promote IMS OptiX optical network products had served over 80 countries of Huawei’s optical equipment
Germany, Spain, Portugal, Italy, Austria, Greece, and broadband multi-media applications, network evolution, across the world, with over 410,000 sets applied on the was deemed the best in the
Canada. In the area of NGN, Huawei rolled out a series of value-added service deployment, the establishment of the network. According to an Ovum-RHK report, Huawei has industry. In the inter-connectivity
NGN products based on IMS architecture and contributed value chain for information service, as well as the research ranked No.2 in the global optical network market, and tests organized by OIF,
greatly to NGN’s development by introducing an and development for the commercial application of IP No.1 in the Asia Pacific market for the past five consecutive Huawei’s products also
industry-leading network intelligence model. In the field access technology, wireless access technology and optical years. Huawei has also ranked No.1 in the global market excelled. Huawei is also
of broadband, Huawei launched end-to-end broadband access technology to provide better service for the in terms of long-haul DWDM products. Thanks to an currently a member of many standardization organizations
solutions featuring IPTV and Triple Play, as well as its construction of next generation networks. In addition, we excellent performance in optical network, Huawei was including ITU-T, ETSI, IETF, MEF, OIF and CCSA. In 2005,
industry-leading IP DSLAM SmartAX MA5600 broadband will continue to work together with carriers to promote also awarded “Optical Vendor of the Year” at Frost & Huawei’s optical expert was elected president of the
access platform and access products including FTTx, the transformation of networks and services. Sullivan’s Asia Pacific Technology Awards in June, 2005. Inter-connectivity Group of OIF.
wireless and xDSL, thereby ensuring the success of
Huawei has also received widespread recognition for its In 2006, Huawei will continue to collaborate more
full series of unique ASON products and solutions, and extensively with global telecom carriers on network
successfully constructed intelligent transmission networks planning, equipment supply and bandwidth operation of
in China, Brazil, Russia, Romania, and Saudi Arabia. transmission networks. In addition, we will focus on our
Huawei’s unique Super WDM technology has successfully customers’ key areas of concern such as IPTV, enterprise
enabled low-cost super-long-haul transmission, with over VPN, leased line, VoIP, and 3G transmission networks.
400,000 kilometers of DWDM backbone network built for Huawei will also pay close attention to the development
customers around the world. Huawei’s GE-ADM technology of carrier Ethernet technology and further optimize our
and Metro WDM technology have also jointly helped products and solutions to help rapidly construct and
provide a new solution for Metro Ethernet service deploy flexible networks for our customers to serve them
transmission, the preferred choice of many Chinese and as a reliable strategic partner in the course of their
European carriers for the construction of high-efficiency development.
transmission networks for IP DSLAM, IPTV and GE VPN.
Huawei’s OptiX BWS1600G DWDM system can realize
hybrid transmission of 10Gbps and 40Gbps per
wavelength, providing carriers with an increased capacity
and improved long-haul transmission solution.
Data Communications: Application & Software:

leading in carrier-class IP network exploring new models for the future
The telecommunications industry began to undergo transformation in Huawei’s application and software product line made areas such as partner alliances, platforms, standards and
2005. In response, global carriers adopted a common development rapid progress in 2005. Huawei maintained its No.1 patents, combination and convergence application,
strategy of making IP network more telecom-based and telecom networks position in terms of the number of intelligent network system integration, development of localization, project
more IP-based. In 2005, Huawei launched its ME60, the first in the industry subscribers in the value-added services and operation management and the profit model. Led by the unified SDP
that complies with the ITU-T Y.1291 standard architecture. Huawei’s ME60 support market, and No.2 in short message quantity. Due application framework, our ENIP2.0 open technical
can be applied at the core edge of the bearer network, enhancing telecom to its strength in these two areas, Huawei developed architecture supports the evolution of TELLIN, InfoX and
services such as Triple Play, 3G, and NGN. This converges all network quickly in the systematic development and market expansion TopEng into a richer, more open and integrated application
services while allowing them to be controlled separately, thus supporting of innovative mainstream services. Our service solutions and service delivery capability system and also supports
carriers’ strategy of providing segmented services. Meanwhile, the largest have been successfully deployed by 230 carriers in 94 smooth upgrade to IMS applications.
mobile softswitch bearer network in the world that Huawei constructed for countries, and more than 100 million subscribers worldwide
China Mobile has been operating smoothly for more than a year, validating are using our Color Ring Back Tone service. Our mobile With a customer-oriented and user-friendly telecoms
China Mobile’s decision to switch to carrier-class IP network for its strategic data service has also been deployed on a large scale, and network operation system as the foundation for an
transformation. our full 3G solutions have proven themselves through ordered information society in the future, not only will 3G
successful applications in mature markets. The popularity and NGN be able to provide subscribers with access and
By the end of 2005, Huawei’s datacom products had been widely deployed of network intelligence is currently at a peak in China, and forwarding capabilities, but service networks will also be
in 91 countries including the UK, Germany, Spain, Russia, Singapore, and our NGN service platform has a market share of more than able to provide subscribers with calculation and storage
South Korea, across a variety of industries such as carriers, government, 60% in China. capabilities. With the continuous strengthening of the
education, banking, securities, insurance, taxation, and electricity. Huawei’s application engine, billing engine, service engine and
datacom products have also gained extensive trust from customers with Our operation support system has not only completed integrated comprehensive capabilities, we will assist the
carrier-class features of strong scalability, high reliability and high security. deployment with the CMCC BOSS system, but has also infrastructure carriers in the information society in
been successfully implemented in more than ten countries. establishing a flexible product line that is sensitive to
2006 will see the further development of the carrier-class IP network, and We stay updated with future market trends in areas market demands. Ultimately, we aim to offer service
Huawei will respond by launching a series of products and solutions including digital music, media entertainment, integrated solutions covering product, price and service in the
designed to meet customer demands in carrier-class IP network, as well as messaging center, converged billing/management, voice information market.
carrier Ethernet. Through this, Huawei will be able to fully utilize its rich message increments, group/industry applications and IMS
experience in designing telecom networks and have the ability to provide convergence applications.
customers with both industry-leading equipment as well as a manageable,
operable and profitable carrier-class IP network . Faced with industry trends such as convergence, transformation
and a change of focus in the software industry from
products to services and operation, Huawei’s application
and software department proactively explored business
models and cooperation, application architecture and
integration, as well as technical architecture and
platforms. Using the concepts of "network-based
business, open-style architecture, modularized platform,
baseline version, and customized requirements" as a
foundation, we enhanced our abilities in key competitive
Data Communications: Application & Software:

leading in carrier-class IP network exploring new models for the future
The telecommunications industry began to undergo transformation in Huawei’s application and software product line made areas such as partner alliances, platforms, standards and
2005. In response, global carriers adopted a common development rapid progress in 2005. Huawei maintained its No.1 patents, combination and convergence application,
strategy of making IP network more telecom-based and telecom networks position in terms of the number of intelligent network system integration, development of localization, project
more IP-based. In 2005, Huawei launched its ME60, the first in the industry subscribers in the value-added services and operation management and the profit model. Led by the unified SDP
that complies with the ITU-T Y.1291 standard architecture. Huawei’s ME60 support market, and No.2 in short message quantity. Due application framework, our ENIP2.0 open technical
can be applied at the core edge of the bearer network, enhancing telecom to its strength in these two areas, Huawei developed architecture supports the evolution of TELLIN, InfoX and
services such as Triple Play, 3G, and NGN. This converges all network quickly in the systematic development and market expansion TopEng into a richer, more open and integrated application
services while allowing them to be controlled separately, thus supporting of innovative mainstream services. Our service solutions and service delivery capability system and also supports
carriers’ strategy of providing segmented services. Meanwhile, the largest have been successfully deployed by 230 carriers in 94 smooth upgrade to IMS applications.
mobile softswitch bearer network in the world that Huawei constructed for countries, and more than 100 million subscribers worldwide
China Mobile has been operating smoothly for more than a year, validating are using our Color Ring Back Tone service. Our mobile With a customer-oriented and user-friendly telecoms
China Mobile’s decision to switch to carrier-class IP network for its strategic data service has also been deployed on a large scale, and network operation system as the foundation for an
transformation. our full 3G solutions have proven themselves through ordered information society in the future, not only will 3G
successful applications in mature markets. The popularity and NGN be able to provide subscribers with access and
By the end of 2005, Huawei’s datacom products had been widely deployed of network intelligence is currently at a peak in China, and forwarding capabilities, but service networks will also be
in 91 countries including the UK, Germany, Spain, Russia, Singapore, and our NGN service platform has a market share of more than able to provide subscribers with calculation and storage
South Korea, across a variety of industries such as carriers, government, 60% in China. capabilities. With the continuous strengthening of the
education, banking, securities, insurance, taxation, and electricity. Huawei’s application engine, billing engine, service engine and
datacom products have also gained extensive trust from customers with Our operation support system has not only completed integrated comprehensive capabilities, we will assist the
carrier-class features of strong scalability, high reliability and high security. deployment with the CMCC BOSS system, but has also infrastructure carriers in the information society in
been successfully implemented in more than ten countries. establishing a flexible product line that is sensitive to
2006 will see the further development of the carrier-class IP network, and We stay updated with future market trends in areas market demands. Ultimately, we aim to offer service
Huawei will respond by launching a series of products and solutions including digital music, media entertainment, integrated solutions covering product, price and service in the
designed to meet customer demands in carrier-class IP network, as well as messaging center, converged billing/management, voice information market.
carrier Ethernet. Through this, Huawei will be able to fully utilize its rich message increments, group/industry applications and IMS
experience in designing telecom networks and have the ability to provide convergence applications.
customers with both industry-leading equipment as well as a manageable,
operable and profitable carrier-class IP network . Faced with industry trends such as convergence, transformation
and a change of focus in the software industry from
products to services and operation, Huawei’s application
and software department proactively explored business
models and cooperation, application architecture and
integration, as well as technical architecture and
platforms. Using the concepts of "network-based
business, open-style architecture, modularized platform,
baseline version, and customized requirements" as a
foundation, we enhanced our abilities in key competitive
Looking Forward
Wireless Terminals:
The telecoms industry is undergoing great changes with content & media and consumer electronics industries),
building an end-to-end the constant development of technology, especially IT and service convergence (including voice, data, multimedia
IP technologies. There is also increasing convergence and content), network convergence (including a unified
solution between industries such as telecommunications, IT, media
and consumer electronics. The next few years will be a
service network, a unified control network, a unified
packet switched bearing network and a unified BOSS) and
In 2005, Huawei sold over 10 million wireless terminal critical time for the transformation of the telecoms industry the convergence of terminals (such as dual-mode terminals
products, with a year-on-year increase of more than as broadband, packetization, convergence and mobility and intelligent terminals). FMC is not simply a technology
100%. Huawei’s UMTS and HSDPA data cards were widely become widely recognized as the main trends of the or a characteristic. ALL IP and FMC encompass the
adopted by mainstream European carriers, and specifically future. transformation and upgrade of an entire network, requiring
used by Vodafone in large quantities. In addition, overall end-to-end considerations.
Huawei’s UMTS handsets have entered the Asia Pacific From the network perspective, ALL IP and FMC will be key
and European markets. Our CDMA handsets have trends in the next three to five years. The telecommunications From the service perspective, the main services that
achieved great success in Asia Pacific, Latin America and network will be undergoing end-to-end changes in all carriers provide today such as bandwidth leasing (e.g.
China, and were deployed by many leading carriers including layers including the service layer, control layer, bearer wholesale and leased lines) and voice services cannot
TATA of India. Huawei’s CDMA handset, C218, was well network, access network and terminals. Even carriers’ meet the requirements of future customer demands and
received in the market and achieved a total sales volume positioning and business models may need to change. market competition. With development of globalization of
of over 2 million units in 2005. information, carriers need to focus on new services,
The development towards ALL IP architecture will gradually namely multi-play services for consumers and ICT services
In June 2005, Huawei’s first commercial 3G handset, the Posts and Telecommunications News, an authoritative change the “vertical network,” characterized by technologies for business users. IPTV is currently the most promising
U626, won “Best 3G Handset” awarded by the Charlton media in China’s telecommunications industry. such as PSTN, SDH, ATM and FR, and services such as technology to enter the individual consumer market, while
Media Group in Singapore. Huawei also won the “Most voice, data and Internet, into a flattened, “horizontal the ability to provide integrated solutions which include
Promising Vendor for 3G Terminals” award from People’s In 2006, Huawei will make further investments in wireless network.” The most direct driver of FMC originates from solution design, service hosting, service outsourcing,
terminals, and strengthen R&D capabilities and the the need to upgrade the customer experience so access to service consulting and business process outsourcing will
marketing network to reinforce its leading position. the same experience can be achieved via any terminal be a key area of concern for future business users. Mean-
Huawei expects its total sales volume of wireless terminals from any location at any time. while, the business model of carriers will change from the
to exceed 25 million units in 2006. “Bit Pipe” model to “Service” provisioning. During this
FMC also lowers OPEX and improves efficiency. FMC transformation, openness, cooperation and value chain
includes industry convergence (including the telecoms, IT, integration will be crucial for success.
Looking Forward
Wireless Terminals:
The telecoms industry is undergoing great changes with content & media and consumer electronics industries),
building an end-to-end the constant development of technology, especially IT and service convergence (including voice, data, multimedia
IP technologies. There is also increasing convergence and content), network convergence (including a unified
solution between industries such as telecommunications, IT, media
and consumer electronics. The next few years will be a
service network, a unified control network, a unified
packet switched bearing network and a unified BOSS) and
In 2005, Huawei sold over 10 million wireless terminal critical time for the transformation of the telecoms industry the convergence of terminals (such as dual-mode terminals
products, with a year-on-year increase of more than as broadband, packetization, convergence and mobility and intelligent terminals). FMC is not simply a technology
100%. Huawei’s UMTS and HSDPA data cards were widely become widely recognized as the main trends of the or a characteristic. ALL IP and FMC encompass the
adopted by mainstream European carriers, and specifically future. transformation and upgrade of an entire network, requiring
used by Vodafone in large quantities. In addition, overall end-to-end considerations.
Huawei’s UMTS handsets have entered the Asia Pacific From the network perspective, ALL IP and FMC will be key
and European markets. Our CDMA handsets have trends in the next three to five years. The telecommunications From the service perspective, the main services that
achieved great success in Asia Pacific, Latin America and network will be undergoing end-to-end changes in all carriers provide today such as bandwidth leasing (e.g.
China, and were deployed by many leading carriers including layers including the service layer, control layer, bearer wholesale and leased lines) and voice services cannot
TATA of India. Huawei’s CDMA handset, C218, was well network, access network and terminals. Even carriers’ meet the requirements of future customer demands and
received in the market and achieved a total sales volume positioning and business models may need to change. market competition. With development of globalization of
of over 2 million units in 2005. information, carriers need to focus on new services,
The development towards ALL IP architecture will gradually namely multi-play services for consumers and ICT services
In June 2005, Huawei’s first commercial 3G handset, the Posts and Telecommunications News, an authoritative change the “vertical network,” characterized by technologies for business users. IPTV is currently the most promising
U626, won “Best 3G Handset” awarded by the Charlton media in China’s telecommunications industry. such as PSTN, SDH, ATM and FR, and services such as technology to enter the individual consumer market, while
Media Group in Singapore. Huawei also won the “Most voice, data and Internet, into a flattened, “horizontal the ability to provide integrated solutions which include
Promising Vendor for 3G Terminals” award from People’s In 2006, Huawei will make further investments in wireless network.” The most direct driver of FMC originates from solution design, service hosting, service outsourcing,
terminals, and strengthen R&D capabilities and the the need to upgrade the customer experience so access to service consulting and business process outsourcing will
marketing network to reinforce its leading position. the same experience can be achieved via any terminal be a key area of concern for future business users. Mean-
Huawei expects its total sales volume of wireless terminals from any location at any time. while, the business model of carriers will change from the
to exceed 25 million units in 2006. “Bit Pipe” model to “Service” provisioning. During this
FMC also lowers OPEX and improves efficiency. FMC transformation, openness, cooperation and value chain
includes industry convergence (including the telecoms, IT, integration will be crucial for success.
Core Network Bearer Network

Due to the strengthening of network standardization and With the development of broadband and multimedia will extend into the access layer to address the great
the trend towards more open networks at the core layer, services, the traditional bearer network with SDH/ATM demands of future large-scale broadband development. In
it is not possible for networks which integrate switching, cannot meet the demands of future services. Currently, this area, Huawei has proposed the creative concept of
control and services to adapt to the development of future there are two main trends that can be seen in the bearer GE-ADM, which has become one of the key features in
services. Thus, it is the industry’s consensus that IMS will network: packetization and intelligence. The aim of these NG-WDM.
become the future core network. two trends is to simplify network layers and increase the
amount of intelligent features in order to realize a “data Intelligence can be seen from two different perspectives.
However, from the current deployment perspective, IMS is perceptive” transmission network, thereby reducing On one hand, it can be seen through the intelligent
fit for multi-media services which will distinguish it from network complexity and operating cost. control on each layer of the transmission network. In this
other services. But IMS still faces a number of inherent situation, automatic routing and configuration via
problems such as handling voice, QoS, IP security, terminal Packetization will have an impact in two areas: the metro dynamic signaling can be realized on each of the different
match, as well as cost. Meanwhile softswitch has established network and backbone network. Carrier Ethernet + layers of SDH, WDM, Ethernet and IP. On the other hand,
its role as a bridge for IMS, especially in the mobile field, NG-WDM will become the main model for building metro intelligence can be seen from the transmission of the
due to its proven ability in solving voice. Thus, softswitch networks, while TSR + DWDM will become the preference interaction between different layers, especially the interac-
and IMS will likely co-exist in harmony for a long time. for backbone networks. All services including voice, data tion between the packet layer (Ethernet and IP) and the
Huawei’s softswitch has been deployed on a large scale, and multimedia will be transmitted using the same IP optical layer (WDM and OTN) to realize a “data perceptive”
and the company has accumulated rich experience in technology. transmission network. This improves the automation degree
areas such as IP QoS, IP security and IP maintenance. upgrades that protect carriers’ investment and guarantee and application rate of the network, the service response
Huawei intends to utilize this experience and expertise in service continuity. In addition, unified user data management With the growing importance of IP in telecom networks, time and customer satisfaction, and also reduces the
the development of our IMS. Because softswitch is is an important characteristic of the future core network carrier-class IP networks must be available in order to operation and maintenance cost of the network.
future-oriented and takes into account long-term results, and also serves as an important foundation for providing a maintain service quality for users in the new technology
it can easily migrate to the IMS network through software unified service experience (one customer account, one bill, system. Based on the “operable and manageable” concept
one service password, etc.). Huawei’s integrated HLR is a that we have been following since 2000 and through many
user management solution for the future converged years of continuous innovation, Huawei proposed and
network. So IMS is not only an important way to realize implemented the concept of the IP Telecom Network in
FMC and ALL IP, but is also the key to the creation of a 2003. Today we have completed end-to-end control and
unified control layer. management of the IP network and have laid a solid
theoretical foundation for more telecom-based IP.
Ethernet is also attracting more attention due to its

simplicity, affordability and broad scale application.
However, Ethernet needs to provide guaranteed services
like a telecom network. In 2003, Huawei proposed the
idea of V-Switch in the Ethernet field and put it into operation.
Currently, Huawei’s V-Switch is widely deployed. In order
to respond to the increasing popularity of packet-switched
services, the optical system needs to adapt to the trend of
packet switching. Thus, NG-WDM for packet transmission
will be widely applied in the next three to five years and
Core Network Bearer Network

Due to the strengthening of network standardization and With the development of broadband and multimedia will extend into the access layer to address the great
the trend towards more open networks at the core layer, services, the traditional bearer network with SDH/ATM demands of future large-scale broadband development. In
it is not possible for networks which integrate switching, cannot meet the demands of future services. Currently, this area, Huawei has proposed the creative concept of
control and services to adapt to the development of future there are two main trends that can be seen in the bearer GE-ADM, which has become one of the key features in
services. Thus, it is the industry’s consensus that IMS will network: packetization and intelligence. The aim of these NG-WDM.
become the future core network. two trends is to simplify network layers and increase the
amount of intelligent features in order to realize a “data Intelligence can be seen from two different perspectives.
However, from the current deployment perspective, IMS is perceptive” transmission network, thereby reducing On one hand, it can be seen through the intelligent
fit for multi-media services which will distinguish it from network complexity and operating cost. control on each layer of the transmission network. In this
other services. But IMS still faces a number of inherent situation, automatic routing and configuration via
problems such as handling voice, QoS, IP security, terminal Packetization will have an impact in two areas: the metro dynamic signaling can be realized on each of the different
match, as well as cost. Meanwhile softswitch has established network and backbone network. Carrier Ethernet + layers of SDH, WDM, Ethernet and IP. On the other hand,
its role as a bridge for IMS, especially in the mobile field, NG-WDM will become the main model for building metro intelligence can be seen from the transmission of the
due to its proven ability in solving voice. Thus, softswitch networks, while TSR + DWDM will become the preference interaction between different layers, especially the interac-
and IMS will likely co-exist in harmony for a long time. for backbone networks. All services including voice, data tion between the packet layer (Ethernet and IP) and the
Huawei’s softswitch has been deployed on a large scale, and multimedia will be transmitted using the same IP optical layer (WDM and OTN) to realize a “data perceptive”
and the company has accumulated rich experience in technology. transmission network. This improves the automation degree
areas such as IP QoS, IP security and IP maintenance. upgrades that protect carriers’ investment and guarantee and application rate of the network, the service response
Huawei intends to utilize this experience and expertise in service continuity. In addition, unified user data management With the growing importance of IP in telecom networks, time and customer satisfaction, and also reduces the
the development of our IMS. Because softswitch is is an important characteristic of the future core network carrier-class IP networks must be available in order to operation and maintenance cost of the network.
future-oriented and takes into account long-term results, and also serves as an important foundation for providing a maintain service quality for users in the new technology
it can easily migrate to the IMS network through software unified service experience (one customer account, one bill, system. Based on the “operable and manageable” concept
one service password, etc.). Huawei’s integrated HLR is a that we have been following since 2000 and through many
user management solution for the future converged years of continuous innovation, Huawei proposed and
network. So IMS is not only an important way to realize implemented the concept of the IP Telecom Network in
FMC and ALL IP, but is also the key to the creation of a 2003. Today we have completed end-to-end control and
unified control layer. management of the IP network and have laid a solid
theoretical foundation for more telecom-based IP.
Ethernet is also attracting more attention due to its

simplicity, affordability and broad scale application.
However, Ethernet needs to provide guaranteed services
like a telecom network. In 2003, Huawei proposed the
idea of V-Switch in the Ethernet field and put it into operation.
Currently, Huawei’s V-Switch is widely deployed. In order
to respond to the increasing popularity of packet-switched
services, the optical system needs to adapt to the trend of
packet switching. Thus, NG-WDM for packet transmission
will be widely applied in the next three to five years and
Access Network Service Network

At the access network layer, the major trends for the next three to five years Currently, the service layer is built largely around voice
are broadbandization and packetization for both wireline and wireless service. With an increase in data services, the focus of the
access. The current trend in the wireline access field is “more optical and service layer will shift toward integrated services and
less copper” with FTTx becoming the primary way to build a network. In customer experience. There will also be multiple service
developed regions, mainstream carriers will provide each subscriber with platforms for different user groups and services such as
20-50M bandwidth in the next few years to support the development of the multimedia communications platform for personal
high-bandwidth services, especially video services. Generally, in the next users, the media and information platform for home users
few years, when considering factors as bandwidth, coverage and cost, and individual users (typical services including broadband
FTTB/C + ADSL2+/VDSL will become primary network models while FTTH portal and IPTV), and the IT platform for business users
will become a complementary method for network construction in new (typical services including software hosting and
home zones. outsourcing). These platforms exist in a relationship that is
both independent and cooperative at the same time, with
In the wireless access field, technologies such as HSPA, WiMAX, LTE and AIE unified user data at the core.
will push forward the development of packetization and broadbandization.
Meanwhile, intelligent terminals (handsets) and mobile PCs will greatly The multimedia communications platform and the media
increase the demand for higher bandwidth. It is important to note that, in and information platform provide multi-play services for
the next five years or more, multiple access technologies will co-exist in home users and individual users, while the multime-
harmony as there will be no single technology that can satisfy all application dia communications platform and the IT platform
situations when factors such as bandwidth, coverage, mobility and cost are provide integrated solutions - namely ICT services - for
considered simultaneously. Thus, seamless mobility between multiple business users. In the future service network, NG-SDP will
access technologies will be critical and will become a vital element in become the core technology, and the ability to integrate
realizing FMC. the entire supply chain and experience marketing will be
the key to ensuring carriers’ success.
The next three to five years is a pivotal period for telecoms

transformation. Network development is moving toward
ALL IP architecture and FMC, while technologies such as
IMS, carrier-class IP, seamless mobility and NG-SDP will
prove to be crucial in helping carriers carry out network
transformation in the future. Huawei will focus on innovation
and investment in the areas of ALL IP and FMC to ensure
that there will be no discrepancy in the experience and
services that customers enjoy via any terminal, anywhere,
and at anytime.
Access Network Service Network

At the access network layer, the major trends for the next three to five years Currently, the service layer is built largely around voice
are broadbandization and packetization for both wireline and wireless service. With an increase in data services, the focus of the
access. The current trend in the wireline access field is “more optical and service layer will shift toward integrated services and
less copper” with FTTx becoming the primary way to build a network. In customer experience. There will also be multiple service
developed regions, mainstream carriers will provide each subscriber with platforms for different user groups and services such as
20-50M bandwidth in the next few years to support the development of the multimedia communications platform for personal
high-bandwidth services, especially video services. Generally, in the next users, the media and information platform for home users
few years, when considering factors as bandwidth, coverage and cost, and individual users (typical services including broadband
FTTB/C + ADSL2+/VDSL will become primary network models while FTTH portal and IPTV), and the IT platform for business users
will become a complementary method for network construction in new (typical services including software hosting and
home zones. outsourcing). These platforms exist in a relationship that is
both independent and cooperative at the same time, with
In the wireless access field, technologies such as HSPA, WiMAX, LTE and AIE unified user data at the core.
will push forward the development of packetization and broadbandization.
Meanwhile, intelligent terminals (handsets) and mobile PCs will greatly The multimedia communications platform and the media
increase the demand for higher bandwidth. It is important to note that, in and information platform provide multi-play services for
the next five years or more, multiple access technologies will co-exist in home users and individual users, while the multime-
harmony as there will be no single technology that can satisfy all application dia communications platform and the IT platform
situations when factors such as bandwidth, coverage, mobility and cost are provide integrated solutions - namely ICT services - for
considered simultaneously. Thus, seamless mobility between multiple business users. In the future service network, NG-SDP will
access technologies will be critical and will become a vital element in become the core technology, and the ability to integrate
realizing FMC. the entire supply chain and experience marketing will be
the key to ensuring carriers’ success.
The next three to five years is a pivotal period for telecoms

transformation. Network development is moving toward
ALL IP architecture and FMC, while technologies such as
IMS, carrier-class IP, seamless mobility and NG-SDP will
prove to be crucial in helping carriers carry out network
transformation in the future. Huawei will focus on innovation
and investment in the areas of ALL IP and FMC to ensure
that there will be no discrepancy in the experience and
services that customers enjoy via any terminal, anywhere,
and at anytime.
Corporate Citizenship Financial Report
It has always been one of Huawei’s core values to contribute million (US$2.42 million) worth of emergency communications
to countries and communities in which we operate. As equipment and an additional RMB 20 million (US$2.42
part of our efforts to fulfill our responsibility as a corporate million) in cash to affected countries including Indonesia,
citizen, Huawei has joined the Global Compact, an initiative Thailand, Sri Lanka and India.
advocated by the United Nations to promote corporate
citizenship worldwide. The ten principles of the Global From 2002 to 2005, Huawei donated over RMB 21.29
Compact on human rights, labor rights, environmental million (US$2.66 million) in cash, along with hundreds of
protection and anti-corruption are now an integral part of computers and 750 boxes of clothing, to schools in
Huawei’s corporate culture. poverty-afflicted regions in China.
In July 2005, an unprecedented flood struck the Chinese In August 1998, Huawei donated remote wireless access
province of Guangdong. In response, Huawei employees equipment worth RMB 25 million (US$3.02 million) to
donated RMB 3.8 million (US$475,000) in cash to help relief efforts for the strongest flood to hit China in over a
people severely affected by the disaster rebuild their lives. hundred years. The equipment was used to support rescue
efforts and restore communication infrastructure
Our overseas offices are also actively engaged in disaster-relief damaged by the flood. In addition, Huawei and its
efforts. At the end of 2005, each employee from Huawei’s employees donated RMB 15 million (US$1.82 million) in
representative office in India made a donation of half a cash to rebuild schools in areas hit by the flood.
day’s pay to Parikrma, a non-governmental organization
that helps needy children gain access to education. In our Huawei has also voluntarily set up a total of five Hope
North American office, employees donated to hurricane Schools in Ansai County of Shaanxi and Yongjing County
Katrina victims through the American Red Cross in November of Gansu to help provide education to less privileged
of 2005. children. In addition, Huawei has donated RMB 25 million
(US$3.02 million) to the National Education Commission
Huawei also participated in disaster-relief efforts in the of China for the establishment of the “Huawei Education
aftermath of the devastating tsunami which struck Southeast Fund”, which provides needy students with an
Asia on December 26, 2004. Huawei was the first Chinese undergraduate education.
company to respond to the disaster, donating RMB 20
Huawei has continuously contributed to the countries and
communities where we operate and strongly encourages
employees to give back to society. Huawei has established
an employee organization known as the “Association of
Care”, in which members actively participate in community
service activities during their free time. Through various
means, Huawei employees actively contribute to a sustainable
and harmonious environment
Financial Highlights The Year Message from the Company Vision, Mission and Strategy
Consolidated Statement of Cash Flows

For the year ended December 31 2005 2004
USD '000 USD '000
Cash Flows from Operating Activities

Cash generated from operation 872,081 491,765
Interest and income tax paid (163,939) (95,888)
Cash Flows from Operating Activities 708,142 395,877
Cash Flows from Investing Activities (220,580) (331,957)
Cash Flows from Financing Activities (733,106) 166,997
Net Increase in Cash and Cash Equivalents (245,544) 230,917
Cash and Cash Equivalents at January 1 1,100,860 869,922

Effect of foreign exchange rate changes 27,713 21
Cash and Cash Equivalents at December 31 883,029 1,100,860
Note:
• All financial data are quoted from the unqualified auditors reports of KPMG which are presented in accordance
with International Financial Reporting Standards.
• Solely for the convenience of the readers, the consolidated financial statement of 2005 has been converted to
United States dollars at the rate of US$1.00=RMB8.0702 ( 2004: US$1.00=RMB8.2765)
33 Huawei Technologies Annual Report 2005

Annual Report 2005
To enrich life through communication
Annual Report 2005

Huawei Industrial Base
Bantian Longgang
Shenzhen 518129, P.R. China
www.huawei.com

2005 Huawei

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2005 Huawei

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HUAWEI TECHNOLOGIES CO., LTD.

Annual Report 2005

Annual Report 2005

HUAWEI TECHNOLOGIES CO., LTD.

About Huawei Technologies

Data Communications: leading in carrier-class IP network

Application & Software: exploring new models for the future

Wireless Terminals: building an end-to-end solution

2 Financial Highlights About Huawei Technologies

Application & Software: exploring new models for the future

Wireless Terminals: building an end-to-end solution

Year Ended December 31 2005 2004 2003 2002 2001(*)

Revenue 5,982 3,827 2,694 2,128 2,290

Net Income 681 624 384 108 258

Cash Flow From Operations 708 396 385 311 204

Operating Profit Margin 14% 18% 19% 10% 17%

Return on Net Assets 30% 31% 23% 7% 20%

Note: (*) Excluding discontinuing operations.

Unit: USD’000,000 Unit: USD’000,000 Unit: USD’000,000

7,000 800 800

REVENUE NET INCOME CASH FLOW FROM OPERATIONS

Year Ended December 31 2005 2004 2003 2002 2001(*)

Revenue 5,982 3,827 2,694 2,128 2,290

Net Income 681 624 384 108 258

Cash Flow From Operations 708 396 385 311 204

Operating Profit Margin 14% 18% 19% 10% 17%

Return on Net Assets 30% 31% 23% 7% 20%

Note: (*) Excluding discontinuing operations.

Unit: USD’000,000 Unit: USD’000,000 Unit: USD’000,000

7,000 800 800

REVENUE NET INCOME CASH FLOW FROM OPERATIONS

Jun Oct Strategic Partnership Agreement

On June 9, Huawei University was On June 24, Royal KPN signed a

Jun Oct Strategic Partnership Agreement

On June 9, Huawei University was On June 24, Royal KPN signed a

For the first time, sales from international markets

Dear customers, partners and peers,

Research & Development Centre, Huawei Industrial Base, Shenzhen

For the first time, sales from international markets

Dear customers, partners and peers,

Research & Development Centre, Huawei Industrial Base, Shenzhen

Innovation Harmony • Continuously performing management transformation to realize

Innovation Harmony • Continuously performing management transformation to realize

Huawei specializes in the R&D, production, marketing and

Wireless Network: quickly becoming a leading

Huawei specializes in the R&D, production, marketing and

Wireless Network: quickly becoming a leading

Fixed Network: leading network transformation Optical Network:

Fixed Network: leading network transformation Optical Network:

Data Communications: Application & Software:

Data Communications: Application & Software:

Core Network Bearer Network

Ethernet is also attracting more attention due to its

Core Network Bearer Network

Ethernet is also attracting more attention due to its

Access Network Service Network

The next three to five years is a pivotal period for telecoms

Access Network Service Network

The next three to five years is a pivotal period for telecoms

Corporate Citizenship Financial Report

Consolidated Statement of Cash Flows

For the year ended December 31 2005 2004

USD '000 USD '000